CENTRAL BANKING AND THE EFFECTS OF ITS MONETARY POLICIE IN OUR

Topic Content 1: DISCUSS THE MONETARY BOARD

The powers and function of Bangko Sentral are exercised by its Monetary Board, which has seven
members appointed by the President of The Philippines. Under the New Ce​ntral Bank Act, one of the
government sector members of the Monetary Board must also be a member of the Cabinet design​ated by
the President.

The New Central Bank Act establishes certain qualifications for the members of the Monetary Board and
also prohibits members from holding certain positions with other governmental agencies and private
institutions that may give rise to conflicts of interest. Wit​h the exception of the members of the Cabinet,
the Governor and the other ​m​embers of the Monetary Board serve terms of six years and may only be
removed for cause.
The Monetary Board meets at least once a week. The Board may be called to a meeting by the Governor
of the Bangko Sentral​ or by two (2) other members of the Board. Usually, the Board meets every
Thursday but on some occasions, it convenes to discuss urgent issues.
​
In the exercise of its authority, the Monetary Board shall:
1. Issue rules and regulations it considers necessary for the effective discharge of the responsibilities and
exercise of the powers vested upon the Monetary Board and the Bangko Sentral;
2. Direct the management, operations, and administration of the Bangko Sentral, reorganize its
personnel, and issue such rules and regulations as it may deem necessary or convenient for this
purpose. The alegal units of the Bangko Sentral shall be under the exclusive supervision and control of
the Monetary Board;
3. Establish a human resource management system which shall govern the selection, hiring,
appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to establish
professionalism and excellence at all levels of the Bangko Sentral in accordance with sound principles of
management.
A compensation structure, based on job evaluation studies and wage surveys subject to the Board's
approval, shall be instituted as an integral component of the Bangko Sentral's human resource
development program..
On the recommendation of the Governor, appoint, fix the remunerations and other emoluments, and
remove personnel of the Bangko Sentral, subject to pertinent civil service laws: Provided, That the
Monetary Board shall have exclusive and final authority to promote, transfer, assign, or reassign
personnel of the Bangko Sentral and these personnel actions are deemed made in the interest of the
service and not disciplinary: Provided, further, That the Monetary Board may delegate such authority to
the Governor under such guidelines as it may determine;
4. Adopt an annual budget for and authorize such expenditures by the Bangko Sentral in the interest
of the effective administration and operations of the Bangko Sentral in accordance with applicable
laws and regulations; an​d
5. Indemnify its members and other officials of the Bangko Sentral, including personnel of the
departments performing supervision and examination functions against all costs and expenses
reasonably incurred by such persons in connection with any civil or criminal action, suit or
proceedings to which he may be, or is, made a party by reason of the performance of his functions
or duties, unless he is finally adjudged in such action or proceeding to be liable for negligence or
misconduct.​

Topic Content 2: DEFINE THE NEW CENTRAL BANK ACT

The Congress of the Philippines' Republic Act No. 7563 creates the Central Bank of the
Philippines (Bangko Sentral ng Pilpinas) which is to provide policy directions in the areas of money,
banking, and credit. The Bank shall have supervision over the operations of banks and exercise such
regulatory powers as operations of finance companies and non-bank financial institutions performing
quasi-banking functions, and institutions performing similar functions.The primary objective of the Bank
is to maintain price stability conducive to a balanced and sustainable growth of the economy. It shall also
promote and maintain monetary stability and the convertibility of the peso. The law is divided into several
chapters, and sets forth provisions on the following topics:

1. Establishment and Organization of the Central Bank of the Philippines

2. The Central Bank and the Means of Payment
3. Guiding Principles of Monetary Administration by the Central Bank

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4. Instruments of Central Bank Action

5. Central Bank's Functions as Banker and Financial Advisor of the Government
6. Privileges and Prohibitions

Topic Content 3: THE LEGAL BANK RESERVES

Reserve requirements refer to the percentage of bank deposits and deposit substitute liabilities
that banks must set aside in deposits with the BSP which they cannot lend out, or where available through
reserve-eligible government securities. Changes in reserve requirements have a significant effect on
money supply in the banking system, making them a powerful means of liquidity management by the
BSP.

