Garcia, Jr. Richard Rhamil C.

AE-113 MTH 11:30-1:30 M210

COA 2D

REACTION PAPER

The purpose of this reaction paper is to provide documentations regarding the nature and extent
of Coronavirus (COVID-19) and to undertake analysis of its economic impacts to different financial
institutions worldwide.
Coronavirus is a disease originated from the city of Wuhan in China. It is a type of virus that
attacks our immune system resulting to major respiratory illness. As of today, COVID-19 is at pandemic
level. Meaning, it had already spread among different countries.
The outbreak of the virus have gone global. It appeared that it gradually slowed down the global
economy affecting the demand and supply. These created devastating impacts on the economy that jolted
the two main financial intermediaries (financial institution and financial markets). Triggering the financial
systems which disrupts the operations of financial institutions with the individuals, businesses and the
government.
Central Banks (CB) worldwide are trying to mitigate its impacts by formulating all probable
measures and solutions. Because once the virus is not able to be contained, worst-case scenario, it could
result into another global financial crisis. Whereas financial institutions like banks will be suffer a lot of
losses resulting to its bankruptcies.
I therefore conclude that this reaction paper is important to me and to my fellow classmates.
Because this provide us an advance knowledge regarding with the different impacts of the virus in our
society, its consequences and our preparedness against of it.

1. Three types of underwritings:

What is an underwriting?
Garcia, Jr. Richard Rhamil C. AE-113 MTH 11:30-1:30 M210
COA 2D

 An underwriting takes places between syndicate of investments bankers who form an

underwriting group and the issuing corporation of a new securities issues.
 The agreement ensures everyone involved understand their responsibilities in the
process.
 The contract outlines the underwriting group’s commitment to purchase the new
securities issue, the agreed-upon price, the initial resale price, and the settlement date.
Three types:

 Firm commitment underwriting:

The underwriter guarantees to purchase all the securities offered for sale by the
issuer regardless of whether they can sell them to investors. It is the most
desirable agreement because it guarantees all of the issuer’s money right away.
The more in demand the offerings is, the more likely it will be done a firm
commitment basis. In a firm commitment, the underwriter puts its own money at
risk if it can’t sell securities to investors.
 Market out clause:
This clause frees the underwriter from its obligations to purchase all of the
securities in case there is a development that impairs the quality of the securities.
Poor market conditions, though are not a qualifying conditions. One example of
when a market out clause could be invoked is if the issuer was a biotech company
and the FDA just defined approval of the company’s new drug.
 Best-efforts underwriting:
Underwriters do their best to sell all the securities offered by the issuer, the
underwriter isn’t obligated to purchase the securities for its own account. The
lower the demand for an issue, the greater the likelihood it will be done on a best-
efforts basis. Any shares of bonds in a best-effort underwriting that have not been
sold will be returned to the issuer.

2. Two types of investment offered by investment companies:

 Shares (E.g. stocks and bonds):

Shares are considered a growth investment as they can help grow the value of your
original investment over the medium to long-term. If you own shares, you may also
receive income from dividends, which are effectively a portion of a company’s profit
paid out of its shareholders.
It is also known as equities, shares have historically delivered higher returns than
other assets. Shares are considered one of the riskiest types of investments.
 Cash investments:
These includes every bank accounts, high interest savings accounts and term
deposits. These typically carry the lowest potential returns among of all the
investment types. It can develop regular income and play an important role in
protecting wealth and reducing risk in an investment portfolio.

3. Three examples of Credit Cooperatives in the Philippines:

 Baguio Benguet Community Credit Cooperative.

 PLDT Employees’ Credit Cooperative, Inc.
 DSE (BSP) Credit Cooperative.