OVERVIEW OF THE PHILIPPINE FINANCIAL SYSTEM

Financial System- institutional units and markets that interact for the purpose of mobilizing funds from
lenders to borrowers.

ELEMENTS OF FINANCIAL SYSTEM

1 .Financial claims- money and the right to receive money under specific circumstances.

2. Financial institution- private and government organization whose assets consist primarily of claims or
income is primarily derived from providing services in connection with claims.

3 .Financial intermediaries- institution that deal with creation and issuance of claims against themselves
and use the proceeds to acquire and hold claims against others.

4. Financial Markets- market in which people and identities can trade financial securities, commodities
and other fungible items of value at low transaction cost and at prices that reflect supply and demand.

5. Government agencies- i.e. Central Bank, maintains internal and external stability of peso

6. Law and policies- formulated to ensure that the desired levels of investment, employment,
production, income and consumption.

FUNCTIONS OF FINANCIAL INSTITUTIONS

The general function is to facilitate the transfer of funds from the savers and the users.

1. Investigation and credit analysis

2. Matching the supply and demand for funds
3. Provision for liquidity

DEVELOPMENT OF THE PHILIPPINE FINANCIAL SYSTEM

 Obras Pias- means pious works; the first credit institutions in the Philippines started by Father
Juan Fernandez de Leon in 1754.
 10 years later Francisco Rodriguez organized the Rodriguez Bank
 Banco Espanol-Filipino de Isabella de II- first Philippine bank established in 1851
 1869- opening of the Suez Canal resulted in expansion of Philippine trade
 1873- Chartered Bank of India, Australia and China set up manila branch
 British banks dominated the economy during the Spanish colonization
 1882- Spain was able to put up their first savings bank, Monte de Piedad, despite of British
domination
 1898- US acquired Philippines through Treaty of Paris which gave way to free trade between US
and the Philippines provided by the Payne Aldrich Act.
 1902- International Banking Corporation of New York set up an office in the country but was
acquired in 1915 by the National City Bank of New York.It is now called First National City Bank.
 1904- Postal Savings Bank
 1906- First Agricultural Bank of the Philippine Government: In 1916, its assets were transferred
to the Newly organized Philippine National Bank (PNB)
 Chinese Banks were formed in 1920s
  PNB closed its doors with the coming of the Japanese Imperial Forces in 1942 but was forced to
open few months later.It was supervise by Japanese Military Advisers
 Southern Development Bank ,a Japanese bank put up a branch in the country and perform the
role of the Central Bank.
 War notes were printed and circulated which resulted to the worst inflation so far in the
country.
 1946- Rehabilitation Finance Corporation was established to provide credit facilities for the
rehabilitation of commerce, industry and the reconstruction of the war-damaged properties.It
later became the Development Bank of the Philippines.
 1948- creation of the Central Bank of the Philippines

STRUCTURE OF THE PHILIPPINE FINANCIAL SYSTEM

Central Bank of the Philippines

Banking Institutions

1. Private Banking Institutions

a. Commercial Banking Institutions
 Expanded commercial banks
 Ordinary commercial banks
b. Thrift Banks
 Savings and mortgage banks
 Private development banks
 Stock savings and loan associations
c. Rural banks
2. Government Banking Institutions
a. Philippine National Bank
b. Development Bank of the Philippines
c. Land Bank of the Philippines
d. Philippine Amanah Bank

Non-bank Financial Institutions

1. Private non-bank Financial Institutions k. Insurance companies

a. Investment houses l. Venture Capital Corporations
b. Investment companies 2. Government Non-bank Financial
c. Financing companies Institutions
d. Securities dealers/brokers a. Government Service Insurance
e. Non-stock saving and loan System
association b. Social Security System
f. Building and loan association c. National Investment and
g. Pawnshops Development Corporation
h. Lending Investors
i. Fund managers
j. Trust companies/departments