STRUCTURE OF THE PHILIPPINE

FINANCIAL SYSTEM
Financial System

► Financial System describes collectively the

financial markets, the participants, and the
instruments and securities that are traded in the
said markets. The functions of the financial system
is to channel the funds from lenders to the
borrowers, provide a medium of exchange,
provide a mechanism for risk sharing and provide
a channel through which the central bank can
influence the economy, in general, and the
financial system in particular.
Brief overview of the Phil.
Financial System
The Financial System has a complex
structure and operation involving
every individual and business org. in a
civilized society. It is a network of
various institutions w/c generates,
circulates, and controls money and
credit.
► Spanish Period – “Obras Pias”
established in 1954, and the 1st
organized financial institution in Phils.
“Monte De Piedadst
y Caja de Ahorros
de Manila” -1 savings bank. Galleon
Trade. Banco Peninsula Ultramarino of
Madrid.
► Cont. financial system
► American Period-International Banking Corp.;
Guaranty Trust Company, American Bank,
Bank of Pangasinan, Bank of Zamboanga,
Postal Savings Bank, Phil National Bank
► Japanese Occupation-Jan. 02,1942 placed
the operation of the 17 existing banks.
► Post-war period -The scope of the Central
Bank authority was broadened to include the
banking and non-banking financial
institutions covering the entire credit system.
► The Eighties: Universal Banking (Expanded
Commercial Banking)
It is the conduct of a variety of financial
services such as trading of financial
instruments; foreign exchange activities;
underwriting new debt and equity issues;
investment management; insurance; as well
as extension of credit and deposit gathering.
Advantages: Diversfication and Expanded
Business Opportunities.
Universal bank can spread its costs over a
broader base activities and generate more
revenues by offering bundle of products and
reduces risk.
► Post-Marcos Era- Mrs. C. Aquino assumed presidency in 1986,
after a successful People Power Revolution that ended 2
decades of Marcos rule. Aquino formulated the Asset
Privatization Trust-whose goal was to dispose of govt.-owned
and controlled properties.
Bangko Sentral ng
Pilipinas
BSP was created by the Rep. Act
No. 7653 known as the New Central
Bank Act of 1993. It was established
on July 3, 1993.
The central bank of the Republic of
the Philippines
It maintains the country’s
international reserves, performs
credit operations, engages in open
market operations
acts as a banker of the
government, and has the sole
power and authority to issue
currency
BSP’s Powers and
Functions
► It is exercised by its Monetary Board, consisting
of 7 members appointed by the President of the
Phils.
► The Governor of BSP is the chief executive
officer of the BSP and is required to direct and
supervise the operations and internal
administration of BSP.
► The governor may delegate certain admin
responsibilities to the Deputy Gov and
Managing directors of the depts. within the BSP.
 Functions of BSP

► Liquidity Management
► Currency Issue
► Lender of last resort
► Financial supervision
► Management of foreign currency reserves
► Determination of exchange rate policy
► Other activities e.g. banker, financial advisor, official depository
of the govt.
 Banking Institutions

► 1. Private Banking Institutions

► A. Expanded Commercial Banks/Universal Banks
► * Universal Bank or Expanded Commercial Bank
► * Commercial Bank or Domestic Bank
► B. Commercial Banks
► C. Thrift Banks
*Savings and Mortgage Banks
* Private Development Banks
* Stock Savings and Loan Association
► D. Rural Banks
► E. Cooperative Banks
 Banking Institutions

► 2. Government Banking
Institutions
► A. Development Bank of
the Philippines
► B. Land Bank of the
Philippines
► C. Philippine Al-Amanah
Islamic Investment Bank
 Non-Bank Financial
Institution
► 1. Private non-bank ► 2. Government
financial institution Non-bank financial
▪ Investment houses
institutions
▪ Government Service
▪ Investment companies
Insurance System (GSIS)
▪ Finaning companies
▪ Social Security System
▪ Securities (SSS)
dealers/brokers
▪ Pag-ibig
▪ Non-stock savings and
loans institutions
▪ Pawnshops
 Commercial Bank

► -any corporation that accepts or

creates demand deposits to
withdrawal by means of checks

► 1. Universal Bank or Expanded

Commercial Bank

► 2. Commercial Bank or Domestic

Bank
 Thrift Banks

► The functions of thrift banks is to

accumulate the savings of
depositors and investing them
together with capital loans secured
by bonds, mortgages in real estate

► 1. Stock Savings and Mortgage

Bank (SSMB)
► any corporations organized for the
purpose of accumulating the
 Thrift Banks
► 2. Savings and Loan Association (SLA)
► - any corporation engaged in the business
of accumulating the savings of its members
or stockholders and using such
accumulation for loans and investment
securities

► 3. Private Development Bank

► - bank that exercise all the powers and shall
assume all the obligations of the savings and
mortgages bank as provided in the General
 Rural Bank

► -any bank authorized by the

Central Bank to make credit
available to farmers, businessmen
and cottage industries in the rural
areas.
 Cooperative Bank

► -banks established to assist the

various cooperatives by lending
those funds at reasonable interest
rates
 Land Bank of the
Philippines
► - a government bank which
provides financial support
in the implementation of
the Agrarian Reform
Program of the government
 Al-Amanah Islamic
Development Bank
► According to R.A. No. 6048
authorizes the bank authorizes
the bank to promote and
accelerate the
socio-economic development
of Autonomous Region of
Muslim Mindanao
Development Bank of the
Philippines
► -provides loans for
developmental purposes, gives
loans to the agricultural sector,
commercial sector and the
industrial sector
Non- banking financial
institutions
Investment House

► Any enterprise which

engages in underwriting
securities of other
corporations
Financing Company

► Any business enterprise where

the primary purpose is to
extend credit facilities to
consumers and to industrial.
Commercial or agricultural
entities either by discounting or
factoring commercial paper
accounts
Securities Dealer

► Any person engaged in the

business of buying and
selling securities for his own
account thereby making a
profit from the difference
between his buying and
selling securities
Securities Broker

► Any person engaged in the

business of effecting securities
transactions and earns through
commission basis
Non-Stock Savings and Loan
Association and Cooperative
Credit
► Corporations engaged in the
business of accumulating the
saving of the savings of its
members and uses such
accumulated funds to lend to
its own member-depositors
Building and Loan
Association
► Any corporation whose Capital
Stock is periodically paid by its
stock members
Pawnshop

► a person or entity engaged in the business in the

business of lending money or personal property,
jewellery, television as a security for a loan
Government Non-bank
Financial Institutions
Social Security System

► Provides retire benefits, funeral

benefits, housing loans and
calamity loans to employees
who are working in private
companies and officers
Government Service
Insurance System (GSIS)
► Provides retirement benefits,
housing loans, personal loans,
emergency loans to
government employees
PAG-IBIG Fund

► Provides housing loans to both

government and private
employees
Monetary Policy

► Monetary Policy refers to the manipulations of the

money supply to affect the economy of the
country as a whole. It largely impact interest rates.
Increase in the money supply lower short term
interest rates, encouraging investments and
consumptions. Expansionary monetary policy may
lower interest rates and stimulates investment and
consumption in the long run. Monetary Policy
Refers to Regulations that will affect money supply
to benefit the economy. Among the tools of
monetary policy are money supply, open market
operations, reserve requirement on bank, discount
rate, interest rate, credit control, among others.