banking in the Philippine

• Banking in the Philippines

  Evolved gradually over the span of more than a century, starting from one bank in 1851 to a multi-faceted system which supplies credit to the growing financial requirements of every sector in the country's economy
• Obras Pias was organized by Fr. Juan Fernandez de Leon


  1594
• Obras Pias


  A religious foundation that accumulated large funds from the legacies of wealthy individuals who made out wills before going out on dangerous expeditions, bequeathing their estates to the Church or to lay confraternities
• Funds of Obras Pias


  First invested in loans to traders to finance the galleon trade in Acapulco, Mexico
• El Banco Español Filipino de Isabel II (later changed to El Banco de las Islas Filipinas)


  Started formal banking with its establishment, now known as Bank of the Philippine Islands, the first commercial bank organized in the Far East
• Monte de Piedad y Caja de Ahorros de Manila

  The country's first savings bank, founded by Fr. Felix Huertas
• During the American Period, banks which were already existing were allowed to continue operations, and more banks were opened to finance the increasing demand of trade in the country
• Philippine Bank of Commerce


  The first private commercial bank in the country wholly owned by Filipinos, established in 1938 and later absorbed by the Philippine Commercial and Industrial Bank
• During the Japanese Period, three domestic banks were allowed to resume operation (Philippine National Bank, Bank of the Philippine Islands, and the Philippine Bank of Commerce), but the banking system was left in a state of almost total collapse with banks having worthless Japanese notes in hand
• Rehabilitation of the banking system after colonization

  1. Creation of the Rehabilitation Finance Corporation

  2. Enactment of R.A. 265, The Central Bank Act in 1948
• The Philippine Banking System had become "unnecessarily complicated and over-fragmented" with too many kinds of banks with different objectives and specialization
• The emergence of new forms of financial intermediation had affected the price of money and the distribution of financial resources within the economy
• The Philippine Banking System was still deficient to support the financial requirement of a growing economy
• Updating the Philippine banking system in 1979

  1. Composition of representatives from the International Monetary Fund and the World Bank

  2. Findings: legislated specialization in the Philippine banking system prevents banks from responding to the needs of the growing economy and thus hampers them from meeting the demands of their clientele, there is more preference for short-term lending and slow growth of long-term deposits

  3. Recommendations: remove legislated specialization, encourage financial institutions to extend more of long-term funds, develop an active capital market
• Banking reforms of 1980

  Effected a revision in the Philippine banking structure including the administrative regulations, expanded commercial banking or universal banking was introduced
• R.A. 8791 General Banking Law of 2000 institutionalized a certain mass of banking reforms in the Philippines, providing the regulation of the organization and operations of banks, quasi-banks and trust entities
• R.A. 9160 Anti-Money Laundering Act of 2001 (AMLA) made money laundering a crime in the Philippines and identified the forms of business institutions or "covered institutions" which are required to submit reports about suspicious or "covered transactions" to authorized persons
• Merger


  Absorption of one or more corporations by another existing corporation which retains its identity and takes over the rights, privileges, franchises and properties and assumes all liabilities and obligations of the absorbed corporation(s) in the same manner as if it had itself incurred such liabilities or obligations
• Consolidation


  Union of two or more corporations into a single new corporation, called the consolidated corporation
• The basic theme is that increased competition has encouraged banks to assume increased portfolio risks in order to earn acceptable returns
• Areas of increased competition for banks

  • Deposits
  • Loans
  • Payment services
  • Other bank services
• Financial innovations


  The catalyst behind the evolving financial services industry and the restructuring of financial markets, representing the systematic process of change in instruments, institutions and operating policies that determine the structure of our financial system
• Types of financial innovations

  • New securities and financial markets
  • New products and services
  • New organizational forms
  • New delivery systems
• Innovations have many causes, such as the need to stop the loss of deposits, enter new geographic or product markets, deliver services with cheaper and better technology, increase their capital base, alter their tax position, reduce their risk profile, or cut operation costs
• Innovation in delivery systems normally takes the form of new technological development to facilitate funds transfers, such as banks popularizing ATMs and POS terminals in retail outlets, and more recent innovations including the development of debit cards, home banking networks and Internet banking