M2: THE FINANCIAL SYSTEM PT. 2

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Cards (22)

  • The Bangko Sentral ng Pilipinas and the Philippine Financial System

    The Philippine Monetary System organization is classified in the following: 

    Bangko Sentral ng Pilipinas

    I. Banking Institutions

    A. Private Banking Institutions

    1.Commercial Banking Institutions
    a.Ordinary Commercial Banks
    b. Universal Banks

    2.Thrift Banks
    a. Savings and Mortgage Banks
    b. Private Development Banks
    c. Savings and Loan Associations   

    3.Rural Banks
  • The Bangko Sentral ng Pilipinas and the Philippine Financial System
    The Philippine Monetary System organization is classified in the following:
     
    Bangko Sentral ng Pilipinas
    B. Government Banking Institution
    1. Philippine National Bank
    2. Development Bank of the Philippines
    3. Land Bank of the Philippines
    4. Philippine Amanah Bank
  • The Bangko Sentral ng Pilipinas and the Philippine Financial System
    The Philippine Monetary System organization is classified in the following:

    Bangko Sentral ng Pilipinas

    A.Private Non-Bank Financial Institutions

    Investment Banks/Companies
    Finance Companies
    Securities Dealers/Brokers
    Pawnshops
    Lending Investors
    Fund Managers
    Trust Companies/Department Insurance Companies

    B. Government Non-Bank Financial Institutions
    1. Government Service Insurance System
    2. Social Security System
  • Internally, BSP is structured as follows:
    1. The Monetary Board
    2. The Monetary Stability Sector
    3. The Supervision and Examination Sector
    4. The Resource Management Sector
  • A)The Monetary Board

    The Board that governs the Central Bank is called the Monetary Board. Hence the powers and functons of BSP are exercise by its Monetary Board, which has seven members appointed by the President of the Philippines
  • B)Objectives of BSP
    BSP as the central monetary authority of the country is expected to provide the country with a safer, more flexible , and more stable and healthy monetary and financial system that will support a stronger economy. It is enjoined to:
    1. maintain the monetary policies conducive to balanced and sustainable growth of the economy;
    2. maintaining price stability inner country
    3. promote and maintain monetary stability and convertibility of peso
  • B)Objectives of BSP
    BSP as the central monetary authority of the country is expected to provide the country with a safer, more flexible , and more stable and healthy monetary and financial system that will support a stronger economy. It is enjoined to:

    4. maintain stability of the financial system;
    5. provide payment and other financial services to the government, the public, financial institutions, and foreign official institutions;
    6. supervise and regulate depository institutions
  • To attain its objectives, the monetary and fiscal policies of the country need to be closely and efficiently coordinated.

    The different agencies of the government, both financial and fiscal, need to cooperate with one another. Moreover, it is important that there would be coordination and cooperation between the government and the private sectors. These sectors are partners in nation building.
  • C) FUNCTIONS OF BSP
    Being the primary monetary authority, BSP performs the following functions:
    1. Bank of issue – BSP has the monopoly of printing money bills and minting money coins.
    2. Government’s banker, agent and adviser – BSP handles the banking accounts of government agencies and instrumentalities. All government agencies deposit their funds with BSP. It provides foreign exchange to the government for the importation of goods and services and for payment of foreign loans.
  • C) FUNCTIONS OF BSPBeing the primary monetary authority, BSP performs the following functions:

    3. Custodian of the cash reserves of banks – All banks are regulated to have adequate reserves in proportion to their deposit liabilities with BSP to ensure availability of cash to depositors who wish to withdraw deposits.
  • C) FUNCTIONS OF BSP
    Being the primary monetary authority, BSP performs the following functions:

