Banking and Financial Institutions

• Bangko Sentral ng Pilipinas It was established on 3 July 1993 pursuant to the provisions of the 1987 Philippine Constitution and the New Central Bank Act of 1993
• Development Bank of the Philippines provides loans for developmental purposes, gives loans to the agricultural sector commercial sector and the industrial sector.
• Land Bank of the Philippines is a governmental bank, which provides financial support in the implementation of the Comprehensive Agrarian Reform Program (CARP) of the government
• Republic Act No. 6048 This Act authorizes the bank to promote and accelerate the socio-economic development of the Autonomous Region of Muslim Mindanao by performing banking, financing and investment operations, and to establish and participate in agriculture, commercial and industrial ventures based on the Islamic concept of banking
• Al-Amanah Islamic Investment Bank the first and only Islamic bank in the Philippines
• Private Banking Institutions (1) Universal Bank (2) Commercial Banks (3) Thrift Banks
• Government Non-Bank Financial Institutions (1) Government Service Insurance System (2) Social Security System (3) Pag-ibig
• Private Non-Bank Financial Institutions (1) Investment houses (2) Investment banks (3) Financing companies
• Government Bank Institutions (1) Development Bank of the Philippines (2) Land Bank of the Philippines (3) Al-Amanah Islamic Investment Bank
• Monetary Policy refers to the process by which a central bank manages the supply of money, interest rates, and overall financial conditions in an economy to achieve specific economic objectives.
• Price Stability - To control inflation and maintain a stable price level. High inflation reduces purchasing power, while deflation can lead to economic stagnation.
• Employment- To achieve a level of employment where all individuals who are willing and able to work can find jobs, without causing inflation to rise excessively.
• Economic Growth - To promote sustainable economic growth by ensuring that the economy operates at its potential without generating excessive inflation.
• Financial Stability- To maintain the stability of the financial system, prevent financial crises, and ensure the smooth functioning of financial markets
• Objectives of Monetary Policy: (1) Price Stability (2) Employment (3) Economic Growth (4) Financial Stability
• Monetary Board exercises the powers and functions of the BSP, such as the conduct of monetary policy and supervision of the financial system.
• Governor chief executive officer of the BSP and is required to direct and supervise the operations and internal administration of the BSP
• Monetary and Economics Sector (MES) - mainly responsible for the operations/activities related to monetary policy formulation, implementation, and assessment.
• Financial Supervision Sector (FSS) - mainly responsible for the regulation of banks and other BSP-supervised financial institutions.
• Corporate Services Sector (CSS) – mainly responsible for the effective management of BSP’s human, financial, and physical resources to support the BSP’s core functions.
• Payments and Currency Management Sector (PCMS) – mainly responsible for maintaining the safety and integrity of the Philippine.
• Regional Operations and Advocacy Sector (ROAS) - mainly responsible for the management of activities related to regional operations, consumer empowerment and advocacy, and communications.
• Regional Operations and Advocacy Sector (ROAS) - mainly responsible for the management of activities related to regional operations, consumer empowerment and advocacy, and communications.
• Commercial Bank To earn a profit, a bank needs to pay less for the funds it receives from depositors than it earns on the loans it makes.
• Bank Asset Banks acquire bank assets with the funds they receive from depositors, the funds they borrow, the funds they acquire from their shareholders purchasing the bank’s new stock issues, and the profits they retain from their operations
• Bank Asset A bank manager builds a portfolio of assets that reflect both the demand for loans by the bank’s customers and the bank’s need to balance returns against risk, liquidity, and information costs.
• Reserve and Other Cash Assets The most liquid asset that banks hold is reserves
• Vault Cash – cash on hand and in the bank (including ATMs) or in deposits at other banks
• Reserve and Other Cash Assets As authorized by Congress, the BSP mandates that bank hold a percentage of their demand deposits as required reserves. Reserves that banks hold over and above those that are required are called excess reserves.
• Securities Marketable securities are liquid assets that banks trade in financial markets.
• Consumer loans – made to households primarily to buy automobiles, furniture and other goods.
• Loans to businesses – called commercial and industrial, or C&I loan
• Real estate loans – which include mortgageloans and any other loans backed with real estate as collateral.
• Loans Receivable By far largest category of bank assets is loans.
• Other Assets Include banks’ physical assets, such as computer equipment and buildings. This category also includes collateral received from borrowers who have defaulted on loans.
• Demand or Current Account Deposits Bank offer savers demand or current account deposits, which are account against which depositors can write checks.
• Demand deposits are current account deposits on which banks do not pay interest.
• NOW (negotiable order of withdrawal) are checking accounts that pay interest
• NOW (negotiable order of withdrawal) is a type of interest-bearing deposit account that allows the account holder to withdraw funds on demand, much like a checking account.
• Nondemand Deposits Savers use only some of their deposits for day-to-day transaction.