Sie sind auf Seite 1von 34
Overview of the Philippine Financial System BY: ASSOC. PROF. RIA SANTOS FAJILAGO DEPARTMENT OF BANKING
Overview of the Philippine Financial System BY: ASSOC. PROF. RIA SANTOS FAJILAGO DEPARTMENT OF BANKING

Overview of the Philippine Financial System

BY: ASSOC. PROF. RIA SANTOS FAJILAGO

DEPARTMENT OF BANKING AND FINANCE COLLEGE OF ACCOUNTANCY AND FINANCE

Financial System BY: ASSOC. PROF. RIA SANTOS FAJILAGO DEPARTMENT OF BANKING AND FINANCE COLLEGE OF ACCOUNTANCY

Creating a Central Bank for the Philippines

Creating a Central Bank for the Philippines A group of Filipinos had conceptualized a central bank

A group of Filipinos had conceptualized a central bank for the Philippines as early as 1933. It

came up with the rudiments of a bill for the establishment of a central bank for the country

after a careful study of the economic provisions of the Hare-Hawes Cutting Bill, the Philippine independence bill approved by the US Congress.

During the Commonwealth period (1935-1941), the discussion about a Philippine central bank that would promote price stability and economic growth continued. The country’s

monetary system then was administered by the Department of Finance and the National

Treasury. The Philippines was on the exchange standard using the US dollarwhich was backed by 100 percent gold reserveas the standard currency.

Creating a Central Bank for the Philippines

cont.

Creating a Central Bank for the Philippines cont. In 1939 , as required by the Tydings-McDuffie

In 1939, as required by the Tydings-McDuffie Act, the Philippine legislature passed a law establishing a central bank. As it was a monetary law, it required the approval of the United States president. However, President Franklin D. Roosevelt disapproved it due to strong opposition from vested interests. A second law was passed in 1944 during the Japanese occupation, but the arrival of the American liberalization forces aborted its implementation.

Shortly after President Manuel Roxas assumed office in 1946, he instructed then Finance

Secretary Miguel Cuaderno, Sr. to draw up a charter for a central bank. The establishment

of a monetary authority became imperative a year later as a result of the findings of the

Joint Philippine-American Finance Commission chaired by Mr. Cuaderno. The Commission,

which studied Philippine financial, monetary and fiscal problems in 1947, recommended a shift from the dollar exchange standard to a managed currency system. A central bank

was necessary to implement the proposed shift to the new system.

Creating a Central Bank for the Philippines

cont.

Creating a Central Bank for the Philippines cont. Immediately, the Central Bank Council, which was created

Immediately, the Central Bank Council, which was created by President Manuel Roxas to prepare

the charter of a proposed monetary authority, produced a draft. It was submitted to Congress in

February1948. By June of the same year, the newly-proclaimed President Elpidio Quirino, who

succeeded President Roxas, affixed his signature on Republic Act No. 265, the Central Bank Act of

1948. The establishment of the Central Bank of the Philippines was a definite step toward national

sovereignty.

Over the years, changes were introduced to make the charter more responsive to the needs of the economy. On 29 November 1972, Presidential Decree No. 72 adopted the recommendations

of the Joint IMF-CB Banking Survey Commission which made a study of the Philippine banking

system. The Commission proposed a program designed to ensure the system’s soundness and healthy growth. Its most important recommendations were related to the objectives of the Central

Bank, its policy-making structures, scope of its authority and procedures for dealing with problem

financial institutions.

Creating a Central Bank for the Philippines

cont.

Creating a Central Bank for the Philippines cont. Subsequent changes sought to enhance the capability of

Subsequent changes sought to enhance the capability of the Central Bank, in the light of a developing economy, to enforce banking laws and regulations and to respond to emerging

central banking issues. Thus, in the 1973 Constitution, the National Assembly was mandated

to establish an independent central monetary authority. Later, PD 1801 designated the Central Bank of the Philippines as the central monetary authority (CMA).

Years later, the 1987 Constitution adopted the provisions on the CMA from the 1973

Constitution that were aimed essentially at establishing an independent monetary authority through increased capitalization and greater private sector representation in the Monetary

Board.

Creating a Central Bank for the Philippines

cont.

Creating a Central Bank for the Philippines cont. The administration that followed the transition government of

The administration that followed the transition government of President Corazon C. Aquino saw the turning of another chapter in Philippine central banking. In accordance with a

provision in the 1987 Constitution, President Fidel V. Ramos signed into law Republic Act No.

7653, the New Central Bank Act, on 14 June 1993.

