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Government
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Banking
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Institutions
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Philippine Land Bank of the Philippine
Banking Thrift Banks Rural Banks Bank of the
National Bank Philippines Amanah Bank
Institutions Philipinnes
Ordinary
Savings and
Commercial
Mortage Banks
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Banks
The Banking Institution
• The Banking Institution in the Philippines can be categorized as private banking and
government banking.
• The private banking institutions are comprised of commercial banking such as universal banks
and ordinary commercial banks; thrift banks like savings and mortrage banks, private
development banks, and stock savings and loan association; and the rural banks.
• The govenment banking institutions, on the other hand, consist of Philippine National Bank,
Development Bank of the Philippines, Land Bank of the Philippines, and the Philippine Amanah
Bank
Objectives of BSP
1. Maintain monetary policies conducive to a balanced and sustainable growth of the economy.
- It is about maintaining the rule of conduct or policies in order to have a good supervising and
regulating the financial system of the Philippines. It is mobilizing and directing the resources to
attain sustainable growth of the economy. They provide policy directions in the areas of money,
banking, and credit.
2. Maintain price stability in the country. - One of the goals in the economy is to attain price
level stability or stable in general price level and the failure to achieve this may mean a problem
if inflation.
3. Promote and maintain monetary stability and the convertibility of the peso. - It should
maintain the monetary stability to regulate the supply of money in the economy. It is about
influencing the timing, cost, and availability of money. And maintaining the convertibility of
peso, the conversion of money. A central bank needs to be able to meet its domestic and
international payments to create confidence in the people it serves and the countries it deals
with abroad.
4. Maintain stability of the financial system - They ensure that financial institution encourage
people and companies to save for the future, make deposits, etc., to oversee that will maintain
its permanence in the financial system.
5. Provide payment and other financial services to the government, the public, financial
institutions, and foreign official institutions. - They continue to give the needs in the financial
environment offering financial services like in the:
Government – issuing treasury bills
Public – make deposits, borrow and invest, withdrawals
Financial Institutions – acquiring capital for investment
Foreign official institution – letter of credit.
6. Supervise and regulate depository institutions. - It is about directing and controlling the fund
that was accepted as deposits from surplus units.
Functions of BSP
Bangko Sentral ng Pilipinas has 7 functions such as (1) Bank of Issue, (2) Government’s banker,
agent, and adviser, (3) Custodian of the cash reserves of banks, (4) Custodian of the nation’s
reserves of international currency, (5) Bank of rediscount and lender of last resort, (6) Bank of
central clearance and settlement, (7) Controller of Credit.
Bank of Issue - BSP is the only one of the financial institutions who has the rights to produce,
print out paper bills and mint coins. This is enact to ensure the uniformity in design and content
of money, for the people to prevent the circulation of a fake money and for us to know if the
money is either be fake or real. It can also effect the government supervision over money
supply, to give prestige or honor to the central bank and become a good source of income for
government. BSP do not easily print out money, they need to know first the state of our
economy because if BSP print out money the prices of goods and services will increase and the
price stability will not be balanced.
Government’s banker, agent, and adviser - All the money of all agencies of our country will
handle by BSP, if ever there is a transaction about money to other party, BSP is the one who will
transact or talk to them. BSP is also responsible in importation or foreign exchange, because we
all know that BSP is the one who has the skills and knowledge about that.
Custodian of the cash reserves of banks - Banks are required to have fund reserved to BSP
because if the bank needs money they have money that is reserved to BSP. If there are some
problems like money crisis or a client withdraws all his/her money, bank has reserved money
where they can use it for that problem. Fund Reserved has an interest.
Custodian of the nation’s reserves of international currency - BSP is the one who handle all the
international currencies, gold and more that owned by our country. And that international
currency and gold is a requirement in printing out money.
Bank of rediscount and lender of last resort - Bank can borrow money to BSP and in that way
they can be a lender of last resort. And about rediscounting, it is a process of a discounted
amount will be discounted again, example of that is when one party borrows money that
money will have an interest and also has a deadline or due date and when other party did not
pay on or before the deadline, the borrowed money will be given another interest that the
borrower needs to pay.
Bank of central clearance and settlement - We all know that BSP is the mother of all banks; it
means that in every disagreement of two banks BSP is responsible to clear things between the
two banks. BSP is the one who will settle all the issues between the banks. And provide rules
and regulations for the banks to prevent the misunderstandings and problems.
Controller of Credit - BSP needs to control credit because controlling credit can control money
supply and if we control money supply there is a possibility that the prices of goods and services
will just be balanced. BSP needs to limit the credit; they need to prevent the high percentage of
credit because if the credit is high then the money supply is high. There are 9 ways how BSP can
control credit. First ids increasing or decreasing interest rate, when the interest rate is high then
the people that is possibly borrows money will decrease. Second increasing or decreasing the
legal reserve requirement of the bank, if the reserved requirement of the bank is high then the
possibility of the bank to borrow money can limit also. Then, by regulating requirements of
stock exchange securities, open market operations can also limit the credit because open
market operations influence the money supply. When BSP sells securities the money supply will
decrease and when they buy securities, money supply will increase. Credits can also limit by
imposing ceilings on total amounts bank can lend, rationing central bank credit, restricting
imports, selecting projects for funding and moral suasion by encouraging people to support and
cooperate with the rules and regulations of central bank.