Publishing the Opinion of the Secretary of Justice, dated December 20, 1963, on Deposits of Excess Funds of the City of Manila with any Commercial Bank Authorized to Receive Government Deposits

June 29, 1964 REVENUE MEMORANDUM ORDER NO. 47-64 SUBJECT : Publishing the Opinion of the Secretary of Justice, dated December 20, 1963, on Deposits of Excess Funds of the City of Manila with any Commercial Bank Authorized to Receive Government Deposits TO : All Internal Revenue Officers, Employees and Other Concerned For the information and guidance of all internal revenue officers, employees and others concerned, there is quoted hereunder the opinion of the Secretary of Justice dated December 20, 1963, embodied in the Memorandum Circular No. 5-64 dated January 28, 1964 of the Secretary of Finance to all heads of Bureaus and Offices and Provincial, City and Municipal Treasurers as follows: aisadc "This has reference to your letter concerning your directive to the City Treasurer of Manila not to make, without your instructions and without previous consultation with the Central Bank, any new deposits of excess city funds with any commercial bank authorized to receive government deposits. You state that the City Mayor, on the other hand, has directed the same official to deposit excess city funds with certain private commercial banks authorized to receive government deposits. "Your directive was issued, it appears, in line with the resolution of the Monetary Board providing that '"a portion of the time deposits of local governments and semi-government entities (excluding financial institutions) shall likewise be transferred to the Central Bank. The specific amounts to be transferred which will be based on data supplied by the Department of Finance, shall be determined by the Central Bank in accordance with the needs for further monetary restraint."' This resolution was adopted by the Monetary Board pursuant to the provisions of Section 118 of Republic Act No. 265, the Central Bank Act, which reads: 'SEC. 118. Official deposits . The Central Bank shall be the official depository of the Government and its political subdivisions and instrumentalities: Provided, however, that the Monetary Board may designate Government-owned banks and other banks incorporated in the Philippines to accept deposits from said entities, subject to such rules and regulations as the Board may prescribe.' Clearly, under this section and Section 52, paragraph 8, Article XI, of the City Charter of Manila (Republic Act No. 409), the City Treasurer should deposit all municipal funds and collections of the City of Manila with the Central Bank as the official depository of the Government and its political subdivisions and instrumentalities. The City of Manila is not authorized or empowered by law to deposit its funds outside of the Central Bank. Rather, it is the Central Bank alone which, through the Monetary Board, is given the authority to designate government-owned or other commercial banks to accept deposits from government entities and political subdivisions such as the City of Manila subject to such rules and regulations as the Board may prescribe. Consequently, unless the Central Bank designates commercial banks as authorized depositories, all funds of the City of Manila must be deposited with the Central Bank. Where it has already designated depositories, it can cancel or withdraw such designation, in which case deposits of the City of Manila would have to be transferred to and deposited with the Central Bank. "If, as above stated, the Central Bank may cause all the funds of the government, and of its political subdivisions and instrumentalities, presently deposited in commercial banks, to be withdrawn from the said banks and transferred to the Central Bank, surely it must have the lesser power to effect a partial withdrawal of said funds, or to limit, prospectively, the amount of funds that the government or any of its entities may continue to deposit outside of the Central Bank. "Manila, under its charter, is not entirely free to determine when or where it can deposit its funds; its charter requires that the City Treasurer deposit its funds in the National Treasury or in a government depository. The matter of how much of its funds the City can deposit outside of the Central Bank is necessarily subject to the authority of the Central Bank, inasmuch as the latter is the official depository of the government and its political subdivisions and instrumentalities, and the one authorized to '"designate Government-owned banks and banks incorporated in the Philippines to accept deposits from said entities;"' as hereinabove discussed. "It is my opinion, therefore, that the directive of the Secretary of Finance, implementing the resolution of the Monetary Board, to the City Treasurer of Manila not to make any new deposit of excess city funds with any commercial bank authorized to receive government deposits, without his instructions and without previous consultation with the Central Bank, in effect requiring that these excess funds so deposited with the Central Bank, is valid and binding upon the City Treasurer." "In view of the foregoing opinion, it is hereby enjoined that all bureaus and offices under the Department of Finance, including provincial, city and municipal treasurers, should ask for a directive or approval of the Secretary of Finance before making any new deposit of their excess funds with any commercial bank authorized to receive government deposits. "Please be guided accordingly. "(SGD.) RUFINO G. HECHANOVA Secretary" All internal revenue officers and others concerned are hereby enjoined to give this circular as wide a publicity as possible. cdta (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue