BANKING

• A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds
• Financial systems exist on firm, regional, and global levels
• Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets
• The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals
• Financial systems


  • They play a critical role for consumers - both corporates and individuals - because they bridge the aspirations of today with the economic fortunes of tomorrow
  • They develop through the banking industry because of the nature of fiat money
  • Making sure that banks operate in a safe and sound manner is in the public interest
• The Global Financial Crisis (GFC) highlighted how the financial system is more than just the sum of its parts
• Systemic-ness


  The unique sense that arises from the way each market player interacts with another party, creating a network of interconnected and sequenced transactions
• Systemic risks


  Risks that could affect the financial system as a whole
• Macroprudential policy


  Policy focused on managing systemic risks to enhance the resilience of the financial system
• The objective of "Financial Stability" is to enhance the resilience of the financial system, in its totality and in its components, from shocks
• Macroprudential policy focuses on interlinked risk behaviors and its concern can extend beyond liquidity or inflation
• Welfare consideration is handled differently in macroprudential policy because adverse outcomes have a greater impact on society than when expected outcomes are likely to be buoyant
• There is a defined organizational structure in the handling of "Financial Stability" centered at the BSP and working in collaboration with other financial authorities

  
• Functions of the Financial System

  • To induce people to save by offering attractive interest rates and channel these savings to various business concerns
  • To monitor corporate performance
  • To link savers and investors (capital formation)
  • To lower transaction costs and increase returns to motivate more saving
  • To help the government decide monetary policy
• Elements of a Financial System

  • Ultimate lenders and borrowers
  • Financial intermediaries
  • Financial instruments
  • Creation of money by banks
  • Financial markets
  • Price discovery
• Financial institutions play a pivotal role in every economy and help bridge the gap between idle savings and investment
• Roles of Financial Institutions

  • Regulation of monetary supply
  • Banking services
  • Insurance services
  • Capital formation
  • Investment advice
  • Brokerage services
  • Pension fund services
  • Trust fund

  
• Components of the Financial System

  • Financial institutions (banking and non-banking)
  • Financial markets (capital market and money market)
  • Financial services
  • Financial instruments

  
• The money market is usually accessed alongside the capital market to park funds needed in a shorter period
• The capital market is widely followed and analyzed for general economic conditions
• Institutions in the capital market access it to raise capital for long-term purposes like mergers, acquisitions, or business expansion
• Development of the Philippine Financial System


  • Barter system
  • Spanish era (Obras Pias, Banco Espanol-Filipino, Monte de Piedad)
  • American era (China Banking Corporation)
  • Post-WWII (Development Bank of the Philippines)
• The planned merger between Land Bank of the Philippines and Development Bank of the Philippines is expected to be completed in the first half of 2024
• This is a slight delay compared to the end of 2023 original target
• Quiz will be given at the end of the discussion
• References


  • https://www.investopedia.com/articles/basics/11/3-s-simple-investing.asp
  • https://www.wallstreetmojo.com/role-of-financial-institutions/
  • https://ebrary.net/20/business_finance/element_money_creation
  • https://www.bsp.gov.ph/SitePages/FinancialStability/FinancialStability.aspx
  • https://www.bsp.gov.ph/Pages/AboutTheBank/SealCharterAndHistory/HistoryOfTheBank/ChronologyOfEventsC entralBankingInThePhilippines.aspx
• UNIVERSITY OF MAKATI, J. P. Rizal Ext., West Rembo, Makati City
• COLLEGE OF BUSINESS AND FINANCIAL SCIENCE, Department of Finance and Economics
• Course Title


  Banking and Financial Institutions
• Title


  Development of Philippine Financial Systems
• Prepared by


  Maria Cecilia Concepcion C. Reyes
• Learning Outcomes


  • To know the Development of Philippine Financial System
  • To know about Post War Financial Institutions
  • To know the Financial Institutions available in the Phils.
• We will find out about the structure of the Philippines Financial System throughout history
• Financial System


  Like the heart of the human beings, if it stops working then the economy would collapse. It is crucial to the allocation of resources
• The Philippine Financial System is composed of banking institutions and nonbank financial intermediaries, including commercial banks, specialized government banks, thrift banks and rural banks, offshore banking units, building and loan associations, investment and brokerage houses and finance companies. The Bangko Sentral ng Pilipinas and the Securities and Exchange Commission maintained the regulatory and supervisory control

  
• The first credit institution in the Philippines, "The ObrasPias"


  Started by Father Juan Fernandez de Leon in 1754 and ended in 1820

  
• Banco Espanol-Filipino de Isabela II

  The first Philippine Bank, established on August 1, 1851. It is the oldest standing bank in the Philippines and in the whole of Southeast Asia
• In 1906 "First Agricultural Bank of the Philippines" was established and in 1916 all of its assets and liabilities were transferred to the newly organized Philippine National Bank
• Financial sector


  Intermediates claims between savings and investors. The credibility and stability of financial institutions and the relative attractiveness of various financial instruments to borrowers and lenders alike determine how much saving will mobilized, how much it stays in the country to be invested, and how this is to be allocated among the various firms and industries
• The Philippine financial system manifested its strength over the past decade, including the period of recent global financial crisis