Principles of Finance

1ST SEMESTER AY 2014-2015

UNIVERSITY OF SANTO TOMAS
FACULTY OF ARTS AND LETTERS
 Specialized Banks

 Banks that cater to specific sectors of the

economy
This includes ordinary households, SME’s
farmers, landowners and even the Muslim
minority.
 Thrift Banks (TB’s)

Includes the following financial institutions:

a)Savings and Mortgage Banks (SMB's)
 a financial institution in which its’ functions are limited to receiving
deposits and issuing mortgages
a)Stock savings and loan associations (SSLA's)
 engages in the business of pooling the savings of its stockholders and
using these funds on private and Government Securities
c)Private Development Banks (PDB’s)
 Established to meet the needs for capital and credit for Filipino
entrepreneurs particularly those engaged in the agricultural and
industry sectors
 Thrift Banks
POWERS
1) accepts savings and time deposits from the
public
2) Grant secured loans

3) Invest in readily marketable bonds and

other debt-securities, commercial papers and
accounts receivables or notes arising out of
commercial transactions.

4) Issue domestic Letters of Credit

 Thrift Banks
Powers with limitations and/or approval of BSP

1) Open current or checking accounts

provided that the thrift bank has net assets of at
least P20M

2) Act as official depository of national agencies and

of municipalities
3) Deal in foreign exchange and operate Foreign
Currency Deposit Units (FCDU)

4) Issue mortgages
5) Engage in quasi-banking
5) Act as collection agent for government entities
(SSS, BIR, BOC, etc.)
 Thrift Banks Characteristics
I. More conservative in its’ operations than Commercial Banks
(KB’s)
 Higher cash to assets ratio than KB’s

 Lower investment to assets ratio than KB’s

 Lower loans to deposit ratio than KB’s

 Lower ROPOA to assets ratio than KB’s
 Most of its’ investment are directed towards short-term debts
II. Prioritizes credit provisions to SME’s and sectors such as the
agricultural, industrial and housing.
 Chamber of thrift banks

 Coordinates with BSP and PDIC in supervising

thrift bank activities

 Helps TB’s in reaching out to SMEs and small

savers particularly to rural areas
 Rural Banks
 Help farmers by providing credit to buy seedlings, farm
machines and in the marketing of their produce.

 In the early 80’s, it relied heavily on Government funding

 In the late 80’s, rural bank rehabilitation program took place

 Over the years, rural banks have engaged in lending to

commercial and industrial sectors
 Specialized Government Banks

Though now classified as commercial banks, these are still

Government owned and controlled

 Developmental Bank of the Philippines

 Started out as a bank that provides credit for economic
recovery during the WWII.
 In the 80’s, it accumulated huge amount of bad debts
mainly because of Behest Loans.
 In the 90's, it has been given authority to function as a
universal bank
 active role in sectoral development by extending credit
to strategic industries such as transportation,
telecommunications, power and energy, education and
healthcare.
 Specialized Government Banks
 Land Bank of the Philippines

 First established to support land reform by

financing the transfer of farm lots to tenants
or cultivators with a repayment plan of 25
years.
 Specialized Government Banks
Al-Amanah Islamic Investment Bank of the
Philippines
 the first and only Islamic bank in the
Philippines
 provides Muslim communities with financial
and banking products and services that are
congruent with their religious values and
principles.
 Savings and Current Accounts are operated
in Wadiah basis
 Other Important Financial Agencies

 Philippine Deposit Insurance Corporation (PDIC)

 Government corporation created for the primary
purpose of insuring bank deposits.
 Works with BSP in monitoring the transparency and
the prudence of the banking system.

 Aids in liquidation of bank closures

 Maximum coverage is set at P500,000.00
 Insurance premium is paid by the banks not by the
depositors
 Membership of banks to PDIC is mandatory; hence,
all operating banks are members of PDIC.
 Other Important Financial Agencies

 International Monetary Fund (IMF)

 promotes international monetary cooperation and
exchange rate stability, facilitates the balanced growth
of international trade, and provides resources to help
members in balance of payments difficulties or to
assist with poverty reduction
 it has 188 member countries. It is a specialized
agency of the United Nations but has its own charter,
governing structure, and finances.
 provides loans to countries that have trouble meeting
their international payments and cannot otherwise find
sufficient financing on affordable terms
 Other Important Financial Agencies

 Asian Development Bank (ADB)

 aims for an Asia and Pacific free from poverty.
 main devices for assistance are loans, grants, policy
dialogue, technical assistance and equity investments.
 Economists, sociologists, engineers, gender experts and
environmental scientists are amongst the hundreds of
professions at the bank working together to reduce poverty.
 Environmental sustainability is a core strategy of ADB
 Philippines is fifth largest borrower, accounting for about
8% of total lending.