Reserve requirements are imposed on the peso liabilities of universal/commercial banks

(UBs/KBs), thrift banks (TBs), rural banks (RBs) and cooperative banks (Coop Banks), and non-bank
financial institutions with quasi-banking functions (NBQBs). Reservable liabilities include demand,
savings, time deposit and deposit substitutes (including long-term non-negotiable tax-exempt certificates
of time deposit or LTNCTDs)
The existing reserve requirement ratios vary across bank types and liabilities.
Reserve Requirement Ratio: Local Currency Deposits: Philippines was set as 12.0 % in Sep 2021.
Philippines Reserve Requirement Ratio data updated monthly, available from May 1986 to Sep 2021. The
data is reported by reported by CEIC Data. Foreign Exchange Reserves in Philippines was measured at
94.0 USD bn in Aug 2021. The Foreign Exchange Reserves equalled 9.9 Months of Import in Jul 2021.
Philippines Domestic Credit reached 280.5 USD bn in Jul 2021, representing an increased of 4.4 % YoY.
The country's Non Performing Loans Ratio stood at 4.0 % in Feb 2021, compared with the ratio of 3.7 %
in the previous month. Household Debt of Philippines reached 40.0 USD bn in Jun 2021, accounting for
11.1 % of the country's Nominal GDP.

Topic Content 4: DUTIES AND RESPONSIBILITIES OF A BOARD OF DIRECTORS OF A

BANK

Most banks, like many large businesses, are run as corporations, with the leadership of the
business delegated among different parties. While the day-to-day operation of most banks is left to its
managers, a board of directors is usually appointed by shareholders to monitor and govern the bank's
operations, thereby safeguarding the shareholders' investments. The duties and responsibilities of this
board are numerous and broad.

1. Selecting Management. While the board of directors does not manage the bank, one of
its foremost duties is to pick the people who will. The board must select and appoint the

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bank’s top executive officers. After hiring a chief executive officer, the board must
regularly review his performance and replace him if it is unsatisfactory.

2. Goals and Strategies. In conjunction with the bank's top officers, the board is
responsible for formulating broad goals and strategies for the bank. The formulation of
clear objectives and policies supplies a framework for the chief executive to work within.
The board also helps set priorities for the bank.

3. Managing Risk. The board of directors not only helps lay out the bank's goals, but acts
as a watchdog as well. One of its main duties in this capacity is to limit the bank's
exposure to excessive risk of all kinds, including legal, reputational and financial. By
managing risk judiciously, the board tries to maintain a balance between enterprise and
caution.

4. Allocating Resources. The primary function of banks is to take money from people who
want to save and lend it to people who want to borrow. Deciding, in a general way, to
whom it lends is one of the board's most important duties. Banks that chose not to invest
in sub-prime mortgages in the late 2000s, for instance, were more likely to stay afloat
than banks that invested in them heavily.

5. Protecting Stockholders. A bank's board of directors is the stockholders' proxy, and

represents their interests. Many banks require that board members own some company
stock to provide them with personal incentives in their decision-making. In overseeing
the running of the bank, however, the board must keep the interests of the shareholders
paramount.

6. Compliance. In its role as company watchdog, the board must also ensure the bank
complies with all relevant statutes, both internal and external. The boards of some banks
suffer a financial penalty if the bank violates certain legal statutes.

7. Audits. A board of directors should always know how the bank is being run. One of the
foremost ways to accomplish this is to conduct periodic audits of the bank. These audits
can be both financial and structural in nature, examining both the banks' books and its
management practices.

8. Conflicts of Interest. Boards must always have an eye out for conflicts of interests, both
in the bank's top executives and on the board itself. If a person in a position of leadership
has mixed motives, this compromises the interests of shareholders; a good board of
directors must step in and resolve the conflict.

Topic Content 5: VARIOUS DEPARTMENT OF A BANK

The average bank has a variety of different departments that all work together to provide services to
individual customers and businesses alike. While most customers are familiar with the retail banking
department, which is what typically serves as the "face" of the bank, it can be confusing to know whom to
ask for help when it comes to other types of financial transactions.
1. Retail Banking and Services Functions
The retail division of a bank consists of a group of employees who
interact directly with customers. These range from tellers and customer
service representatives to loan officers and branch managers. The retail
bank division is likely the first place you'll find yourself whenever you
walk through the average bank's doors. It’s also where you'll find help
with:
 Checking and savings accounts
 Marketing and community relations
 Personal loans
 Credit cards
 Certificates of Deposits (CDs)
 Some types of insurance

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2. Commercial and Business Banking Options

Whereas retail banking is aimed at providing services to individuals, commercial banking is
catered towards businesses. Often, many mid-size and larger banks have both retail and
commercial branches that operate under the same roof. That said, not every local bank branch or
credit union may have a commercial business department, though most can accept commercial
deposits.

