CAPITAL MARKET 2.

The mortgage market

 Deals with loans on residential, commercial, and industrial
 that portion of the financial market which deals with longer-term real estate, and on farmland
loanable funds (Money Market – short-term funds) 3. The stock market
 loans obtained are used by industry and commerce mainly for fixed  Common and preferred stocks are issued by corporations
investment. are traded.
 Consists of all institutions that canalize the supply and demand for  TWO COMPONENTS:
long-term capital and claims on capital o The organized exchanges
 Comprises the entire structure of the Philippine financial system o The less formal over-the-counter markets

THE COST OF CAPITAL

PHILIPPINE FINANCIAL SYSTEM
CAPITAL FUNDING
GROSS COMBINATION COST OF NET
ALTER
INCOME CAPITAL PROFIT
NATIVE SHORT LONG
BANKING (000,000) PREFERRED (000,000) (000,000)
BANGKO NON-BANK FINANCIAL TERM TERM
STOCKS
INSTITUTIONS SENTRAL NG INSTITUTIONS (NBFI) DEBT DEBT
PILIPINAS
1 P170 100% - - P20 P10

PRIVATE
BANKS 2 170 - 100% - 17 13
PRIVATE NBFI
3 170 - - 100% 10 20
COMMERCIAL
BANKS GOVERNMENT NBFI 4 170 33% 33% 34% 16 14

THRIFT BANKS
*Assuming other relevant costs of P40 million were deducted from the
gross income.
GOVERNMENT
BANKS

COMPONENTS OF THE CAPITAL MARKET:

1. The bond market

 Done over-the-counter
 Owned by and traded among the large financial institutions
like life insurance companies, mutual funds, and pension
funds