Professional Documents
Culture Documents
FINANCIAL
INSTITUTIONS
By:
Published by:
House of Color Graphics and Services, Inc.
ISBN: 978-621-96052-0-5
1
CHAPTER 1
OVERVIEW OF THE PHILIPPINE
FINANCIAL SYSTEM
Guide Questions
1. What is the importance of a financial system in
a country’s economy?
2. What roles does each of its elements play in
financial systems?
3. How did the current Philippine Financial System
come to be?
2
funds from savers – whether households or
businesses – and allocates financial capital to those
with entrepreneurs and other in need of credit.”
Financial systems, in other words, guarantee that all
components are provided with a smooth flow of
funds. This system is comprised of complex
interconnected institutions, markets, instruments,
services, and monetary policies and laws that all work
together for economic development.
In the Philippine setting, the financial system is
comprised of various institutions that collect, process,
maintain, transmit, budget, allocate, and report
finance data. These institutions include banks,
pawnshops, the central bank, insurance companies,
the money market, and also includes monetary laws
and policies. The Philippine Financial System is also
heavily influenced by the globally recognized financial
institutions such as the International Monetary Fund,
the World Bank, and multinational banks.
3
into productive channels, which therefore affects the
progress of the economy. To better understand how it
affects the economy in a major way, below are the
aspect-specific functions of financial systems:
1. Savings. Funds invested in banks via savings
accounts do not remain stagnant – instead, the
cash flows through the other bodies of the
financial system. These are often channelled
into funding production of goods and into the
money market.
2. Liquidity. Without proper systems in place,
stocks, bonds, and other income-yielding
investments would not be easily cashed out
when needed by the investor.
3. Payment. Current payment collection services
such as credit cards, debit cards, and cheque
issuing provides a convenient process of
paying fees.
4. Risk. Various insurance policies are made
available in the financial market for investors.
These insurance policies lessen the risks
people face for different investments, such as
4
their health, properties, assets, income, and
even their life.
5. Policy. Looking at the bigger picture, financial
systems impact the economy of a country
through affecting interest rates and even
inflation.
5
3. Financial Markets. Markets give way into
speedy transactions for claims to be processed.
4. Government Agencies. In the Philippines, laws
on monetary policies are handled by the
Monetary Board of the Central Bank.
5. Laws and Policies. This element of the financial
system is regulated by the government and
therefore affects the whole economy
depending on how strict the regulations are
put in place.
6
• 1851 – The first Philippine bank, Banco
Espanol-Filipino de Isabella de II, was
instituted
• 1869 – The Suez Canal was opened,
consequently expanding Philippine trade with
other nations
• 1873 – Branches of the Chartered Bank of
India, Australia, and China were built in Manila
• 1882 – In the height of the Spanish
colonization, British banks ruled the economy.
Nonetheless, Spain was able to establish their
first bank in the Philippines, the Monte de
Piedad.
• 1898 – The Treaty of Paris was signed, giving
way to a free trade between the US and the
Philippines through the Payne Aldrich Act.
• 1902 – The International Banking Corporation
of New York built a branch in the Philippines;
however, in 1915, it was acquired by the
National City Bank of New York.
• 1904 – The Postal Savings Bank was
established.
7
• 1906 – The First Agricultural Bank of the
Philippine Government was founded. Ten years
later, it would be transferred to the newly
founded Philippine National Bank.
• 1920s – Chinese banks were built in the
country
• 1942 – Because of the Japanese colonization,
the Philippine National Bank was forced to
close, but was reopened within a few months
under the supervision of the Japanese Military.
Also during the Japanese period, war notes
were circulated, resulting to the worst inflation
in history.
• 1946 – In order to provide rehabilitation to the
war-damaged industries, the Rehabilitation
Finance Corporation was organized. Years
later, it turned into the Development Bank of
the Philippines.
• 1948 – The Central Bank of the Philippines was
created.
8
Structure of the Philippine Financial System
The financial system of the Philippines is majorly
influenced and comprised of banking institutions,
primarily the Bangko Sentral ng Pilipinas. Being the
central bank of the nation, the BSP, as ordered by the
State, is responsible for the regulation of the supply,
cost, and use of money in order to uphold economic
stability. This banking system is consisted of universal
and commercial banks, thrift banks, rural banks, and
cooperative banks, allowing for a system that
provides the option for debts, bonds, and stocks.