Commercial banking departments work with a wide variety of companies, from local businesses
to large corporations. Some of the services that fall under commercial banking include:
 Business loans
 Start-up loans
 Lines of credit
 Equipment of lending
 Employer services
 Commercial real estate
Banks that offer services to businesses are where you’re likely to find finance professionals like
cash-management analysts, treasury analysts, business bankers and business banking associates.
A bank’s cash-management division generally works with business clients to manage short-term
investment strategies, liquidity and cash flow. The employees here often handle:
 Accounts receivable management
 ACH setup and processing
 Risk management
 Payroll services
 Controlled disbursements
3. Loan Servicing Departments
The loan servicing department of a bank takes care of communications with borrowers at any
point in their loan journey — from managing the initial application process to assisting borrowers
once loan funds have been disbursed. Common loan service jobs include mortgage service
specialists, consumer loan servicing specialists, commercial loan administrators and escrow-
servicing analysts.

As an overall department, loan servicing takes care of things like:

 Assisting with filling out and processing applications
 Collecting payments
 Helping borrowers set up repayment plans or loan consolidations
 Advising and working with borrowers whose loans have defaulted
4. Wealth Management and Investing Assistance
A bank's wealth-management department is sometimes also known as "private banking" or
"private wealth management." This department is usually geared towards a bank's high-net-worth
clientele and offers personalized financial services. Not all banks have wealth-management
departments, so you may have to do a bit of research to see which larger banks near you do.

Within the average wealth-management department, you’ll find financial advisors, wealth
advisors, trust officers, private banking associates and management associates. They generally
offer services such as:
 Estate planning
 Portfolio management
 Retirement planning
 Legal and tax strategies
 Trust management
Many larger banks have also now developed their own investment banking divisions to work with larger
enterprise clients. Again, this is not a department that you'll find in every local bank; it’s generally
exclusive to larger banking institutions. Sometimes investment banks are even institutions all their own.

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An investment bank or banking branch is made up of business bankers, commercial banking

representatives and business documentation analysts. Together they work to help clients with investments
and their related financial tasks like:
 Risk management
 Mergers and acquisitions
 Restructuring
 Strategic advisory
 Divestitures
 Prime brokerage services
5. Deposit Operations
The deposit operations branch of a bank is responsible for overseeing a wide range of important
information that a bank depends on to stay afloat. This branch's employees are known as deposit
operations specialists, and they usually work behind the scenes to take care of tasks such as:
 Entering deposits into the bank’s database
 Documenting new account information
 Generating reports of monthly deposits
 Verifying customer signatures
 Verifying the accuracy of deposits against account balances
6. Electronic Banking Divisions
A bank's electronic payment department consists of employees who monitor and maintain the
systems that facilitate the bank's electronic financial transactions. Additionally, providing security
is also a large part of the electronic banking department's job, as they need to ensure that the bank
is protected from fraud, hacking and other electronic crimes.

Some of the positions that are common in an electronic banking division include electronic
banking specialists, payment operations analysts, processing/proof specialists, security analysts
and fraud-detection experts. They oversee a large variety of electronic systems and processes,
including:
 Electronic bill payments
 ATMs
 Electronic deposits
 Electronic transfers
 The bank’s online/mobile banking system
7. Mortgage Banking
When it comes to mortgage banking, you may either be able to work through a mortgage
department at your regular bank or go to a bank that specifically handles mortgages and property
loans.

A variety of employees work in this department, including mortgage loan officers, loan servicing
specialists, underwriters and mortgage analysts. Their jobs collectively help borrowers secure
mortgage loans. Among their responsibilities are:
 Assessing a potential borrower’s eligibility
 Processing a mortgage application after collecting the required information and documents
 Inspecting a borrower’s credit reports and other information to determine whether the bank
should approve or deny a loan
 Processing mortgage payments
 Answering questions that a borrower has throughout the course of their loan
References:
https://www.bsp.gov.ph/Pages/AboutTheBank/WhoWeAre/OrganizationAndGovernance/TheMonetaryB
oard/TheMonetaryBoard.aspx
https://dfsobservatory.com/content/congress-philippines-republic-act-no-7563-new-central-bank-act
https://www.bsp.gov.ph/Pages/PriceStability/ReserveRequirement.aspx
https://www.ceicdata.com/en/indicator/philippines/reserve-requirement-ratio
https://careertrend.com/list-6719798-duties-fiduciary-officers.html

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