Non-bank Financial Intermediaries

Philippine Financial System the countrys financial system consists broadly of three major groups of institutions involved ion the mobilization and intermediation of private savings bank as well as the allocation of financial resources. These institutions include BSP, the banking system and non-bank financial institution. Central Bank Bangko Sentral ng Pilipinas The basic idea behind central banking is the discretionary control of the means of payment or money in a given community, regardless of the form they take.

Evolution/Milestone in our Monetary System

1. Monetary experience of the Filipinos during the Spanish colonial period 2. Transition to the American colonial period with a brief sketch of the attempts of the First Philippine Republic at a money system 3. The next segment focuses on the American colonial money system with the installation of the gold exchange standard in the Philippines in 1903 4. This money system was subsequently disrupted by the chaotic monetary experience of the Filipinos with their travails under the Mickey Mouse money of the Japanese occupation operating alongside the Emergency currency system prevalent among parts of the Philippine archipelago when the Filipino resistance movement was in control 5. The final milestone in this evolutionary experience with discretionary money system in the legislation in 1948 of RA 265 which created Central Bank of the Philippines that opened doors for business on July 3, 1969 Bangko Sentral ng Pilipinas the highest regulatory body in the financial system. Established on July 3, 1993 under RA 7653, the BSP is empowered to supervise the operations of banks and exercise such regulatory powers over the operations of finance and non-bank financial institution performing quasi-banking functions. Apart from its regulatory and supervisory functions, the BSP also participate in the money and foreign exchange market in time with ensuing stability in the financial system. Banking System the Philippine banking system consists of duty licensed and registered banking entitites engaged in the lending of funds obtained in the form of deposits. Non-bank Financial Institutions refer to all financial institutions other than banks engaged principally in the provision of a wide range of financial services. NBFIs are authorized to insue deposit substitutes similar to deposits taking activities of banks. NBQB are also under the regulatory supervision of the BSP.

Philippine Financial System

Universal Bank/Expanded Commercial Bank/EKB are banks nested with the authority to exercise, in addition to the powers authorized for a commercial bank, the power of an investment house and the power to invest in the equities of allied and non-allied enterprises as may be determined by the BSP. Commercial Bank are banking entities which in addition to the general savers incidents to corporation are authorized to any of the business of KB namely: 1. Accepting drafts and issuing letters of credit 2. Discounting and negotiating promissory notes, draft bills of exchange and other evidence of debts 3. Accepting or creating demand deposits 4. Receiving other types of deposits and deposit substitute 5. Buying and selling foreign exchange and gold or silver bullion 6. Acquiring marketable bond and other debt securities; and 7. Extending credit subject to the rules the BSP may promulgate Commercial bank may only invest in the equities of allied enterprises (financial or non-financial), the total investment of which shall not exceed 35% of the net worth of the bank; however the equity investment in any one enterprise shall not exceed 25% of the bank. The acquisition of such equities however, requires prior BSP approval. Thrift Bank banks established primarily to mobilize small savings and provide loans at generally longer and easier terms. They cater small and medium enterprises. 1. Savings Bank are organized for the purpose of accumulatory savings deposits and investing them for specified purposes. 2. Private Development Bank organized primarily to cater to the capital needs and demand for investment credit or medium to long-term loan for the promotion of growth of industry and agriculture at reasonable cost. 3. Stock Savings and Loan Assoc. are institution engaged in the accumulation of savings mainly of stockholders in specified undertakings. They are primarily concerned with servicing the needs of the household by providing several finance and long-term financing for the home building development. Rural Bank which are largely privately owned that provide credit facilities to farmers and merchants or their cooperatives and in general, to the people of rural community. Cooperative Bank are duly registered asso. Of persons who voluntarily joined together with a commen bond of interest to achieve a lawful, common, social or economic and to make equitable contributions to the capital required and accept a fair share of the risks and benefits of the undertaking in accordance with universally accepted cooperative principles. Islamic Bank banks established to promote and accelerate the socio-economic development of the ARMM by performing banking, financing and investment operations and to established and industrial ventures based on the Islamic concept of banking. The business dealings and activities of Islamic banks are subject to the basic and rulings of Islamic Sharia.

Microfinance Bank banks that provide a broad range of financial services such as deposits, loans, payment services, money transfer and insurance products to the poor and low income households for microenterprises and small business.

Regulations/ Supervision of Non-banks

The BSP is the sole regulatory and supervisory authority for banks. - In case of NBFIs other government agencies which include the SEC, Insurance Commission, and the DTI share with the BSP the responsibility of regulatory and supervising these institutions. - The New Central Bank Act of 1993 (RA 7653) mandate of the phase out of the BSP regulatory oversight over finance companies; without quasi-bonding functions and other institutions performing similar functions; and its transfer to the SEC. - This amendment was intended to enable the BSP to concentrate on one of its primary responsibilities, the supervision and regulation of banking institutions. - Effective July 3, 1998, the supervision and regulation over NB entities was turned over to the SEC for corporations and partnership and to the DTI for sole/single ownership. - Building and Loan Asso. to Home Guarantee Corp. (HGC) effective February 7, 2002 - Insurance Commission for insurance companies - BSP remained 1. NBFIs with quasi banking and/or with trust 2. NB which are subsidiaries/affiliates of banks and quasi-banks, NSSLA, trust companies and pawnshop, and dealer/brokers.

Key Services Provided by the Financial System

1. Risk Sharing among the advantages of using the financial system to match individual savers and borrowers is that sharing of risks. Risks are interpreted differently by sifferent people depending on their perspective, the way they perceive things as they are and as they should beo or how they personally feel about taking chances. 2. Liquidity liquidity in financial system is manifested by ease with which an asset can be exchanged for money to purchase other assets, goods and services. 3. Information the financial system provides market players more access to vital informaton about borrowers and lenders.