MODULE 7: BANGKO SENTRAL NG
PILIPINAS
HISTORY
➢ IN THE YEAR 1900 - Act No. 52
was passed by the First Philippine
Commission placing all banks under
the Bureau of Treasury. The Insular
Treasurer was authorized to supervise
and examine banks and banking
activities.
➢ IN 1933 - Particular group of
Filipinos were trying to conceptualize
a central bank for the Philippines.
Resulted from a careful
understanding of the economic
provisions of HARE HAWES
CUTTING BILL.
➢ IN FEBRUARY OF 1929 - The
Bureau of Banking under the
Department of Finance took over the
task of banking supervision.
➢ IN 1939 - A bill establishing a central
bank was drafted by Secretary of
Finance Manuel Roxas and approved
by the Philippine Legislature.
However, the bill was returned by the
US government, without action, to the
Commonwealth Government.
➢ 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 with respect to the currency and
the Bureau of Banking, and for other
purposes.
➢ 15 June 1948 - The bill was signed
into law as Republic Act No. 265
(The Central Bank Act) by President
Elpidio Quirino.
➢ 3 January 1949 - The Central Bank
of the Philippines (CBP) was
inaugurated and formally opened with
Hon. Miguel Cuaderno, Sr. as the first
governor.
➢ 3 July 1993 - The Bangko Sentral ng
Pilipinas (BSP) was established to
replace the CBP as the country’s
central monetary authority.
BANGKO SENTRAL NG PILIPINAS
• The Bangko Sentral ng Pilipinas
(BSP) is the central bank of the
Republic of the Philippines. It was
established on 3 July 1993 pursuant to
the provisions of the 1987 Philippine
Constitution and the New Central
Bank Act of 1993.
• The BSP took over from the Central
Bank of Philippines, which was
established on 3 January 1949, as the
country’s central monetary authority.
The BSP enjoys fiscal and
administrative autonomy from the
National Government in the pursuit of
its mandated responsibilities.
VISION - The BSP aims to be a world-
class monetary authority and a catalyst
for a globally competitive economy and
financial system that delivers a high
quality of life for all Filipinos.
MISSION - BSP is committed to
promote and maintain price stability and
provide proactive leadership in bringing
about a strong financial system conducive
to a balanced and sustainable growth of
the economy. Towards this end, it shall
conduct sound monetary policy and
effective supervision over financial
institutions under its jurisdiction.
FUNCTIONS AND OPERATIONS
OBJECTIVES - The BSP’s primary
objective is to maintain price stability
conducive to a balanced and sustainable
economic growth. The BSP also aims to
promote and preserve monetary stability
and the convertibility of the national
currency
RESPONSIBILITIES - The BSP
provides policy directions in the areas of
money, banking and credit. It supervises
operations of banks and exercises
regulatory powers over non-bank
financial institutions with quasi-banking
functions.
Liquidity Management - formulates and
implements monetary policy aimed at
influencing money supply consistent with
its primary objective to maintain price
stability.
Currency issue - has the exclusive power
to issue the national currency. All notes
and coins issued by the BSP are fully
guaranteed by the Government and are
considered legal tender for all private and
public debts.
Lender of last resort - The BSP extends
discounts, loans and advances to banking
institutions for liquidity purposes.
Financial Supervision - The BSP
supervises banks and exercises regulatory
powers over non-bank institutions
performing quasi-banking functions
Management of foreign currency
reserves - The BSP seeks to maintain
sufficient international reserves to meet
any foreseeable net demands for foreign
currencies in order to preserve the
international stability and convertibility
of the Philippine peso.
Determination of exchange rate policy
- determines the exchange rate policy of
the Philippines. Currently, the BSP
adheres to a market-oriented foreign
exchange rate policy such that the role of
Bangko Sentral is principally to ensure
orderly conditions in the market.
Other activities, the BSP functions as
the banker, financial advisor and
official depository of the Government,
its political subdivisions and
instrumentalities and government-
owned and -controlled corporations.
