Republic Act 6426 Case Study

REPUBLIC ACT No. 6426 is also known as the “Foreign Currency Deposit Act of the Philippines” (hereinafter referred to as “Act”). It was intended to encourage deposits from foreign lenders and investors.

The Act authorizes the deposit of foreign currencies.

Any person, natural or juridical, may, in accordance with the provisions of RA 6326, deposit with such Philippine banks in good standing, as may, upon application, be designated by the Central Bank for the purpose, foreign currencies which are acceptable as part of the international reserve, except those which are required by the Central Bank to be surrendered in accordance with the provisions of Republic Act Numbered two hundred sixty-five (Now Rep. Act No. 7653). (Section 2)

The Act authorizes banks to accept foreign currency deposits.

The banks designated by the Central Bank under Section two hereof shall have the authority:

(1) To accept deposits and to accept foreign currencies in trust Provided, That numbered accounts for recording and servicing of said deposits shall be allowed;

(2) To issue certificates to evidence such deposits;

(3) To discount said certificates;

(4) To accept said deposits as collateral for loans

Subject to prior Central Bank approval when required by Central Bank regulations, said depository banks may extend foreign currency loans to any domestic enterprise, without the limitations prescribed in the preceding paragraph regarding maturity and marketability, and such loans shall be eligible for purposes of the 100% foreign currency cover prescribed in the preceding paragraph. (As added by PD No.