Republic of the Philippines

Laguna State Polytechnic University

ISO 9001:2015 Certified
Province of Laguna
Level I Institutionally Accredited
LSPU Self-Paced Learning Module (SLM)

Student Learning Strategies

Online A. Online Discussion via Google Meet/Zoom
Activities You will be directed to attend in a __________class discussion on Financial System .
(Synchron To have access to the Online Discussion, refer to this link: ____________________.
ous/ The online discussion will happen ______, and ___, 2020, from ____________ AM./PM.
Asynchron (For further instructions, refer to your Google Classroom and see the schedule of
ous) activities for this module)
B. Learning Guide Questions:
1. What is financial system?
2. What are financials systems function?
3. Describe the financial system in the country?

Note: The insight that you will post on online discussion forum using Learning Management System (LMS)
will receive additional scores in class participation.

Offline
Activities Lecture Guide
(e- Read chapter five and six of Elenita Cabrera’s book on Financial Market and
Institutions, 2020 edition.
Learning/  Financial System - It is a system that makes or channels funds from people
Self- who save to people who have productive investment opportunities? The financial system
Paced) is complex in structure and functions throughout the world.
Financial System consist of a variety of institutions, markets and instruments related
in a systematic manner and provide the principal means by which savings are
transformed
into investment, this is according to Prasanna Chandra. A system that allows the transfer
of money between savers and borrowers.
The financial system plays a critical role in the economy. It enables
the financial intermediation process which facilitates the flow of funds between savers
and borrowers, thus ensuring that financial resources are allocated efficiently towards
promoting economic growth and development.

LSPU SELF-PACED LEARNING MODULE: TECHNOLOGY FOR TEACHING AND LEARNING

 Republic of the Philippines
Laguna State Polytechnic University
ISO 9001:2015 Certified
Province of Laguna
Level I Institutionally Accredited

https://www.google.com/search?sxsrf=ALeKk02VadYQzvWJdlP5tcAQCQDvz6rtxQ:1599981501669&source=univ&tb
m=isch&q=objective+of+financial+system&authuser=2&sa=X&ved=2ahUKEwiP5bbIy-
rAhVuFqYKHQPJBGIQsAR6BAgFEAE&biw=1920&bih=969#imgrc=8ljCNHLBSb4KEM

The financial system plays a vital role in the economic development of a country.
It encourages both savings and investment and also creates links between savers and
investors and also facilitates the expansion of financial markets and aids financial
deepening and broadening.
Hence, a major objective of a financial system is to institutionalize and
standardize many common financial transactions, such as the buying and selling of
stocks, and to provide common financial instruments with similar characteristics, such as
options and futures.
The financial system is composed of the products and services provided by
financial institutions which includes banks, insurance companies, pension funds,
organized exchanges, and the many other companies that serve to facilitate economic
transactions. Virtually all economic transactions are effected by one or more of these
financial institutions. They create financial instruments, such as stocks and bonds, pay
interest on deposits, lend money to creditworthy borrowers, and create and maintain the
payment systems of modern economies.

These financial products and services are based on the following fundamental
objectives of any modern financial system:
 to provide a payment system
 to give money time value,
 to offer products and services to reduce financial risk or to compensate risk-taking for
desirable objectives,
 to collect and disperse information that allows the most efficient allocation of economic
resources,
 to create and maintain financial markets that provide prices, which indicates how well
investments are performing, which also determines the subsequent allocation of resources,
and to maintain economic stability.

https://thismatter.com/money/banking/financial-

LSPU SELF-PACED LEARNING MODULE: TECHNOLOGY FOR TEACHING AND LEARNING

 Republic of the Philippines
Laguna State Polytechnic University
ISO 9001:2015 Certified
Province of Laguna
Level I Institutionally Accredited
system.htm#:~:text=Hence%2C%20a%20major%20objective%20of,such%20as%20options%20and%20
futures.