The law provides for the establishment of an independent monetary authority to be known

as the Bangko Sentral ng Pilipinas, with the maintenance of price stability explicitly stated

as its primary objective. This objective was only implied in the old Central Bank charter. The law also gives the Bangko Sentral fiscal and administrative autonomy which the old Central

Bank did not have. On 3 July 1993, the New Central Bank Act took effect.

Overview of Functions and Operations

Overview of Functions and Operations Objectives The BSP’s primary objective is to maintain price stability

Objectives

The BSP’s primary objective is to maintain price stability conducive to a balanced and

sustainable economic growth. The BSP also aims to promote and preserve monetary

stability and the convertibility of the national currency.

Responsibilities

The BSP provides policy directions in the areas of money, banking and credit. It supervises

operations of banks and exercises regulatory powers over non-bank financial institutions

with quasi-banking functions.

Under the New Central Bank Act, the BSP performs the following functions, all of which

relate to its status as the Republic’s central monetary authority.

Overview of Functions and Operations

Overview of Functions and Operations Liquidity Management. The BSP formulates and implements monetary policy aimed at

Liquidity Management. The BSP formulates and implements monetary policy aimed at influencing money supply consistent with its primary objective to maintain price stability.

Currency issue. The BSP has the exclusive power to issue the national currency. All notes

and coins issued by the BSP are fully guaranteed by the Government and are considered legal tender for all private and public debts.

Lender of last resort. The BSP extends discounts, loans and advances to banking institutions for liquidity purposes.

Financial Supervision. The BSP supervises banks and exercises regulatory powers over non-

bank institutions performing quasi-banking functions.

Overview of Functions and Operations

Overview of Functions and Operations Management of foreign currency reserves. The BSP seeks to maintain sufficient

Management of foreign currency reserves. The BSP seeks to maintain sufficient international reserves to meet any foreseeable net demands for foreign currencies in order to preserve

the international stability and convertibility of the Philippine peso.

Determination of exchange rate policy. The BSP determines the exchange rate policy of the Philippines. Currently, the BSP adheres to a market-oriented foreign exchange rate policy

such that the role of Bangko Sentral is principally to ensure orderly conditions in the market.

Other activities. The BSP functions as the banker, financial advisor and official depository of the Government, its political subdivisions and instrumentalities and government-owned and -controlled corporations.

Bangko Sentral

ng Pilipinas

Bangko Sentral ng Pilipinas Banking Institutions Non - bank Financial Institutions I. Private Banking Institutions I.
Bangko Sentral ng Pilipinas Banking Institutions Non - bank Financial Institutions I. Private Banking Institutions I.
Banking Institutions Non - bank Financial Institutions I. Private Banking Institutions I. Private Non -bank
Banking Institutions
Non - bank Financial Institutions
I. Private Banking Institutions
I. Private Non -bank Financial
1.
Commercial Banking Institutions
Institutions
1.1 Ordinary Commercial Bank
1. Investment Banks
1.2 Universal Bank
2. Finance Companies
2. Thrift Banks
3. Securities Dealers/Brokers
2.1 Savings and Mortgage Bank
4. Pawnshops
2.2 Private Development Bank
5. Lending Investors
2.3 Savings and Loan Association
6. Fund Managers
3. Rural Banks
7. Trust Companies/Departments
II. Government Banking Institutions
8 . Insurance Companies
1. Philippine National Bank
II. Government Non -bank Financial
2. Developme nt Bank
of the
Institutions
Philippines
1. Government Service Insurance
3. Landbank of the Philippines
System
4. Philippine Amanah Bank
2. Social Security System
The Monetary Board The powers and function of Bangko Sentral are exercised by its Monetary

The Monetary Board

The Monetary Board The powers and function of Bangko Sentral are exercised by its Monetary Board,

The powers and function of Bangko Sentral are exercised by its Monetary Board, which has seven members appointed by the President of The Philippines. Under the New Central Bank Act, one of the government sector members of the Monetary Board must also be a

member of the Cabinet designated by the President.

The New Central Bank Act establishes certain qualifications for the members of the

Monetary Board and also prohibits members from holding certain positions with other

governmental agencies and private institutions that may give rise to conflicts of interest.

With the exception of the members of the Cabinet, the Governor and the other members

of the Monetary Board serve terms of six years and may only be removed for cause.

The Monetary Board meets at least once a week. The Board may be called to a meeting by

the Governor of the Bangko Sentral or by two (2) other members of the Board. Usually, the Board meets every Thursday but on some occasions, it convenes to discuss urgent issues.

