Knowing the BSP

The central banking is responsible in maintaining low and stable inflation and providing proactive
leadership to ensure a strong financial system for a balanced and sustainable growth of the
economy.
The BSP provides a solid anchor for the economy while meeting the challenges of times
Functions:
1. Promoting price stability
2. Supervision of all banks monitors & examines the operations of the banks
3. Regulates other financial institutions including pawnshops
BSP
--- only agency that can use banknotes & coins
--- manages international reserves
--- helps keep the piso stable
--- determines the exchange rate policy
--- banks of all banks & as lender of last resort it can be provide loans and assistance to banks
when necessary.
--- financial adviser & official depository bank of the government
3 Pillars of Central Banking:
1. Price stability keep inflation low to promote economic efficiency & improve the
economic well-being of the
people.
2. Financial Stability ensures banks compliance w/ the rules and regulations and ensuring
bank business conduct in a safe and sound manner
3. Efficient payments & settlements system enables people to make safe, timely, &
accurate settlements of financial transactions.
BSP is headed by the governor ---chair of monetary board --- policy making body.
6 memebrs of the monetary board, 5 from private sector & 1 from cabinet.
3 deputy governors.
1. Monetary stability sector
2. Supervision & examination sector
3. Resource management sector
BSP Security Complex where:
1. Coins are minted - a mint is industrial facility w/c manufactures coins for currency.
2. Banknotes are printed;
3. Gold is refined.
3 regional offices: a.) La Union
municipalities.

b.) Cebu

c.) Davao ; and 18 branches in the key cities and

Price Stability keeping inflation low & stable.

Monetary policy refers to the measures or actions taken by the BSP to help keep inflation low &
stable.
The BSP conducts monetary policy using an approach called INFLATION TARGETTING keeping
the average inflation close to a pre-announced target. If prices are rising more rapidly than the
desired inflation rate because of the strong demand for goods relative to supply then the BSP ill
take action to bring down inflation to target level by tightening monetary policy. On the other
hand, if the forecasted inflation is below the target due to weak demand for goods & services
then the BSP will ease monetary policy.
To tighten monetary policy the BSP:
a.) raise its policy interest rates;
c.) raise the reserve requirements imposed on
banks.
b.) sell government securities;
To ease monetary policy, the BSP will do the opposite.
Financial Stability banking is business founded on public trust. Bankers are uniquely allowed
to take deposits then transforming these deposits into loans & other financial assets that fuels
the requirements of the economy. Banks are subject to close supervisions by the BSP.
6 major categories of Banks:
1.) Universal Banks offers both banking and stock broking services to its clients.
2.) Commercial Banks provides transactional, savings, & money market accounts & that
accepts time deposits
3.) Thrift Banks focus on taking deposits & originating home mortgages

4.) Rural Banks helps rationalize the developing regions or developing country to finance
their needs specially the projects regarding agricultural progress
5.) Cooperatives owned & operated by a group of individuals for their mutual benefit
6.) Islamic Bank banking activity that is consistent with the principles of Islamic Law.
Efficient Payments & Settlements System: PhilPass
-the BSP takesthe lead in maintaining safe, sound & efficient payments and settlement
system for the country. Some transactions are simple involving small amounts, examples:
payments settled in cash, cheques, debit & credit cards. Other transcctions are more complex
involving large payments such as interbank loans, purchases & sale of government securities
Given the ability to print money, why cant we just print a lot of money?
As a matter of policy, BSP print only the amount of money projected to be sufficient to promote
stable movement of consumer prices conducive to balance and sustain the level of economic
growth. Printing more money than need is a bad policy because it will lead to a high consumer
prices and lower buying power for the family.