RA 6426: Foreign Currency Deposit Act

Here's the piece of legislation that's been one of the significant issues of the Corona impeachment case: RA 6426, the Foreign Currency Deposit Act. The purpose of this law, when it was enacted, was to protect foreign currency deposits in order to encourage an inflow of foreign capital necessary for our country's industries. The law allows foreign currencies to be incorporated into the national reserve.

Any person, natural or juridical is allowed to maintain foreign currency accounts (not just dollars) in banks with good standing in the Philippines. These banks will be designated by the Central Bank. The authority granted to these banks are as follows:

1.) Accept deposits and foreign currencies in trust (numbered accounts fore servicing and recording of these deposits is allowed)

2.) Issue certificates as evidence of these deposits

3.) To discount these certificates

4.) Accept the deposits in question as collateral for loans under the rules and regulations promulgated from time to time by the Central Bank

5.) Pay interest in foreign currency on these deposits

The banks in question are required to maintain a 100% cover for their deposit liabilities.

Foreign currency deposits are also exempt from attachment and garnishment. The law covers the following:

1.) Examination and inquiry into all deposits of whatever nature

2.) Disclosure by any official or employee of any banking institution to any unauthorized person of any information concerning the deposit in question

The exceptions are the following:

1.) Under written permission of the depositor

2.) Cases under the Anti-Money Laundering Act

3.) If the money was unlawfully taken and deposited in a bank, the rightful owner can inquire into the deposit in question (GSIS vs. CA, GR 189206, June 8, 2011 and China Bank vs. CA, GR 140687, December 18, 2006 -pro hac vice ruling)

4.) Under PD 1035, which created the Foreign Currency Deposit System and PD 1246, both of which amended RA 6426, the protection of RA 6426 is intended to cover foreign lenders and investors, not tourists (Salvacion vs. Central Bank, GR 94723, August 21, 1997)

The recent case of PSBank vs. Senate Impeachment Court, GR 200238, February 9, 2012, where PSBank requested a TRO with regard to Chief Justice Corona's bank account highlights a need to further improve this law.

Violations of this law are penalized 1 to 5 years' imprisonment and/or a fine of Php5,000 to 25,000.