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• 3 Parts of a Financial System

  1. Savers (lenders)                     
  2. Financial Institutions               
  3. Borrowers (spenders)
• Financial institutions provide financial services for members and clients. It is also termed as financial intermediaries because they act as middlemen between the savers and borrowers.
•  Banks are financial intermediaries that lend money to borrowers to generate revenue and accept deposits. They are typically regulated heavily, as they provide market stability and consumer protection. 
• Banks include

  • Public banks
  • Commercial banks
  • Central banks
  • Cooperative banks
  • Government-managed cooperative banks
  • Government-managed land development banks
• Non-bank financial institutions facilitate services like investment, risk pooling, and market brokering. They generally do not have full banking licenses.
• Non-bank financial institutions include

  1. Finance and loan companies
  2. Insurance companies
  3. Mutual funds
  4. Commodity traders
• Financial markets are markets in which securities, commodities, and fungible items are traded at prices representing supply and demand. The term “market” typically means the institution of aggregate exchanges of possible buyers and sellers of such items.
• The primary market (or initial market) generally refers to new issues of stocks, bonds, or other financial instruments.
• The secondary market refers to transactions in financial instruments that were previously issued.
• Financial instruments are tradable financial assets of any kind. They include money, evidence of ownership interest in an entity, and contracts.
• Cash instruments is determined directly by markets. They may include securities, loans, and deposits
• Derivative instruments is a contract that derives its value from one or more underlying entities (including an asset, index, or interest rate.
• Non-bank financial intermediaries  

  are financial institutions that are not considered full-scale banks because they do not offer both lending and  depositing  services can also engage in credit card operations or other lending services, provided they do not also accept deposits.
• The Banko Central ng Pilipinas (BSP) is the Central bank of the Republic of the Philippines. It was established on 3 July 1993 pursuant to the provisions of the 1987 Philippine Constitution and the New central Bank Act  of 1993. The BSP took over from Central Bank of the Philippines, which was established on 3 January 1949, as the country’s central monetary authority.
•  Commercial Banks

  An institutions which accepts deposits, makes business loans, and offers relative services
• Universal Banks

  Refers to those banks that offer a wide range of financial services, beyond commercial banking and investment, banking, insurance etc.
• Thrift Banks

  Mobilization of small savings, provide loans generally longer and easier terms.
• Rural Banks

  Banks entrenched to ensure sufficient institutional credit for agriculture and other rural sectors.
• Cooperative Banks

  A business organization owned and operate by a group of individuals for their mutual benefit.
• Microeconomics

  The provision of financial services to low-income clients, including consumers and the self-employed who traditionally lack access to banking and relative services
• The Functions of the Financial System are:

  • To channel the funds from the savings units (lender) to the deficit units (borrowers) 
  • To provide a medium of exchange
  • To provide mechanism for risk and sharing, and
  • To provide a channel through which central banks can influence the economy, in general and the financial system in particular.
• Financial services are offered by a large number of businesses that encompass the finance industry.
• The Philippine financial system is primarily bank-based rather than capital market based.
• Components of Philippine Financial System

  Banks

  • Government Banks, Thrift Banks, Commercial Banks, and external Sector