In the exercise of its authority, the Monetary

Board shall:

discharge of the
discharge of the

Issue rules and regulations it considers necessary for the effective

responsibilities and exercise of the powers vested upon the Monetary Board and the

Bangko Sentral;

Direct the management, operations, and administration of the Bangko Sentral, reorganize its personnel, and issue such rules and regulations as it may deem necessary or convenient for this purpose. The legal units of the Bangko Sentral shall be under the exclusive supervision and control of the Monetary Board;

Establish a human resource management system which shall govern the selection, hiring,

appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to

establish professionalism and excellence at all levels of the Bangko Sentral in accordance with sound principles of management.

A compensation structure, based on job evaluation studies and wage surveys subject to

the Board's approval, shall be instituted as an integral component of the Bangko Sentral's human resource development program.

In the exercise of its authority, the Monetary

Board shall:

In the exercise of its authority, the Monetary Board shall: On the recommendation of the Governor,

On the recommendation of the Governor, appoint, fix the remunerations and other emoluments, and remove personnel of the Bangko Sentral, subject to pertinent civil service laws: Provided,

That the Monetary Board shall have exclusive and final authority to promote, transfer, assign, or

reassign personnel of the Bangko Sentral and these personnel actions are deemed made in the

interest of the service and not disciplinary: Provided, further, That the Monetary Board may delegate such authority to the Governor under such guidelines as it may determine;

Adopt an annual budget for and authorize such expenditures by the Bangko Sentral in the

interest of the effective administration and operations of the Bangko Sentral in accordance with applicable laws and regulations; and

Indemnify its members and other officials of the Bangko Sentral, including personnel of the

departments performing supervision and examination functions against all costs and expenses reasonably incurred by such persons in connection with any civil or criminal action, suit or proceedings to which he may be, or is, made a party by reason of the performance of his functions or duties, unless he is finally adjudged in such action or proceeding to be liable for negligence or misconduct.

The BSP Monetary Board

The BSP Monetary Board

Chairman Benjamin E. Diokno

Members Carlos G. Dominguez III

Felipe M. Medalla

Juan De Zuniga, Jr.

Peter B. Favila

Antonio S. Abacan, Jr.

V. Bruce J. Tolentino

Carlos G. Dominguez III Felipe M. Medalla Juan De Zuniga, Jr. Peter B. Favila Antonio S.
Carlos G. Dominguez III Felipe M. Medalla Juan De Zuniga, Jr. Peter B. Favila Antonio S.

Bsp Organizational structure

Bsp Organizational structure
Bsp Organizational structure
Bsp Organizational structure
Bsp Organizational structure
Bsp Organizational structure
Governance of the Bank  The Monetary Board exercises the powers and functions of the

Governance of the Bank

Governance of the Bank  The Monetary Board exercises the powers and functions of the BSP,

The Monetary Board exercises the powers and functions of the BSP, such as the conduct of monetary

policy and supervision of the financial system. Its chairman is the BSP Governor, with five full-time members

from the private sector and one member from the Cabinet.

The Governor is the chief executive officer of the BSP and is required to direct and supervise the operations

and internal administration of the BSP. A deputy governor (or a Senior Assistant Governor in the case of the

Currency Management Sector) heads each of the BSP's operating sector as follows:

Monetary and Economics Sector is mainly responsible for the operations/activities related to monetary policy formulation, implementation, and assessment

Financial Supervision Sector is mainly responsible for the regulation of banks and other BSP-supervised financial institutions, as well as the oversight and supervision of financial technology and payment systems

Currency Management Sector is mainly responsible for the forecasting, production, distribution, and

retirement of Philippine currency, as well as security documents, commemorative medals, and medallions

Corporate Services Sector is mainly responsible for the effective management of corporate strategy, communications, and risks, as well as the BSP's human, financial, technological, and physical resources to

support the BSP's core functions

The Governor Pursuant to Republic Act No. 7653 (The New Central Bank Act), the Governor

The Governor

The Governor Pursuant to Republic Act No. 7653 (The New Central Bank Act), the Governor shall

Pursuant to Republic Act No. 7653 (The New Central Bank Act), the Governor shall be the chief executive officer of the Bangko Sentral. His powers and duties shall be to:

Prepare the agenda for the meetings of the Monetary Board and to submit for the consideration of the

Board the policies and measures that he believes to be necessary to carry out the purposes and provisions of said Act;

Execute and administer the policies and measures approved by the Monetary Board;

