Financial System is widespread.

Its various
institutions touch the lives of people all over
the world
The financial system does not only include
banks, credit unions, pawnshops or usurers,
but also other financial institutions such as
insurance companies, investment companies,
lending investors, etc.
World Bank, International Monetary Fund, and
the Asian Development bank are part of the
Philippine Financial System. (Great
Implementation of our banking laws and
monetary policies)
Finance most of big projects
Central Bank together with laws and policies
affecting money, credit and banking are part
of the financial system
Financial System is a network of various
institutions which generate, circulate, and
control money and credit.
Provides intermediation between suppliers
and users of credit- (extends loans to
individual families, small producers, big
businessmen and industrialists, finances the
social and economic development of the
country)
Funds programs for development towards
industrialization and modernization
Some have excess money, others needs funds
for consumption or production
Services of financial institutions like a bank
should be made available to both parties.
PRIMARY JOB OF A BANK AND OTHER
FINANCIAL INSTITUTIONS SPECIALISTS ARE
NEEDED TO SATISFY THE BUSINESS INTERESTS
OF BOTH SUPPLIERS AND USERS OF FUNDS.
Financial System acts as an intermediary
between the lender and borrower of funds.
Financial claims- these are the money and
the rights to receive money under specific
circumstances.
2 broad categories of claims:
a. debts- financial obligations which are to be
paid
b. Equities-claims of ownerships like shares of
stock
Financial Institutions-private or government
organizations whose assets consist primarily of
claims or incomes primarily derived from dealing
in and/or performing services in connection with
claims.
Financial Intermediaries- commercial banks,
savings and loan associations, and finance
companies
Financial markets- expedite transactions in
financial claims. (Manila Stock Exchange)
Government Agencies- The central Bank
supervises and regulates the banking institutions
and other financial institutions. Controls money
credit and banking operations in the country
Laws and Policies- Laws are legislated by
Congress. The main job of implementing said
laws falls on the Central Bank of the Philippines.

The general function of financial institutions
is to facilitate the transfer of funds from the
savers to the users.
Financial institutions perform specific
functions such as:
a. Investigation and credit analysis
b. Matching the supply and demand for funds-
bringing the lender and borrowers together.
Specializing in matching the supply of
savings with the demand for funds
C. Provisions for Liquidity- the investor can find a
buyer for his debt or ownership claims. In case a
saver decides to liquidate his claim, the financial
institution can pay him with its current funds it
has received from other savers.
d. Provides Payment System- Whenever we like a
good, we just exchange money for it. We pay
goods and services in order to acquire the rights
to use them. Checks and credit cards are being
used for convenience and safety
Central Bank of the Philippines
Banking Institutions:
1. Private Banking Institutions
a. Commercial Bank
b. Thrift Banks
c. Rural Banks
2. Government Banking Institutions:
a. PNB
b. DBP
c. Land Bank

1. Private- Non- Bank Financial Institutions:
a. Investment houses
b. Investment Companies
c. Financing Companies
d. Securities/ dealers/ brokers
e. Non- stock savings and loan associations
f. Building and loan associations
g. Pawnshops
h. Lending Investors
i. Retirement/ Pension Plans
j. Trust Companies
k. Insurance Companies
l. Credit Cooperatives
A. Government Service insurance System
Social Security System
One of the financial reforms was the increase of
the capital base of commercial banks from P20M
to P100m. Such capital requirement has forced
several commercial banks to merge their
resources with foreign banks.
The objectives of the 1980 financial reforms are:
1. To attain greater efficiency through increased
competition and scale of economies
2. To obtain greater availability and use of long-
term funds
Introduction of Universal Banking
Removal of most ceiling on interest rates of
deposits and loans
Increase of the powers and functions of quasi
banks
Elimination of all functional distinctions
between private development banks and
savings banks
Are international financial institutions which
operate in many countries throughout the world.
They specialize in international finance and their
clients are primarily the multinational
corporations, governments, big companies, and
wealthy individuals in the developing countries
Owned by highly industrialized countries- US,
Japan, UK, France, and Canada
Have huge resources therefore they can decide
which countries can be saved from serious
economic crisis
The World Bank, International Monetary Fund,
and the Asian Development Bank are owned
mostly by the governments of the industrialized
countries.
US- Biggest stock holder of all the three
international financial institutions
President of World Bank- American, managing
director of the International Monetary Fund is
always European and the president of the Asian
Development Bank is Japanese.
US has strong influence in all three institutions
because of its large voting power.
Initial objective of the WB and IMF was to assist
in the reconstruction of Western Europe, which
was devastated in WWII.
WB then shifted its goals to financing developing
programs of developing countries
IMFs principal was to ensure an international
monetary system that will promote international
free trade dominated by the US and other
industrialized nations.
ADBs function is to help promote economic and
social development of its member countries,
especially the less developed ones.
The Philippines is a member of WB, IMF and
ADB. It is also one of the biggest borrowers
from said institutions.
One particular condition for the approval of a
WB- IMF loan is to implement political, fiscal and
monetary reforms. They also decide the specific
type of project they want to finance
Adoption of floating rate system
Devaluation of the peso
Import liberalization
Export Promotion
Encouragement of Foreign investment
Raising of specific tax on oil products
Removal of price control over essential goods for
domestic use
Limiting of growth of money supply and domestic
credit
Reduction or elimination of consumption subsidies
like rice subsidy
Limiting of budget deficit of the national government
Financial system plays a vital role in economy
and society. It holds funds for investment,
business and development.
The central bank which is the leader of the
financial system has been entrusted with the very
great responsibility of promoting monetary
stability and economic growth for the whole
country.
The financial system should channel its resources
into the development of the depressed regions of
the country, and into the projects of the poor.