Under the Bangko Sentral ng Pilipinas are the
following banking and non-banking institutions:
I. Banking Institutions
a. Private Banking Institutions
i. Commercial Banking Institutions
1. Expanded commercial
banks/universal banks
2. Ordinary commercial
banks
ii. Thrift Banks
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1. Savings and mortgage
banks
2. Private development banks
3. Stock savings and loan
associations
iii. Rural banks
b. Government banking institutions
i. Philippine National Bank
ii. Development Bank of the
Philippines
iii. Land Bank of the Philippines
iv. Philippine Amanah Bank
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viii. Lending investors
ix. Fund managers
x. Trust companies/departments
xi. Insurance companies
xii. Venture capital corporations
b. Government non-bank financial
institutions
i. Government Service Insurance
System (GSIS)
ii. Social Security System (SSS)
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CHAPTER QUIZ NO.1
OVERVIEW OF THE PHILIPPINE FINANCIAL
SYSTEM
NAME DATE
SECTION SCORE
PART I. IDENTIFICATION
12
These insurance policies lessen the risks people face
for different investments, such as their health,
properties, assets, income, and even their life.
13
_____________ 9. Markets give way into speedy
transactions for claims to be processed.
I. Banking Institutions
a. ________________________________
1. Expanded commercial
banks/universal banks
2. _____________________
ii. ___________________________
2. _____________________
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3. Stock savings and loan
associations
iii. ___________________________
i. ___________________________
iii. ___________________________
II. _____________________________________
i. Investment houses
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vii. Pawnshops
x. Trust companies/departments
xii. ___________________________
b. ________________________________
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CHAPTER 2
BANGKO SENTRAL NG PILIPINAS
(BSP)
Guide Questions
1. Why was the concept of a Central Bank born in
the Philippines?
2. What reforms in central banking were included
in the New Central Bank Act?
3. How does the Bangko Sentral ng Pilipinas
function in the whole finance industry?
19
as early as 1933 by a group of Filipinos. It was
organized in the same way as that of Paraguay and
Guatemala’s central banking system as the Philippines
ran on the same export economy.
It was during the Commonwealth period when the
idea of a establishing a Philippine Central Bank
sparked. Back then, the country’s monetary system
was supervised by the Department of Finance and the
National Treasury. Establishing a central bank would
be beneficial in promoting rice stability and economic
growth. It was in 1939 when a monetary law
establishing a central bank was passed by the
Philippine legislature, as it was required by the
Tydings-McDuffie Act. However, this first attempt was
disapproved by then US President Franklin D.
Roosevelt. A second attempt for central banking was
made during the Japanese occupation, which was
also discarded when the American liberalization forces
came.
In 1946, President Manuel Roxas instructed then
Finance Secretary Miguel Cuaderno, Sr. to draft a
legislation creating a central banking system for the
country. The realization of a central bank became
20
imperative a year later as recommended by the
results of a study conducted by the Joint Philippine-
American Finance Commission headed by Cuaderno.
The same study also recommended that the
Philippines should shift to a self-regulated currency
system.
A draft legislation establishing a central bank was
produced by the Central Bank Council, and was then
submitted to Congress for
review in February of 1948. It
was June of the same year
when newly-elected President
Elpidio Quirino signed Republic
Act No. 265, the Central Bank
Figure 1 The Central Act of 1948.
Bank of the
Philippines logo
21
objectives, and procedures for
financial institutions. These
recommendations were adopted
through Presidential Decree No.
72 was signed on 29 November
of the same year.
Several changes were made to Figure 2 The Bangko
Sentral ng Pilipinas
enhance the authority of the logo
22
Objectives and Functions of the Bangko Sentral
ng Pilipinas
According to the New Central Bank Act of 1993, the
BSP’s main objective is to maintain price stability
conducive to a balanced and sustainable economic
growth. It also aims to promote and preserve
monetary stability and the convertibility of the
national currency. The creation of the BSP also
founded the BSP Monetary Board, which is the policy-
making body of the bank. It is administered by a
Governor, who also acts as the Chairman of the
Board, together with five members coming from the
private sector and one member for the cabinet. The
Monetary Board is responsible for delegating tasks to
accomplish the following functions of the Bangko
Sentral:
1. Liquidity Management. The Bangko Sentral
implements monetary policies in accordance to
its primary objective of price stability, including
policies on money supply.