GOVERNANCE OF THE BANK
THE MONETARY BOARD - exercises
the powers and functions of the BSP, such
as the conduct of monetary policy and
supervision of the financial system. Its
chairman is the BSP Governor, with five
full-time members from the private sector
and one member from the Cabinet.
THE GOVERNOR - Is the chief
executive officer of the BSP and is
required to direct and supervise the
operations and internal administration of
the BSP.
A deputy governor heads each of the
BSP's operating sector as follows:
• Monetary Stability Sector takes
charge of the formulation and
implementation of the BSP’s
monetary policy, including serving
the banking needs of all banks
through accepting deposits, servicing
withdrawals and extending credit
through the rediscounting facility.
-Supervision and Examination
Sector enforces and monitors
compliance to banking laws to
promote a sound and healthy banking
system.
-Resource Management Sector
serves the human, financial and
physical resource needs of the BSP
BSP’S IN THE PHILIPPINES
BSP MAIN COMPLEX - The BSP
Main Complex in Manila houses the
offices of the Governor, the Monetary
Board and the different operating
departments/ offices. The Complex has
several buildings, namely: 5-Storey
building, Multi-storey building, the
EDPC building and the BSP Money
Museum, which showcases the Bank's
collection of currencies.
BSP SECURITY PLANT COMPLEX
- The Security Plant Complex which is
located in Quezon City houses a banknote
printing plant, a securities printing plant,
a mint and a gold refinery. The banknote
printing plant and the mint take care of
producing currency notes and coins,
respectively.
BSP’S IN THE PHILIPPINES - The
BSP has three regional offices
performing cash operations, cash
administration, loans and rediscounting,
bank supervision and gold buying
operations. These regional offices are
located in La Union, Cebu City and
Davao City and 19 branches all over the
Philippines.
MODULE 8: THE PHILIPPINES
FINANCIAL SYSTEM,
DEVELOPMENT CLASSFICATION
AND KINDS
The Bangko Sentral ng Pilipinas
• The Bangko Sentral ng Pilipinas
(BSP) was created by the Republic
Act No. 7653, otherwise known as the
New Central Bank Act of 1993.
• The BSP is now the Philippines’
central monetary authority that
provides policy directions in the areas
of money, banking and credit.
• The BSP’s powers and functions are
exercised by its Monetary Board,
consisting of seven members
 appointed by the president of the
Philippines.
• One of the government sector
members of the Monetary Board must
be a member of the Cabinet
designated by the President of the
Republic, which position is currently
held by the Secretary of Finance.
• The New Central Bank Act authorizes
the Governor of BSP to appoint up to
three Deputy Governors, subject to
the approval of the Monetary Board.
• The Governor is the chief executive
officer of the BSP and is required to
direct and supervise the operations
and interval administration of BSP.
• The BSP is aided in its bank
monitoring and examination
processes by credit rating agencies
and financial conglomerates.
• The BSP is also into the upgrading of
its domestic prudential standards in
areas of capitalization, connected or
pooled lending, loan provisioning,
data disclosure, and qualifications of
owners and managers.
• The BSP likewise imposes the
requirements on the operations on e-
bankers.
• The BSP is backstopped in this regard
by the passage of e-commerce law in
June 2000 which facilitated the
exchange of information and
promoted the security of electronic
transactions.
THE BANKING INSTITUTION
The Banking Institution in the Philippines
can be categorized as private banking and
government banking.
• The private banking institutions are
comprised of commercial banking such
as universal banks and ordinary
commercial banks; thrift banks like
savings and mortgage banks, private
development banks, and stock savings
and loan association; and the rural banks.
• The government banking institutions,
on the other hand, consist of Philippine
National Bank, Development Bank of the
Philippines, Land Bank of the
Philippines, and the Philippine Amanah
Bank
PRIVATE BANKING INSTITUTIONS
Commercial Banking Institutions - The
Banks that fall under commercial banking
institutions are the ordinary commercial
banks or non-expanded commercial banks.
