UNIVERSITY OF THE EAST

Caloocan Campus

Subject: MONETARY POLICY & CENTRAL BANKING(BFM421/FM403) Instructor: Annie Lee G. DeBelen, MBA
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Continued lecture 7 (MODULE 4)

OTHER MONETARY POLICIES TO STABILIZE BANKING OPERATION

1. BSP may FIX MATURITIES in bank loans for the purpose of CREDIT CONTROL or
AS A MEANS OF PAYMENT.
2. BSP may also FIX the MAXIMUM INTEREST that the bank may PAY ON DEPOSIT SUBSTITUTES for the
purpose of PREVENTING COMPETITION among banks in attracting DEPOSITORS
3. Establish PRIORITIES FOR BANK LOANS (especially with respect to funds which has been borrowed
from the BSP)
4. BSP makes PERIODIC EXAMINATION OF THE BANK’S ACCOUNTING RECORDS(require banks to submit
their FS at the end of every quarter.
5. BSP look into the CHARACTER and INTEGRITY OF THE BANK’S INCORPORATORS and MEMBERS OF THE
BOARD (as well as the top ranking executives of the banks)

HISTORY OF BSP
American era and World War II
In 1900, the FIRST PHILIPPINE COMMISSION passed Act No. 52, which placed all banks under the BUREAU OF THE
TREASURY and authorizing the Insular Treasurer to supervise and examine banks and all banking activity.

In 1929, the DEPARTMENT OF FINANCE through the Bureau of Banking, took over bank supervision.

By 1933, a group of Filipinos had conceptualised a CENTRAL BANK for the Philippine Islands.

Third Republic and Martial Law

Shortly after PRESIDENT MANUEL ROXAS assumed office in 1946, he instructed then-Finance Secretary Miguel
Cuaderno, Sr. to draw up a charter for a central bank.

The establishment of a MONETARY AUTHORITY became imperative a year later as a result of the findings of the
Joint Philippine-American Finance Commission chaired by Cuaderno. The Commission, which studied Philippine financial,
monetary, and fiscal problems in 1947, recommended a shift from the dollar exchange standard to a managed currency
system. A central bank was necessary to implement the proposed shift to the new system.
President Roxas then created the CENTRAL BANK COUNCIL to prepare the charter of a proposed monetary
authority. It was submitted to Congress in February 1948. By June of the same year, the newly proclaimed President Elpidio
Quirino, who succeeded President Roxas, affixed his signature on Republic Act (RA) No. 265, the Central Bank Act of 1948.

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 In 1949 the EXECUTIVE ORDER 295 was issued on November 29 USHERING IN A PERIOD OF EXCHANGE CONTROLS
to STEM THE HEAVY DRAIN on INTERNATIONAL RESERVES.

In 1950, RA 529, The UNIFORM CURRENCY ACT was signed into LAW on June 16. The law required SETTLEMENT OF
ALL OBLIGATIONS in the PHILIPPINE PESO, the LEGAL TENDER of the country.

In 1965, The PESO EXCHANGE RATE was fixed at the new parity of php. 3.90 to $1 on November 5 from the original
php. 2.00 to $1.

In the 1973 Constitution, the interim Batasang Pambansa (National Assembly) was mandated to establish an
independent CENTRAL MONETARY AUTHORITY.
Presidential Decree No. 1801 designated the Central Bank of the Philippines as the central monetary authority
(CMA). Years later, the 1987 Constitution adopted the CMA provisions from the 1973 Constitution that were aimed
essentially at establishing an independent monetary authority through increased capitalization and greater private sector
representation in the Monetary Board.

Bangko Sentral Ng Pilipinas at Present

In accordance with a provision in the 1987 Constitution, President Fidel V. Ramos signed Republic Act No. 7653,
otherwise known as the NEW CENTRAL BANK ACT, into law on June 14, 1993.
The law provides for the establishment of an independent monetary authority to be known as the Bangko Sentral
ng Pilipinas (BSP), its primary objective being the maintenance of price stability.
This objective was only implied in the old Central Bank charter. The law also gives the Bangko Sentral fiscal and
administrative autonomy which the old Central Bank did not have. On July 3, 1993, the New Central Bank Act took effect.