Flow of Fund through the Financial System (Fig. 1)

Indirect Finance

Financial Funds
Funds Intermediaries

Funds

Lenders – Savers Funds Funds Borrower – Spenders

1. Household 1. Business
2. Business Financial Firms
Firms Market 2. Government
3. Government 3. Households
4. Foreigners 4. Foreigners

Direct Finance

Key Components of Financial System

a) Financial Instruments
b) Financial Markets and Financial Institutions
c) The Central Bank and Other Financial Regulators

Three key services (functions) that the financial systems provide:

a) Risk sharing- Here are a few examples of how you regularly share risk: Auto,
home, or life insurance, shares risk with other people who do the same. Taxes share risk with
others so that all can enjoy police, fire, and military protection. Retirement funds and Social
Security share risk by spreading out investments.
b) Liquidity - Liquidity risk is the risk that a business will have insufficient funds
to meet its financial commitments in a timely manner. The two key elements of liquidity risk are
short-term cash flow risk and long-term funding risk.

c) Information – other function of financial system is the collection of data or

information of borrowers as well lenders. Sometimes Asymmetric Information occurs thus,
adverse selection and moral hazard exists.

Engaging Activities: Answer the following questions

a) What comprises the financial system?
b) Explain Figure 1 above.

LSPU SELF-PACED LEARNING MODULE: TECHNOLOGY FOR TEACHING AND LEARNING

 Republic of the Philippines
Laguna State Polytechnic University
ISO 9001:2015 Certified
Province of Laguna
Level I Institutionally Accredited
c) Explain the importance and function of a financial system
d) Describe the three important functions of financial system.
 Philippine Financial System – the basic function of the financial system is
the moving of funds from those who has surplus to those who have shortage.
(E. Cabrera, Financial Market and Institution 2020edition)

Structure of the Philippine Financial System

 Bangko Sentral Ng Pilipinas – principal regulatory agency which regulate all
depository institutions. The BSP examines the book of commercial banks that are
members of the system, sets reserve requirements for all banks. Other regulatory
agencies are; Securities and Exchange Commission (SEC), Insurance Commission
(IC) and Philippine Deposit Insurance Companies (PDIC).
 Banking Institutions
A. Private Banking Institutions:
1. Universal Bank (UB) or Expanded Commercial Bank (EKB)
2. Commercial Bank or Domestic Bank (KB)
3. Thrift Banks (TB)
a. Stock Savings and Mortgage Bank (SSMB)
b. Private Development Bank (PDB)
c. Stock Savings and Loan Association (SLA)
4. Rural Bank (RB)
5. Cooperative Bank
B. Government Banks or Specialized Government Banking Institutions
1. Development Bank of the Philippines (DBP)
2. Land Bank of the Philippines (LBP)
3. Al-Amanah Islamic Investment Bank

 Non-Bank Financial Institutions

A. Private non-bank financial Institutions
1. Investment houses 6. Mutual Funds
2. Investment banks 7. Pawnshops
3. Financing companies 8. Lending investors
4. Securities dealers/brokers 9. Pension funds
5. Savings and loans association 10. Insurance companies
11. Credit union

B. Government Non-bank financial institutions

1. Government Service Insurance System (GSIS)
2. Social Security System (SSS)
3. Pag-ibig

Philippine Financial System continue to evolve, and shows sign of growth in the
domestic market. The Philippine banking system consistently posting double-digit asset
growth since January 2016. While total asset of the insurance industry more than doubled
from 2008 to 2016 and the securities market has also exhibited growth. Through the
continues effort of monitoring and controls of the regulatory bodies the above goals were
achieved.
Regulatory Landscape:
A. Alignment with global standards – BSP released several circulars governing
the issuance of bonds and liberalizing the foreign exchange (FX) regulatory framework.
The Insurance Commission adopts the implementation of the Philippine Financial
Reporting Standards in congruence with the Financial Reporting Standards Council. The

LSPU SELF-PACED LEARNING MODULE: TECHNOLOGY FOR TEACHING AND LEARNING

 Republic of the Philippines
Laguna State Polytechnic University
ISO 9001:2015 Certified
Province of Laguna
Level I Institutionally Accredited
SEC approved amendments to Securities Regulation Code and Corporation Code,
supporting the bills on regulating Collective Investment schemes to enhance local
regulations and conform to international best practices. PDIC has entered into a cross-
border partnership by way of a Memorandum of Understanding with eight deposit
insurance agencies from Asia, the UK and the US.
B. Deepening capital markets – Several financial products have been
introduced aimed to provide alternative options for raising funds or for investing money.
Includes: 1) dollar-denominated securities, 2) exchange traded funds, 3) green bonds,
4) Personal Equity and Retirement Account, 5) PHP government fund forward, 6) public-
private shares, and 7) real estate investment trust.
C. Strengthening surveillance - PHL is Now a BIS-Reporting Country, 01.15.2018
The Philippines will join an elite group of less than 50 jurisdictions worldwide which
report cross-border banking statistics to the Bank for International Settlements (BIS) as
part of the global database.