These banks continue to account for the bulk
of the total resources of banking industry.
The Thrift Banks - Thrift banks are
primarily engaged in mobilizing the small
savings of the people. They provide funds for
agriculture and industry at reasonable interest
rates. The small producers like farmers,
fishermen, craftsmen, and poor consumers
can rely on such banks for financing their
production and consumptions inputs. The
following banks fall under the category of
Thrift Banks
The Savings and Mortgages Banks - The
Savings and Mortgages Banks. The primary
function of a savings and mortgage bank is to
receive time deposit of different types and to
invest its funds in long term investment.
The Savings and Loan Association - Very
similar to the savings and mortgage banks are
the savings and loans associations nowadays.
However, these institutions may either be
stock or non-stock corporations.
The Private Development Banks - This is
quite different from the government
institution of the same name. It is a
government entity, formerly the
Rehabilitation Finance Corporations.
The Rural Banks - Rural Banks fulfil the
investment function by allowing small
farmers to finance their needs through the
granting of loans for capital or other uses.
GOVERNMENT BANKING
INSTITUTION
1. The Philippine National Bank. The
Philippine National Bank (PNB)
operates under the provision of
Executive Order No. 80, the 1996
revised charter of PNB.
2. The Development Bank of the
Philippines. The Development
Bank of the Philippines (DBP)
started operating in 1935 as the
National Loan and Investment Board.
Its first mission was to coordinate and
manage trust funds.
3. The Land Bank of the Philipines.
The Agrarian Reforms Code
created the Land Bank of the
Philippines (LBP) to finance the
acquisition and distribution of
 agricultural estates for division and
resell these small landholders.
4. The Al-Amanah Islamic
Investment Bank of the Philippines.
The Al-Amanah Islamic Investment
Bank of the Philippines (Islamic
Bank) was created under Republic
Act No. 6848 for the purpose of
promoting and accelerating the socio-
economic growth of Mindanao,
particularly the provinces of
Cotabato, Lanao del Sur, Lanano del
Norte, Zamboanga del Sur,
Zamboanga del Norte, and Sulu.
NON-FINANCIAL INSTITUTION
• These are other financial institutions
which engage in specific functions.
They provide services related to
claims, financial information, and
advice, manage portfolios of financial
assets on behalf of other economic
units, buy and sell claims on
institution from clients, and assist in
finding sources for those economic
units seeking loans. These either
private or government non-bank
financial institution.
PRIVATE NON-BANK INSTITUTIONS
Investment House/Banks - The term
“investment house” is defined to mean as
“any enterprise” which engages in the
underwriting of securities of other
corporations. Underwriting is the act or
process of guaranteeing the distribution and
sale of securities of any kind issued by
another corporation. Securities are written
evidences of ownership, interest, or
participation in any enterprise, or written
evidences of indebtedness of a person or
enterprise.
Securities Brokers/dealers. - Pursuant to the
provision of the Revised Securities Act, no
broker, dealer, or salesman must engage in
business in the Philippines as such broker,
dealer, or salesman or sell any securities,
including securities exempted under the said
law.
Building and Loan Associations. - A
building and loan association is a special type
of savings institution. Because of its very
nature, however, it falls under this category
in view of the fact that it also receives savings
from members and lends fund to them.
Credit Union. - A credit union is another
type of savings’ institutions. It also has for its
purpose the inculcation of the habit of thrift,
frugality, and the idea of helping one another.
Private Insurance - Private insurance
companies contribute to the country's socio-
economic development as well as to the
insured.