In 1997, the BSP launched LONG-TERM YANKEE BONDS amounting to $500M, including $100M of 100-year
CENTURY BONDS, to establish a market benchmark. Governor Singson was named CENTRAL BANK GOVERNOR OF THE
YEAR, anew by ASIAMONEY MAGAZINE.
In 2001, Consistent with the GOVERNMENT’S POVERTY ALLEVIATION PROGRAM, Microfinance became BSP’s
flagship project to HELP EASE POVERTY by PROVIDING THE ENTERPRISING POOR WITH ALTERNATIVE SOURCE OF CAPITAL.
RA 9160, the ANTI-MONEY LAUNDERING ACT OF 2001, was enacted on September 29 and took effect on October
17 to ALIGN THE COUNTRY’S ANTI-MONEY LAUNDERING initiatives with INTERNATIONAL STANDARDS and enhance the
integrity and credibility of the domestic banking system.
In 2003, President Gloria Arroyo signed on January 10 the RA 9182, the SPECIAL PURPOSE VEHICLE LAW, a crucial
ECONOMIC REFORM MEASURE that COVERS DISPOSITION OF THE NON-PERFORMING ASSETS OF THE BANKING SECTOR.
The law provides INCENTIVES TO BANKS AND OTHER FINANCIAL INSTITUTIONS which clear their books of bad loans and
acquired assets.
In 2004, BSP adopted FINANCIAL LITERACY as an ADVOCACY. BSP issued CIRCULAR #454 Governing CREDIT AND
OPERATIONS OF BANKS and subsidiary credit card companies.
On the evening of September 26, 2012, a Wednesday, the BSP website was hacked by a group
named ANONYMOUS PHILIPPINES in a protest against the recently passed CYBERCRIME PREVENTION Act of 2012. The
website was promptly restored in the early hours of the following day.
On April 23, 2013, THE ASIAN BANKER named the BSP as the Best Macroeconomic Regulator in the Asia-Pacific
Region for 2013 in The Asian Banker Leadership Achievement Awards in Jakarta, Indonesia.
The BSP was cited as a “good, strong, and fair-minded regulator.” About a month later, the BSP was given the
country award by the Child and Youth Finance International in its 2013 International Summit in Istanbul, Turkey, in
recognition of its initiative to integrate financial education in the Philippine elementary school curriculum.
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ORGANIZATION OF THE BSP

The basic structure of the BSP includes:

 The Monetary Board, which exercises the powers and functions of the BSP, such as the conduct of monetary policy and
supervision of the financial system;
 The Monetary Stability Sector, which 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;
 The Supervision and Examination Sector, which enforces and monitors compliance to banking laws to promote a sound
and healthy banking system; and
 The Resource Management Sector, which serves the human, financial and physical resource needs of the BSP.

The powers and function of BSP are exercised by its Monetary Board, whose seven members are appointed by the
President of the Philippines. As provided for by RA 7653 or the New Central Bank Act, one of the government sector
members of the Monetary Board must also be a member of Cabinet.

Members of the Monetary Board are prohibited from holding certain positions in other government agencies
and private institutions that may give rise to conflicts of interest. The members have fixed and overlapping terms, except
for the Cabinet Secretary representing the incumbent administration.

THE CURRENT MEMBERS OF THE MONETARY BOARD

 Benjamin E. Diokno, BSP Governor and Chairman of the Monetary Board

 Carlos Dominguez III, Secretary of the Department of Finance
 Antonio S. Abacan, Jr.
 Juan D. De Zuñiga, Jr.
 V. Bruce J. Tolentino
 Felipe M. Medalla, a Filipino Economist and Dean of UP School of Economics
 Peter B. Favila

BSP GOVERNORS THEN AND NOW

Name Tenure

BENJAMIN E. DIOKNO at present

NESTOR ESPENILLA JR. 2017-2019

AMANDO TETANGCO JR. July 4, 2005 – July 2017

RAFAEL BUENAVENTURA July 6, 1999 – July 2005

GABRIEL SINGSON July 6, 1993 – July 1999

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 CENTRAL BANK GOVERNORS

Name Tenure

JOSE CUISA Feb. 20, 1990 – July 2, 1993

JOSE FERNANDEZ JR. Jan. 19, 1984 – Feb. 19, 1990

JAIME LAYA Jan. 16, 1981 – Jan. 18, 1984

GREGORIO LICAROS Jan. 10, 1970 – Jan. 15, 1981

ALFONSO CALALANG Jan. 1, 1968 – Jan. 9, 1970

ANDRES CASTILLO Jan. 6, 1961 – Dec. 31, 1967

MIGUEL CUADERNO Jan. 3, 1949 – Dec. 31, 1960

What is CENTRAL BANK OF THE PHILIPPINES (BSP) or the RA 7653?

The Bangko Sentral ng Pilipinas ( lit. Central Bank of the Philippines; commonly abbreviated as BSP in both Filipino
and English) is the CENTRAL BANK of the PHILIPPINES. It was established on 3 July 1993, pursuant to the provision of
Republic Act 7653 or the New Central Bank Act of 1993.

Who established CENTRAL BANK OF THE PHILIPPINES (BSP)?

Government of the Philippines is the founder of BSP.

IMPORTANCE OF BSP

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.

PURPOSE Of BSP

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.

When was BSP established?

Central Bank of the Philippines or BSP was established JULY 3, 1993.