Direct and supervise the operations and internal administration of the Bangko Sentral. The Governor may

delegate certain of his administrative responsibilities to other officers or may assign specific tasks or responsibilities to any full-time member of the Monetary Board without additional remuneration or allowance whenever he may deem fit or subject to such rules and regulations as the Monetary Board may

prescribe;

Appoint and fix the remunerations and other emoluments of personnel below the rank of a department head in accordance with the position and compensation plans approved by the Monetary Board, as well as to impose disciplinary measures upon personnel of the Bangko Sentral, subject to the provisions of

Section 15(c) of said Act: Provided, That removal of personnel shall be with the approval of the Monetary

Board;

Render opinions, decisions, or rulings, which shall be final and executory until reversed or modified by the

Monetary Board, on matters regarding application or enforcement of laws pertaining to institutions

supervised by the Bangko Sentral and laws pertaining to quasi-banks, as well as regulations, policies or instructions issued by the Monetary Board, and the implementation thereof; and

Exercise such other powers as may be vested in him by the Monetary Board.

The Governor cont. The Governor of the Bangko Sentral shall be the principal representative of

The Governor cont.

The Governor cont. The Governor of the Bangko Sentral shall be the principal representative of the

The Governor of the Bangko Sentral shall be the principal representative of the Monetary Board and of the

Bangko Sentral and, in such capacity and in accordance with the instructions of the Monetary Board, he shall

be empowered to:

Represent the Monetary Board and the Bangko Sentral in all dealings with other offices, agencies and

instrumentalities of the Government, and all other persons or entities, public or private, whether domestic,

foreign or international;

Sign contracts entered into by the Bangko Sentral, notes and securities issued by the Bangko Sentral, all reports, balance sheets, profit and loss statements, correspondence, and other documents of the Bangko

Sentral;

Represent the Bangko Sentral, either personally or through counsel,

including private counsel, as may be

authorized by the Monetary Board, in any legal proceedings, action or specialized legal studies; and

Delegate his power to represent the Bangko Sentral, to other officers upon his own responsibility: Provided, however, That in order to preserve the integrity and the prestige of his office, the Governor of the Bangko Sentral may choose not to participate in preliminary discussions with any multilateral banking or financial

institution on any negotiations for the Government within or outside the Philippines. During the

negotiations, he may instead be represented by a permanent negotiator.

Banking institutions Banking Supervision The Bangko Sentral has supervision over the operations of banks and

Banking institutions

Banking institutions Banking Supervision The Bangko Sentral has supervision over the operations of banks and exercises

Banking Supervision

The Bangko Sentral has supervision over the operations of banks and exercises such regulatory powers as provided in the New Central Bank Act and other pertinent laws over the operations of finance companies and non-bank financial institutions performing quasi- banking functions.

Banking institutions How the bank operates? The main operation of a bank involves financial intermediation.

Banking institutions

Banking institutions How the bank operates? The main operation of a bank involves financial intermediation. Transactions

How the bank operates?

The main operation of a bank involves financial intermediation.

Transactions are created between individuals, business firms, government institutions and

foreign investors- the suppliers and users of funds.

Banking institutions (borrowers). A bank act as a financial intermediary that serves as a middleman

Banking institutions

Banking institutions (borrowers). A bank act as a financial intermediary that serves as a middleman for

(borrowers).

A bank act as a financial intermediary that serves as a middleman for different parties in a

financial transaction. It facilitates the channeling of funds between lenders and borrowers

indirectly.

Through the process of financial intermediation, certain assets or liabilities are transformed

into different assets or liabilities. As such, financial intermediaries channel funds from people

carry

out

a

desired

who have extra money or surplus savings (savers) to those who do not have enough money

to

activity

That is, savers (lenders) give funds to an intermediary institution (such as a bank), and that institution gives those funds to spenders (borrowers).

Financial intermediation

Financial intermediation
Financial intermediation
Banking institutions A banker is one who undertakes banking activities, accepting deposits and lending money

Banking institutions

Banking institutions A banker is one who undertakes banking activities, accepting deposits and lending money for

A banker is one who undertakes banking activities, accepting deposits and lending money for different purposes.