MODULE 9: FINANCIAL MARKETS
AND INSTITUTIONS
The Financial Markets
• Financial markets are a system that
includes individuals and institutions,
instruments, and procedures that
bring together borrowers and savers
no matter the location
• The primary role of financial markets
is to facilitate the flow of funds from
individuals and businesses that have
surplus funds to individuals,
businesses, and governments that
need funds in excess of their incomes
FLOW OF FUNDS
• Three financial phases
o Young adults borrow
o Older working adults save
o Retired adults use savings
• Funds transferred from savers to
borrowers
o Direct transfer
o Investment banking house
o Financial intermediary
MARKET EFFICIENCY
Economic Efficiency - Funds are allocated
to their optimal use at the lowest costs
Informational Efficiency - Investment
prices are adjusted quickly to reflect current
information
Weak-form - all information contained in
past price movements is reflected in current
market prices
Semistrong-form - current prices reflect all
publicly available information
Strong-form current prices reflect all
pertinent information, both public and private
Types of Financial Markets
• Money versus capital markets
• Debt versus equity markets
• Primary versus secondary markets
• Derivatives markets
General Stock Market Activities
• The secondary market - trading in
the outstanding, previously issued
shares of established, publicly owned
companies
• The primary market - additional
shares sold by established, publicly
owned companies
• IPO market - new public offerings
by privately held firms
Stock Markets
Physical stock exchanges
• NYSE, AMEX, and regional
exchanges
Exchange members
• Floor brokers
• Specialists
To have a stock listed
• Apply to the exchange
• Pay a relatively small fee
• Meet the exchange’s minimum
requirements
Over-the-Counter Markets and the
Nasdaq
• Network of brokers and dealers
• Auction market
• Organized Investment Network
• Electronic Communications
Networks
10 Best Online Investment Sites &
Platforms for Filipinos
1. First Metro Securities
2. COL Financial
3. Coins Pro
4. Angel Investment Network PH
5. FundKo
6. SeedBox PH
7. Flippa.com
8. Lamudi PH
9. eToro
10. GCash Invest Money
Regulation of Securities Markets
Securities and Exchange Commission
(SEC)
• Jurisdiction over most interstate
offerings of new securities to the
general public
• Regulation of national securities
exchanges
• Power to prohibit manipulation of
securities’ prices
• Control over stock trades by
corporate insiders
The Investment Banking Process
• Investment Banker
o Helps corporations design
securities attractive to
investors
o Buys these securities from the
corporation
o Resells the securities to
investors
Raising Capital: Stage I Decisions
1. Dollars to be raised
2. Type of securities used
3. Competitive bid versus negotiated
deal
4. Selection of an investment banker
Raising Capital: Stage II Decisions
1. Reevaluating the initial decisions
2. Best efforts or underwritten issues
• Underwritten Arrangement -
investment bank guarantees the
sale by purchasing the securities
from the issuer
• Best Effort Arrangement -
investment bank gives no
guarantee that the securities will
be sold
3. Issuance (flotation) Costs
4. Setting the offering price
Selling Procedures
• Underwriting Syndicate: A
syndicate of investment firms formed
to spread the risk associated with the
purchase and distribution of a new
issuance of securities
• Lead or Managing Underwriter:
The member of an underwriting
syndicate who actually manages the
distribution and sale of a new security
offering
• Selling Group: A network of
brokerage firms formed for the
purpose of distributing a new
issuance of securities
Shelf Registrations
• Securities registered with the SEC for
sale at a later date
• Held “on the shelf” until the sale
Maintenance of the Secondary Market
• When a company is going public for
the first time, the investment banker is
obligated to maintain a market for the
shares after the issue has been
completed.
• The lead underwriter agrees to “make
a market” in the stock and keep it
reasonably liquid.

Types of Financial Intermediaries

• Commercial banks
• Credit unions
• Savings and loan associations
• Mutual funds
• Whole life insurance companies
• Pension funds

The Role of Financial Intermediaries

• Facilitate the transfer of funds from
those who have funds (savers) to
those who need funds (borrowers)
• Manufacturing a variety of financial
products that take the form of either
loans or savings instruments

Benefits of Financial Intermediaries

• Reduced costs
• Risk/diversification
• Funds divisibility/pooling
• Financial flexibility
• Related services