2. Currency issue. The power to issue national
currency, including all notes and coins, belongs
to the BSP. Once authorized by the BSP, these
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notes and coins are considered legal tender for
all public and private debts.
3. Lender of last resort. Banking institutions can
request for loans, discounts, and advances
from the BSP for liquidity purposes.
4. Financial Supervision. Supervision of banking
institutions and regulation of non-banking
institutions fall under the authority of the BSP.
5. Management of foreign currency reserves. In
order to preserve international stability and
convertibility of the Philippine Peso, the BSP
maintains enough international reserves to
meet any possible net demands for foreign
currencies.
6. Determination of exchange rate policy.
Exchange rate policies are determined by the
BSP. Presently, the BSP follows a market-
oriented foreign exchange rate policy, reducing
the BSP’s role into ensuring a stable market.
7. Other activities. The BSP also plays other roles
such as that of a banker, a financial advisor,
and official depository of the Government.
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CHAPTER QUIZ NO.2
BANGKO SENTRAL NG PILIPINAS
NAME DATE
SECTION SCORE
PART I. IDENTIFICATION
25
_____________ 3. This decree designated the Central
Bank as the central monetary authority in the country
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PART II. ILLUSTRATION
27
PART III. ESSAY
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CHAPTER 3
BANKING INSTITUTIONS: BANKS
AND BANKING PERSPECTIVES
Guide Questions
1. What are the highlights of the history of
banking, and why was there a need to develop
the concept of such?
2. In comparison, how does the old Philippine
banking ways differ from banking today?
3. What is a bank’s importance in the nation’s
economy?
4. Why does the government supervise the
banking industry?
30
civilizations who follow rules of law and have stable
governments. The concept of banking became
imperative once the early civilizations developed the
global economy, especially in the aspects of trade,
industrial development, and infrastructure.
Below are the important highlights of the history of
banking worldwide:
• Code of Hammurabi – A code dating back from
the peak of the Babylonian Empire, the Code of
Hammurabi, contained 150 paragraphs on the
principles of lending. This includes paragraphs
on interests, loans, pledges, and guarantee
procedures.
• Chinese currency – Standardized coins were
introduced during the Qin Dynasty and opened
a new and easier way of trade in the country.
This later paved the way for the development
of letters of credit.
• Egyptian granaries – The first known
governmental banks were grain banks from
early Egypt, where grains functioned as
money. All the scattered grain banks were
31
centralized in Alexandria, where all records are
tracked and stored.
• Greek treasuries – The ancient Grecian society
performed financial transactions within temples
where their treasures are kept safe. By the end
of the 7th century BC, the first treasury was
built to the Apollonian temple.
• Roman money-lending and formalized banking
– Roman banks mostly offer money-lending to
its people. It was in Rome where the term
“bank” originated: from the Roman word
“bancu”, a long bench where money-lenders
would sit inside set up stalls within enclosed
courtyards. The Roman Empire formalized
banking in its administrative aspects and
regulated its institutions and practices.
However, the concept of banking came to a
pause along with the fall of the Roman Empire.
• Merchant Banks of the Middle Ages. Merchant
banks are considered as the first modern
banks, and primarily focused on the trade of
commodities. Originally, merchant banks
32
started with Italian grain and cloth merchants
and started to develop in the 11th century.
• Modern Banking – Modern banking developed
by the end of the 16th century and the start of
the 17th century. By the end of the latter, the
world would see the development of central
banks and the start of regulation from
governments. The Bank of England was the
first bank to issue actual bank notes in 1695.
The Industrial Revolution came, and along with
it, a growing international trade. This led to an
increase in the number of banks operating in
London.
• Rothschilds – In the early 19th century, the
Rothschild family gave loans to the Bank of
England, pioneering the onset of international
finance. The family is instrumental in the
completion of the Suez Canal and has founded
several financial institutions that are still
present and influential today, such as the Royal
& SunAlliance.