The essential features of banking activities are as follows:

1. accepting deposits from public;

2. lending or investment of such deposits;

3. incidental to the activities of accepting deposits for lending or investing,

banks undertake activities like

banks undertake activities like — a. Promoting and mobilizing savings of the public; b. Providing funds

a. Promoting and mobilizing savings of the public;

b. Providing funds to trade and industry by way of discounting bills, overdraft,

cash credit facility, and transfer of funds from one place to another;

c. Providing agency services to customers, such as collection of bills, payment of insurance

premium, purchase and sale of securities, etc., and other general services, such as issue of travelers’ checks, credit cards, locker facility, etc.;

Banking Institutions The Bangko Sentral ng Pilipinas is the regulating body of all banking institutions

Banking Institutions

Banking Institutions The Bangko Sentral ng Pilipinas is the regulating body of all banking institutions in

The Bangko Sentral ng Pilipinas is the regulating body of all banking institutions in the

country. The Monetary Board as its policy making body issues policies and guidelines for the banks strict implementation.

Philippine banking system is composed of universal and commercial banks, thrift banks, rural and cooperative banks.

Universal and Commercial banks

financial institutions.
financial
institutions.

Universal and commercial banks represent the largest single group, resource-wise, of financial institutions in the country.

They

offer

the

widest

variety

of

banking

services

among

In addition to the function of an ordinary commercial bank, universal banks are also

authorized to engage in underwriting and other functions of investment houses, and to invest in equities of non-allied undertakings.

Thrift banks The thrift banking system is composed of savings and mortgage banks, private development

Thrift banks

Thrift banks The thrift banking system is composed of savings and mortgage banks, private development banks,

The thrift banking system is composed of savings and mortgage banks, private development banks, stock savings and loan associations and microfinance thrift banks.

Thrift banks are engaged in accumulating savings of depositors and investing them.

They also provide short-term working capital and medium- and long-term financing to

businesses engaged in agriculture, services, industry and housing, and diversified financial and allied services, and to their chosen markets and constituencies, especially small- and

individuals.

medium-

enterprises

and

Rural and Cooperative banks financial services. Rural and cooperative banks are the more popular type

Rural and Cooperative banks

financial services.
financial
services.

Rural and cooperative banks are the more popular type of banks in the rural communities.

Their role is to promote and expand the rural economy in an orderly and effective manner

by

providing

the

people

in

the

rural

communities

with

basic

Rural and cooperative banks help farmers through the stages of production, from buying

seedlings to marketing of their produce. Rural banks and cooperative banks are differentiated from each other by ownership.

While rural banks are privately owned and managed, cooperative banks are

organized/owned by cooperatives or federation of cooperatives.

Monetary Policies

1. Legal Reserve Requirement

2. Rediscounting

3. Discounting

4. Open Market Operations

5. Selective Credit Control

6. Moral Suasion

Reserve Requirement 2. Rediscounting 3. Discounting 4. Open Market Operations 5. Selective Credit Control 6. Moral
Reserve Requirement 2. Rediscounting 3. Discounting 4. Open Market Operations 5. Selective Credit Control 6. Moral
Non-bank financial institutions The term non-bank financial institution refers to companies that offer financial services,

Non-bank financial institutions

Non-bank financial institutions The term non-bank financial institution refers to companies that offer financial services,

The term non-bank financial institution refers to companies that offer financial services, but

do not hold banking licenses and cannot accept deposits. Insurance companies,

brokerage firms, and companies offering microloans are examples of non-bank financial

institutions.

A non-bank financial institution (NBFI) is an organization that provides financial services, but is not a licensed bank and is not allowed to accept deposits from customers. The types of

services offered by a NBFI typically fall into the following categories:

Non-bank financial institutions cont.

Non-bank financial institutions cont. Risk Pooling Institutions : organizations such as insurance companies that spread

Risk Pooling Institutions: organizations such as insurance companies that spread financial

risk among a large number of entities.

Institutional Investors: organizations such as pension funds and mutual funds that trade securities in volumes that qualify for lower commissions.

Other Non-Bank Financial Institutions: organizations that provide financial services such as leasing of assets, market makers (who provide liquidity), management companies, financial

advisors, and securities brokers.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. References

References

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. References

www.bsp.gov.ph

Financial Literacy Agenda for Mass Empowerment http://flame.org.in/KnowledgeCenter

www.google.com

Philippine Clearing House Corporation www.pchc.com.ph

Investor Savings.com http://www.investorsavings.com

Investopedia.com https://www.investopedia.com

Bank of the Philippine Islands www.bpiexpressonline.com

Bangko Sentral ng Pilipinas www.bsp.gov.ph

http://gluedideas.com/content-collection/banking-principles-practice-1/Classification-and-Functions-of_P6.html

www.thebalance.com

https://www.streetdirectory.com/travel_guide/145431/banking/role_of_commercial_banks_in_trading_currencies.html

www.wisdomjobs.com

https://iedunote.com/bank-services

http://www.businessdictionary.com/definition/collection.html

www.pdic.gov.ph