Financial Stability Assessment of the Philippine Financial System – (study the report on
this by the PDIC, SEC, Dept. of Finance, Insurance Commission and BSP. Provide a
summary of your understanding with the given report… you may access the given
link below:
http://www.pdic.gov.ph/files/ccd/2018%20H1-2019%20H1%20FSR%20(FINAL).pdf
http://www.pdic.gov.ph/files/ccd/april_2020_FSR_final.pdf.

Current risks in the Philippine financial System

A. Repricing, refinancing and repayments risks (3rs)
B. Developments in the credit market
C. Continuous demand for credit by corporate enterprises and households
is evident in the domestic

Engaging Activities: 1. Compare the function of a commercial with that of a

universal bank.
2. Enumerate and cite the nature of the 3 government banks.
3. Discuss briefly the following current risks in the Philippine
Financial system

Performance Tasks
Performance Task 1 :
Scheduled quiz onNov. __________ involves Identification (Multiple Choice),
enumeration and essay

LSPU SELF-PACED LEARNING MODULE: TECHNOLOGY FOR TEACHING AND LEARNING

 Republic of the Philippines
Laguna State Polytechnic University
ISO 9001:2015 Certified
Province of Laguna
Level I Institutionally Accredited

Understanding Directed Assess

Rubrics ON ENGAGING ACTIVITIES:

RUBRICS FOR DISCUSSION POSTINGS

Answer to Guide Question Score

The answer shows a deep understanding of the ideas in the course 5 7 10

materials.

They reflect an incisive analysis of theory, practice and personal experience. 5 7 10

They are well supported by valid arguments, appropriate 5 7 10

examples/illustrations/details and relevant personal experiences.

Reaction/Comments

The reactions/comments reflect understanding and analysis of the DB 1 3 5

postings concerned.

They are reasonable and well supported by theory/practice/ personal 1 3 5

experience/logical examples/illustrations.

Timeliness

The postings are timely/up-to-date (i.e., contributed within the assigned 1 3 5

schedule/time frame).

Organization and Mechanics

The postings are organized, clear, concise, and grammatically correct. 1 3 5

TOTAL /50

Learning Resources

Cabrera, Ma. E. B. and Cabrera, G. A., (2020) Financial Markets and Institutions, 2020
edition, GIC Enterprises,2017 C. M. Recto Avenue, Manila Philippines

https://www.google.com/search?sxsrf=ALeKk02VadYQzvWJdlP5tcAQCQDvz6rtxQ:15999815
01669&source=univ&tb
m=isch&q=objective+of+financial+system&authuser=2&sa=X&ved=2ahUKEwiP5bbIy-
rAhVuFqYKHQPJBGIQsAR6BAgFEAE&biw=1920&bih=969#imgrc=8ljCNHLBSb4KEM

http://www.pdic.gov.ph/files/ccd/2018%20H1-2019%20H1%20FSR%20(FINAL).pdf

LSPU SELF-PACED LEARNING MODULE: TECHNOLOGY FOR TEACHING AND LEARNING

 Republic of the Philippines
Laguna State Polytechnic University
ISO 9001:2015 Certified
Province of Laguna
Level I Institutionally Accredited
http://www.pdic.gov.ph/files/ccd/april_2020_FSR_final.pdf.

Intellectual Property This module is for educational purpose only. Under section Sec. 185 of RA 8293,
which states, “The fair use of a copyrighted work for criticism, comment, news reporting, teaching
including multiple copies for classroom use, scholarship, research, and similar purposes is not an
infringement of copyright”. The unauthorized reproduction, use, and dissemination of this module,
without joint consent of the authors and LSPU, is strictly prohibited and shall be prosecuted to the full
extent of the law, including appropriate administrative sanctions, civil, and criminal. -----------------------
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LSPU SELF-PACED LEARNING MODULE: TECHNOLOGY FOR TEACHING AND LEARNING