• The World Bank and the International
Monetary Fund – After the Second World War,
33
these two banks were established to further
the functions of commercial banks worldwide.
• Retail Banking, Automatic Teller Machines, and
electronic payment systems – These modern
day banking services were also introduced
post-World War II.
34
buildings, and other projects of the religious
order.
• During the 19th century, the first Philippine
banks emerged, and among these is the
Rodriguez bank. Although labelled as a bank,
the Rodriguez bank played the role of a loan
association.
• On 1 August 1851, the Junte de Autoridades
(board of authorities) concluded that there was
a need to establish a state bank in the country,
which led to the opening of Banco Espanol-
Filipino de Isabel II. This state bank was
provided 50% of its capital by the Obras Pias.
• In 1869, the Suez Canal opened, signalling an
expanded trade between the Philippines and
the West. As a result, in 1873, British-Orient
banks opened in the country.
• In 1872, the Chartered Bank of India,
Australia, and China opened in Manila. Three
years after, the Hongkong and Shanghi
Banking Corporation opened a branch in
Manila.
35
• With initial capital still provided by the Obras
Pias, the first mutual savings bank Monte de
Piedad Y Caja de Ahorros opened in 1882. The
bank later changed its name to Monte De
Piedad and Savings Bank.
• In 1 January 1912, the first state bank
changed its name to the Bank of the Philippine
Islands. This makes BPI the oldest bank in
Philippine history. BPI also built connections
with banks in the West to service clients
around the world.
• In 1906, the Postal Savings bank was
established.
• In 1916, the Philippine National Bank was
organized. The PNB also
adopted the assets and
liabilities of the first
agricultural bank in the
country which was
Philippines was
established a few years after the culmination of
36
the American occupation, along with the
establishment of an independent monetary
system.
37
banking through phone applications. Banks have
also utilized the use of social media in marketing
their financial services, a platform that has a huge
marketing potential but is also tied to huge risks.
38
they gain through providing loans to
investors with interest rates.
• Principle of Loan and Investment. As
mentioned, commercial banks rely on loans
for profit. Aside from this, commercial
banks also gain profit through investing in
businesses.
• Principle of Savings. Savings facilities also
allow commercial banks to gain funding and
capital. The more savings deposited in a
commercial bank, the more profit and fund
there is.
• Principle of Service. These banks offer only
the best services to its customers, as the
success of the whole bank relies on the
success of its customer service.
• Principle of Secrecy. Depositors and
customers trust banks for the safety of not
only their hard-earned money, but also of
their privacy, as banks collect personal
information from its customers. Breaches of
security and hacking of accounts can lead
39
to customers backing out and cancelling
accounts.
• Principle of Efficiency. An efficient business
operation makes for satisfied customers.
Employees of commercial banks should be
given proper training and familiarization of
the banking system in order to give its
customers a competitive service style.
• Principle of Location. A good location is one
that attracts possible depositors and
investors. A good location should also be
accessible by all types of customers, and
should follow safety procedures.
Types of Banks
Banks make up the majority of the Philippine financial
system, with the Bangko Sentral ng Pilipinas on its
lead. The financial system consists of universal banks,
commercial banks, thrift banks, rural banks, and
cooperative banks.
• Universal and commercial banks. This type of
bank represents majority of the banks present
in the Philippines today. With a wide variety of
40
banking services to offer, these banks also
have the widest target customer range.
• Commercial banks. This type of bank takes in
deposits and offers business loans. Banks of
commercial nature provides a variety of deposit
accounts, including savings, checking, and time
deposit accounts. Commercial banks are for-
profit institutions, making profit from providing
loans and maintaining a capital through
deposited funds.
• Thrift banks. Under thrift banks are savings
and mortgage banks, private development
banks, stock savings and loan associations,
and microfinance thrift banks. The primary
objective of thrift banks is to make the savings
of depositors grow by investing in them. Thrift
banks also provide funding for businesses,
especially the small and medium enterprises.
• Rural and cooperative banks. This type of bank
provides financial services to the rural
communities. Cooperative banks offer
assistance to farmers in every stage of
production. The difference between rural banks
41
and cooperative banks is that rural banks are
privately owned, while cooperative banks are
built by members of a federation.