    4. Custodian of the nation’s reserves of international currency – the early years of central banking required central banks to maintain a minimum reserve of gold, and later of international currency, as a guarantee for its issuance of currency bills or notes and deposit liabilities (cash reserves of commercial banks). This is designed to meet problems relevant to balance of payments and maintaining the external value of local currency.
  • C) FUNCTIONS OF BSP
    Being the primary monetary authority, BSP performs the following functions:
    6. Bank of central clearance and settlement – The central bank acts as a sort of clearing house. This means that banks send representatives to the clearing house at the central bank where claims are demanded by one bank against another.
    7. Controller of credit – controlling money ssupply equires controlling credit
  • BSP can control credit
    1. Increasing or decreasing interest rates
    2. Regulating the margin requirements of stock exchange securities
    3. Increasing or decreasing the legal reserve requirement of banks
    4. Open market operations (buying or selling government securities)
    5. Imposing ceilings on total amounts bank can lend
    6. Rationing central bank credit
    7. Restricting imports
    8. Moral suasion (i.e encouraging people and businesses to support and cooperate with central bank policies and regulations
  • MONETARY POLICY AND FINANCIAL SYSTEM
    Monetary policy refers to the manipulation of money supply to affect the economy of a country as a whole. It largely impacts interest rates, increases in the money supply, lower short term interest rates and will encourage investment and consumption. On the long run however, an abundance of money supply leads to increased prices or inflation and is undesirable. This is where BSP plays its role as balancer.
  • MONETARY POLICY AND FINANCIAL SYSTEM
    Generally speaking, expansionary monetary policies and contractionary monetary policies involve changing the level of the money supply in a country.
    Expansionary monetary policy is a policy that expands (increases) the supply of money, whereas
    Contractionary monetary policy contracts (decreases) the supply of a country’s currency.
    Money supply is the total of currency and coins and demand deposits in the economy.
  • When central bank wishes to increase money supply,it can do a combination of three things:
    1. Purchase securities in the open market, known as open market operations
    2. Lower the government discount rate
    3. Lower reserve requirement on banks
    When the central bank wishes to decrease money supply, it can do a combination of three things:
    1. Sell securities in the open market, known as open market operations
    2. Raise the discount rate
    3. Raise the reserve requirements
  • SUMMARY :
    Objectives of the BSP include
    (à) maintaining the monetary policies conducive to balanced and sustainable growth of the economy;
    (b) maintaining price stability inner country;
    (c) promoting and maintaining monetary stability and convertibility of peso;
    (d) maintaining stability of the financial system;
    (e) providing payment and other financial services to the government, the public, financial institutions, and foreign official institutions; and
    (f) supervising and regulating depository institutions.
  • SUMMARY:
    Functions of the BSP include
    (a) bank of issue;
    (b) government's banker, agent, and adviser;
    (c) custodian of the cash reserves of banks;
    (d) custodian of the nation's reserves of international currency;
    (e) bank of rediscount and lender of last resort;
    (f) bank of central clearance and settlement; and
    (e) controller of credit
  • Monetary policy refers to regulations that will affect money supply to benefit the economy. among the tools of it are money supply, open market operations, reserved requirements on banks, discount rate, interest rate, and credit control, among others.
  • APPLICATION:
    BANK OF ISSUE --- It is the function of BSP involving monopoly of printing money bills and minting money coins.
    MONETARY POLICY --- It is the manipulation of money supply to affect the economy of the country.
    OPEN MARKET OPERATIONS ---It is the operation involving buying and selling government securities.
  • APPLICATION:
    THE MONETARY STABILITY SECTOR --- It is the BSP sector that is in charged of the formulation and implementation of the BSP's monetary policy.
    THE SUPERVISION AND EXAMINATION SECTOR ---- It is the BSP sector that enforces and monitors compliance in banking laws to promote a sound and healthy banking system.
  • True or False
    FALSE --- Increases in the money supply push short-term interest rates up, encouraging investments and consumptions.
    TRUE --- In the long run, an abundance of money supply will lead to increase in prices.
    TRUE --- BSP may lower interest rates and stimulate investment and consumption in the short run.
    FALSE --- When BSP sells securities, money supply increases.
    TRUE --- When BSP increases the reserve requirement for banks, the amount available to banks for lending to borrowers reduces, limiting the credit and ultimately the money supply.