BUSFIN FINAL

• Bank


  A financial entity that is authorized to accept deposits and give credit
• Banking system


  A network of institutions that provide financial services to customers
• Banking system's goal

  To give economic security and confidence
• Evolution of the Banking System

  1. Earliest banking systems: Grain, food, and livestock

  2. Banking was done before there were coins by exchanging grain and other commodities

  3. Banking in the Roman Empire: Rome's first banks were established in the temples dedicated to the old Gods

  4. In ancient Rome, banking played a significant role in the growth of trade and commerce and the emergence of wealth

  5. European Monarchs Discover Easy Money: Due to multiple pointless wars, Philip II of Spain managed to drown his kingdom in debt in 1557, leading to the first national bankruptcy and the second, third, and fourth

  6. Merchant Banks: Big merchant banks gained significant economic and political power, taking over most national banking responsibilities and providing loans and corporate finance

  7. J.P. Morgan & Co. and the 1907 Bank Panic: In 1907, the Bank Panic occurred due to the collapse of a copper trust, leading to a run on banks and stock sell-offs

  8. Fed Formation: The formation of the Federal Reserve Bank in 1913 marked the end of private bankers, but financial and political power remained concentrated on Wall Street even with the creation of the Fed

  9. Rise of modern banking: ATMs were created in the 1960s to enable depositors to access their money after business hours, and more recently, with the aid of the internet, electronic payment systems have changed modern commerce
• Banking History in the Philippines


  1. 16th century: During the 16th-century Spanish colonial era, the first organized credit institutions known as "Obra Pias" were established in the Philippines

  2. 1869: The opening of the Suez Canal facilitated trade between the Philippines and Europe

  3. 1900: Act No. 52 was passed by the First Philippine Commission placing all banks under the Bureau of Treasury

  4. In February 1929: The Bureau of Banking under the Department of Finance took over the task of banking supervision

  5. In 1933: A particular group of Filipinos were trying to conceptualize a central bank for the Philippines; HARE HAWES CUTTING BILL

  6. In 1939: A bill establishing a central bank was drafted by Secretary of Finance Manuel Roxas and approved by the Philippine Legislature, but returned by the US government without action

  7. February 1948: President Manuel Roxas submitted to Congress a bill "Establishing the Central Bank of the Philippines, defining its powers in the administration of the monetary and banking system, amending pertinent provisions of the Administrative Code concerning the currency and the Bureau of Banking, and for other purposes"

  8. 15 June 1948: The bill was signed into law as Republic Act No. 265 (The Central Bank Act) by President Elpidio Quirino

  9. 3 January 1949: The Central Bank of the Philippines (CBP) was inaugurated and formally opened with Hon. Miguel Cuaderno, Sr. as the first governor

  10. 3 July 1993: The Bangko Sentral ng Pilipinas (BSP) was established to replace the CBP as the country's central monetary authority
• Philippine Banking Industry


  • The BSP, the central bank of the Philippines, oversees the entire banking sector
  • The BSP was created by the Republic Act No. 7653, otherwise known as the New Central Bank Act of 1993
• Private Banking Institutions


  • Commercial Banking
  • Thrift Banks
  • Savings and Mortgages Banks
  • Savings and Loan Association
  • Private Development Banks
  • Rural Banks
• Government Banking Institutions

  • The Philippine National Bank
  • The Development Bank of the Philippines
  • The Land Bank of the Philippines
  • The Al-Amanah Islamic Investment Bank of the Philippines
• Non-Bank Financial Institutions


  • Investment House/Banks
  • Securities Brokers/dealers
  • Building and Loan Associations
  • Credit Unions
  • Private Insurance
• Functions of Banks


  • Primary Functions: Accepting Deposits, Granting Advances
  • Secondary Functions: Agency Functions, Utility Functions
• Classification of Banks Based on Ownership

  • Public Sector Banks
  • Private Sector Banks
  • Foreign Bank
• Classification of Banks Based on Structure

  • Unit Banks
  • Branch Banks
  • Chain Banks
  • Correspondent Banks
• Classification of Banks Based on Function

  • Commercial Banks
  • Industrial Banks
• Financial Markets


  • A system that includes individuals and institutions, instruments, and procedures
  • The primary role of financial markets is to facilitate the flow of funds from individuals and governments that need funds over their incomes
• Flow of Funds

  • The sum of all cash inflows/outflows from and into different financial assets
  • Three financial phases: Young adults borrow, Older working adults save, Retired adults use saving
• Funds transferred from savers to borrowers

  • Direct transfer
  • Indirect transfer through investment banking house
  • Indirect transfer through financial intermediates
• Industrial Banks


  Specialized financial institutions that are primarily focused on providing financial services to industrial companies
• Financial Market


  A system that includes individuals and institutions, instruments, and procedures
• Primary role of financial markets


  To facilitate the flow of funds from individuals and governments that need funds over their incomes
• Flow of Funds


  The sum of all cash inflows/outflows from and into different financial assets
• Three financial phases


  • Young adults borrow
  • Older working adults save
  • Retired adults use saving
• Funds transferred from savers to borrowers

  • Direct transfer
  • Transfer through investment banking house
  • Transfer through financial intermediates
• Investment banking house


  Assists both people and businesses in raising capital through underwriting, helps individuals/organizations raise capital and provide financial consultancy services to them, act as intermediaries between security issuers and investors and help new firms go public
• Financial intermediaries


  An entity that facilitates a financial transaction between 2 parties
• Types of market efficiency

  • Economic efficiency
  • Informational efficiency
  • Weak-form
  • Semi-strong-form
  • Strong-form
• Types of financial markets

  • Money market
  • Capital market
  • Debt market
  • Equity market
  • Primary market
  • Secondary market
  • Derivatives market
• Stock Market


  A place where shares of publicly listed companies are traded
• Over-the-Counter Market


  A decentralized market in which market participants trade stocks, commodities, currencies, or other instruments directly between two parties and without a central exchange or broker
• Bond Market


  The collective name given to all trades and issues of debt securities
• Money Market


  Refers to trading in very short-term debt investments
• Derivative Market


  A type of financial contract whose value is dependent on an underlying asset, group of assets, or benchmark
• Forex Market


  Allows participants, such as banks and individuals, to buy, sell, or exchange currencies for both hedging and speculative purposes. It is the largest financial market in the world
• Commodities Market


  A marketplace for buying, selling, and trading raw materials or primary products
• Cryptocurrency Market


  A digital or virtual currency secured by cryptography, which makes it nearly impossible to counterfeit or double-spend
• Functions of the Markets

  • Puts savings into more productive use
  • Determines the price of securities
  • Makes financial assets liquid
  • Lowers the cost of transactions
• General Stock Market Activities

  • The secondary market
  • The primary market
  • IPO market
• Physical Stock Exchanges


  NYSE, AMEX, and regional exchanges
• Exchange Members


  • Floor brokers
  • Specialists
• Over-the-Counter Market and the Nasdaq

  Network of brokers and dealers, Auction market, Organized Investment Network, Electronic Communications Networks
• Securities and Exchange Commission (SEC)

  Regulation of national securities exchanges, Power to prohibit manipulation of securities' prices, Control over stock trades by corporate insiders