Supervision of Banks
With the wide network of financial institutions
included in the Philippine financial system, it is only
proper that they are supervised and governed by the
42
highest power: the State itself. Regulation and
supervision of banks rely on laws and policies enacted
by the government, a concept that became a
necessity when the banking system became too
complex, funds were not being allocated properly,
and affluent families were profiting off of it.
In 1993, Republic Act No. 7653, the New Central
Bank Act, authorized the government through the
Bangko Sentral ng Pilipinas to supervise and regulate
the operations of banking institutions in the
Philippines. This serves as a legal basis for a
consolidated supervision. Seven years later in the
year 2000, Republic Act No. 8791 or the General
Banking Law of 2000 endorsed the shift to a risk-
based approach instead in order to keep up with the
growing banking businesses.
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CHAPTER QUIZ NO.3
BANKING INSTITUTIONS: BANKS AND
BANKING PERSPECTIVES
NAME DATE
SECTION SCORE
PART I. IDENTIFICATION
44
_____________ 4. A code dating back from the peak
of the Babylonian Empire containing 150 paragraphs
on the principles of lending.
45
PART II. COMPLETION
Principle of Liquidity
Principle of Solvency
Principle of Profitability
Principle of Savings
Principle of Service
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Principle of Secrecy
Principle of Efficiency
Principle of Location
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CHAPTER 4
GOVERNMENT BANKING
INSTITUTIONS
Guide Questions
1. What is the primary objective of the creation of
the Land Bank of the Philippines?
2. Why was the Development Bank of the
Philippines established?
3. What was the purpose behind the
establishment of the Al-Amanah Islamic Bank?
50
Land Bank of the Philippines
The Land Bank of the Philippines is the largest credit-
providing institution in the rural areas of the country.
It is a government financial
institution that performs two
functions: providing financial
services to the rural areas
while remaining financially Figure 4 The Land Bank of the
Philippines logo
viable. Initially, it was
created as the financing arm of the Agrarian Reform.
As it progressed as a bank, it has transformed into a
full-service commercial bank.
Republic Act 3844, also known as the Agricultural
Land Reform Code, paved the way for the creation of
the Land Bank of the Philippines. Signed on 8 August
1963, the act created the Land Bank tp provide
financing to the acquisition and distribution of
agricultural estates for distribution or reselling. It was
put under direct supervision of the Bangko Sentral ng
Pilipinas, and was administered by a board of
trustees, which includes a Chairman (the CEO of the
bank), the Head of the Department of Agrarian
Reform, and two more elected members. The
51
chairmanship was transferred to the Secretary of
Finance in the amendments raised in 1966.
The Land Bank of the Philippines enjoys tax
exemption on all operations, equipment, property,
and income, and is also exempt from cash payments
to the State.
With Presidential Decree No. 27, also known as the
Tenant Emancipation Act signed 21 October 1972,
tenant-farmers of private agricultural lands were
emancipated under a system of lease-tenancy. The
Land Bank of the Philippines was then instructed to
collect 15-year land amortizations from the
beneficiaries and a 6% interest per annum.
In July of 1973, the Land Bank of the Philippines was
granted a universal or expanded commercial banking
powers through Presidential Decree 251. It gave the
bank an explicitly stated objective of spreading its
social mission while continuing development and
support of the countryside industries. The bank
continued to provide subsidies to small-time farmers
and fish folk, while also expanding its powers to also
lend credit support to agricultural, industrial, home-
building, or home-financing projects. The Presidential
52
Decree also expanded the tax exemption of the Land
Bank to exemption from all national, provincial,
municipal, and city taxes. In 1977, the Land Bank of
the Philippines organized three major sectors within
it: Agrarian, Banking, and Operations.
Executive Order 229 of July 1987 led to the creation
of the Presidential Agrarian Reform Council, the
council to oversee the Comprehensive Agrarian
Reform Program. According to this Executive Order,
the Land Bank of the Philippines is to provide
assistance to landowners through investment
information and counselling assistance. In 1988, the
LBP was established as the financial intermediary of
the Comprehensive Agrarian Reform Program through
the Republic Act 6657. Two years later, the primary
responsibility of determining land valuation and
compensation for all lands under the Comprehensive
Agrarian Reform Program was transferred to the LBP
through Executive Order 405.
