FOREIGN CURRENCY DEPOSIT ACT OF THE PHILIPPINES

Case Overview and Summary

Summary of Republic Act No. 6426 (Foreign Currency Deposit Act of the Philippines)

Authority to Deposit Foreign Currencies
- Any person, natural or juridical, may deposit foreign currencies with designated Philippine banks, except those required to be surrendered to the Central Bank. (Section 2)

Authority of Designated Banks
- Accept foreign currency deposits and hold them in trust, allowing numbered accounts. (Section 3(1))
- Issue certificates evidencing the deposits. (Section 3(2))
- Discount the certificates. (Section 3(3))
- Accept the deposits as collateral for loans, subject to Central Bank rules. (Section 3(4))
- Pay interest in foreign currency on the deposits. (Section 3(5))

Foreign Currency Cover Requirements
- Maintain 100% foreign currency cover for liabilities, with at least 15% as deposit with Central Bank and the balance in short-term, readily marketable foreign currency loans or securities. (Section 4)
- Foreign currency loans may include loans to export-oriented or Board of Investments-registered domestic enterprises, subject to Monetary Board limitations. (Section 4)
- Cover must be in the same currency as the corresponding liability, unless otherwise prescribed by Monetary Board. (Section 4)
- Qualified banks may extend foreign currency loans to any domestic enterprise without maturity and marketability limitations, subject to Central Bank approval. (Section 4)

Withdrawability and Transferability
- No restriction on withdrawal or transfer abroad, except those arising from the contract between depositor and bank. (Section 5)

Tax Exemption
- All foreign currency deposits, interest, and earnings are exempt from taxes, regardless of depositor's residency or engagement in trade or business in the Philippines. (Section 6)

Rules and Regulations
- Monetary Board shall promulgate necessary rules and regulations, effective after publication in the Official Gazette and a national newspaper for three consecutive weeks. (Section 7)
- If new rules decrease depositors' rights, the rules at the time of deposit shall govern. (Section 7)

Secrecy of Deposits
- Foreign currency deposits are confidential and shall not be examined, inquired into, or looked into by any person, government official, bureau, office, or entity, except with the depositor's written permission. (Section 8)
- Deposits are exempt from attachment, garnishment, or any court, legislative, government agency, or administrative body order or process. (Section 8)

Deposit Insurance Coverage
- Deposits shall be insured under the Philippine Deposit Insurance Corporation (Republic Act No. 3591), with insurance payment in the same currency as the insured deposits. (Section 9)

Penal Provisions
- Willful violation of the Act or Monetary Board regulations shall be punishable by imprisonment of 1-5 years, a fine of 5,000-25,000 pesos, or both. (Section 10)

Separability Clause
- If any provision is held unconstitutional, the validity of other provisions shall not be affected. (Section 11)

Repealing Clause
- Inconsistent acts, executive orders, rules, and regulations are repealed, amended, or modified accordingly, without prejudice to deposits made thereunder. (Section 12)

Amendatory Enactments and Regulations
- New enactments or regulations decreasing granted rights shall not apply to existing foreign currency deposits but shall apply only to deposits made after issuance. (Section 12-A)

Effectivity
- The Act shall take effect upon approval. (Section 13)