Arianne Grace C.

Botones

1. The Philippine Financial System

The Financial System is a term used in finance to describe the system that allows money to go

between savers and borrowers.

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.

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.

 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. 

 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.

2. Different Financial Intermediaries

According to the dominant economic view of monetary operations, the following institutions are

or can act as financial intermediaries:

 Banks - a financial institution that accepts deposits from the public and creates credit.

 Mutual savings banks - a financial institution chartered by a central or regional

government, without capital stock, that is owned by its members who subscribe to a

common fund.

 Savings banks - a financial institution whose primary purpose is accepting savings

deposits and paying interest on those deposits.

 Building societies - a financial institution owned by its members as a mutual

organization. Building societies offer banking and related financial services, especially

savings and mortgage lending.

 Credit unions - a member-owned financial cooperative, democratically controlled by its

members, and operated for the purpose of promoting thrift, providing credit at competitive

rates, and providing other financial services to its members.

 Financial advisers or brokers - a professional who renders financial services to clients.

 Insurance companies

 Collective investment schemes

 Pension funds

 cooperative societies

 Stock exchanges

3. Global Finance

The global financial system is becoming more and more integrated each year. Financial

markets exist throughout the world and financial institutions have become a global industry.

Most nations’ central banks respond to the decisions of the US and the FED by taking similar

actions.

The financial system is more connected.

Financial institutions are more global.

Only 3 of the 30 largest banks in the world are US institutions.

Most nations have a central bank.

4. Financial Intermediaries

A financial intermediary is typically an institution that facilitates the channeling of funds between

lenders and borrowers indirectly. That is, savers (lenders) give funds to an intermediary

institution (such as a bank), and that institution gives those funds to spenders (borrowers). This

may be in the form of loans or mortgages.

The hypothesis of financial intermediaries adopted by mainstream economics offers the

following three major functions they are meant to perform:

1. Creditors provide a line of credit to qualified clients and collect the premiums of debt

instruments such as loans for financing homes, education, auto, credit cards, small

businesses, and personal needs.

Converting short-term liabilities to long term assets (banks deal with large number of

lenders and borrowers, and reconcile their conflicting needs)

2. Risk transformation

Converting risky investments into relatively risk-free ones. (lending to multiple borrowers

to spread the risk)

3. Convenience denomination

Matching small deposits with large loans and large deposits with small loans

Arianne Grace C. Botones

1. Global Finance

The global financial system is becoming more and more integrated each year. Financial

markets exist throughout the world and financial institutions have become a global industry.

Most nations’ central banks respond to the decisions of the US and the FED by taking similar

actions.

The financial system is more connected.

Financial institutions are more global.

Only 3 of the 30 largest banks in the world are US institutions.

Most nations have a central bank.

2. Financial Intermediaries

A financial intermediary is typically an institution that facilitates the channeling of funds between

lenders and borrowers indirectly. That is, savers (lenders) give funds to an intermediary

institution (such as a bank), and that institution gives those funds to spenders (borrowers). This

may be in the form of loans or mortgages.

The hypothesis of financial intermediaries adopted by mainstream economics offers the

following three major functions they are meant to perform:

1. Creditors provide a line of credit to qualified clients and collect the premiums of debt

instruments such as loans for financing homes, education, auto, credit cards, small

businesses, and personal needs.

Converting short-term liabilities to long term assets (banks deal with large number of

lenders and borrowers, and reconcile their conflicting needs)

2. Risk transformation
Project in Financial Management
(Inflation Rate Q4 2016, Q1 2017, Q2 2017)

Submitted by:
Ariannne Grace C. Botones
BSA – III

Submitted to:
Dr. Armando L. Ba