The Land Bank of the Philippines Charter was
amended in 23 February 1995 through Republic Act
7907, wherein the authorized capital allowed for the
bank was increased to 9 billion Php. It was also
53
through this act that the LBP was recognized as an
official government depository. By 1998, the
authorized capital for the bank was increased to 25
billion Php.
The Land Bank of the Philippines currently offer the
following financial services:
• Regular savings account
• Regular Current Account
• Savings Account with ATM Access
• Current Account with ATM Access
• Regular Peso EASY Check
• Peso EASY Check with ATM Access
• Regular Time Deposit
• Land Bank Cash Card
• OFW Cash Card
• E-Tax Payment System
• Land Bank VISA Card
• iAccess Retail Internet Banking
54
agricultural industry and the establishment of private
development banks.
Created through Republic Act No.
85, the Development Bank of the
Philippines was originally known
as the Rehabilitation Finance
Corporation. Its primary objective Figure 5 The
Development Bank of
is to provide credit facilities for the Philippines logo
the rehabilitation and
development and expansion of agriculture, and
industry, the reconstruction of property damaged by
war, and the broadening and diversification of the
national economy, and to promote the establishment
of private development banks in provinces and cities.
Under this law, the Development Bank of the
Philippines has the following corporate powers:
• To grant loans for home building or home
financing projects and for the rehabilitation,
establishment or development of any
agricultural and/or industrial enterprise,
including public utilities, mining, livestock
industry and fishing, whether offshore or
inland;
55
• To purchase preferred redeemable shares of
stock, securities, other than shares of stock,
and obligations of, and to grant loans to, any
agricultural and industrial enterprises
mentioned in paragraph (a) to finance their
fixed and operating capital requirements.
• To grant loans to provincial, city and municipal
governments for the rehabilitation,
construction or reconstruction of public
markets, irrigation, waterworks, toll bridges,
slaughterhouses, for cadastral surveys and
other self-liquidating or income-producing
services, or the purchase and acquisition and
machineries and to agencies and corporations
owned or controlled by the Government of the
Republic of the Philippines for the production
and distribution of electrical power, for the
purchase and subdivision of rural and urban
estates, for housing projects, for irrigation and
waterworks system, and for other essential
industrial and agricultural enterprises;
56
• To grant loans to cooperative associations to
facilitate production, the marketing of crops,
and the acquisition of essential commodities;
• To grant loans to individual employees in a
government-owned or controlled corporation or
private corporation engaged in the
development and/or expansion of agriculture
or industry, for the purpose of buying shares of
stock directly from such corporation for the
purpose of enabling them to participate in the
ownership and to share in the profits thereof;
• To underwrite, purchase, own, sell, mortgage
or otherwise dispose of stocks, bonds,
debentures, securities and other evidences of
indebtedness issued for or in connection with
any project or enterprise;
• To issue bonds, debentures, securities,
collaterals, and other obligations and/or
renewal or the refunding of the same upon the
recommendation of the Secretary of Finance
and with the approval of the President, but in
no case to exceed at any one time an
57
aggregate amount equivalent to ten times of
its paid-in capital and surplus.
(Source: Republic Act No. 85 - An Act Creating the
Rehabilitation Finance Corporation)
58
Al-Amanah Islamic Bank
Created under Presidential Decree No. 264, the Al-
Amanah Islamic Bank, also known as the Philippine
Amanah Bank, was
founded to promote
socio-economic growth
in Mindanao. It is the
first and only Islamic Figure 7 The Al-Amanah
Islamic Bank logo
Bank in the country.
According to PD No. 264 of August 1973, studies led
by the government have concluded that there is a
pressing need to magnify the banking and credit
scene in the Mindanao region to make it more
receptive to investments and credit requirements. The
Philippine Amanah Bank was then created to provide
credit, commercial, development and savings banking
services mostly to the Muslim provinces in Mindanao,
specifically the following provinces: Cotabato, South
Cotabato, Lanao del Sur, Lanao del Norte, Sulu,
Basilan, Zamboanga del Norte, Zamboanga del Sur
and Palawan. This objective will aid in meeting the
government’s goal of establishing expansion of
59
agricultural, commercial, and industrial enterprises in
the region.
The Al-Amanah Islamic Bank has the following
corporate powers:
60
livestock and poultry and fishing, whether off-
shore or inland;
• to invest in equities of allied undertakings as
pertinent laws and the Central Bank shall
authorize;
• to carry on trust business in accordance with
the provisions of law governing trust
corporations;
• to issue bonds, debentures, securities,
collaterals and/or the renewal or refinancing of
the same with the approval of the Central
Bank, to be used by the bank in its lending
operations for industrial and agricultural
projects that will promote the economic
development of the region;
(Source: Presidential Decree No. 264 - An Act
Creating A Philippine Amanah Bank)
61
shall comprise thirty million pesos
equivalent to three hundred thousand
Series A common shares to be subscribed by
the Government of the Republic of the
Philippines
shall comprise twenty million pesos
equivalent to two hundred thousand
preferred shares which shall be
Series B
subscribed by the government of the
Republic of the Philippines, its
agencies or instrumentalities
shall comprise thirty million pesos
equivalent to three hundred thousand
common shares to be subscribed
solely by the citizens of the Philippines
Series C
and domestic corporations and
entities, seventy per centum of the
equity of which is owned by Citizens of
the Philippines
shall comprise twenty million pesos
equivalent to two hundred thousand
Series D
common shares which shall be
available for subscription of foreign
62
nationals, their corporations and/or
associations.
Figure 8 Classes of Par Value Shares
64
CHAPTER QUIZ NO.4
GOVERNMENT BANKING INSTITUTIONS
NAME DATE
SECTION SCORE
PART I. IDENTIFICATION
65
_____________ 5. Initially, this bank was created as
the financing arm of the Agrarian Reform.
66
PART II. ESSAY
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CHAPTER 5
COMMERCIAL BANKS
Guide Questions
1. What are the powers of an ordinary
commercial bank?
2. What powers are added into an expanded
commercial bank?
3. How do ordinary and expanded commercial
banks differ in organization and capitalization?
4. How do commercial banks operate on different
facets?
69
promotes efficient banking in Philippine financial
institutions that could be at par with that of globally
known banks.
The General Banking Law classified banks into seven
types:
• Universal Banks
• Commercial Banks
• Thrift Banks
• Rural Banks
• Cooperative Banks
• Islamic Banks
• Other classifications as determined by the
Monetary Board
70
• Accepting deposits – This is a commercial
bank’s most vital service. Money deposited in
commercial banks earn interest, and the higher
the interest rate, the more motivated people
are to deposit their funds in banks.
o Current deposits – Also known as
demand deposits, this type of deposits
can be withdrawn anytime. Customers
are required to have a maintaining
balance in these accounts, and no
interest rate is offered. Withdrawing
balances in current accounts go through
cheques and not direct cash withdrawal.
Current deposit accounts usually are
utilized by businessmen.
o Savings deposit – Usually availed by
professionals and middleclass men,
savings deposit accounts are easy to
open and easy to maintain. However,
there is a limit in the amount of money
that can be withdrawn in a day or in a
week, depending on the bank’s policies.
Interest rates of savings accounts are
71
greater than that of current deposit, but
less than that of fixed deposits.
o Fixed deposits – Also known as time
deposits, money in fixed deposits
accounts cannot be withdrawn until the
expiration of the period set to grow the
balance. Should a customer need to
withdraw funds from this deposit prior
the specified date, he would have to
borrow under the security of his account
and would be required to pay with a
higher interest rate.
• Grants of loans – Commercial banks have the
authority to grant loans to the public with
interest rates depending on the purpose of the
loan, the period, and the mode of repayment.
Loans can be withdrawn in the entire amount
or in instalments, but the interest rate is placed
on the full amount.
• Grant of advances – Commercial banks offer
credit facilities to its customers. Advances are
also funds lent to the public, but only for a
short period of time. Interest rates placed on
72
advances depends on the bank itself. There are
also different types of short-term advances:
o Cash credit – this is a financial service
offered by banks which allows the public
to withdraw amounts up to a specified
limit, and interest rates depend on the
actual amount withdrawn.
o Overdraft – Overdrafts are offered to
customers with a checking account in
banks. This service allows them to
withdraw cash that is more than the
credit balance reflected in their account.
o Discounting of bills – This service allows
the public to pay an amount before due
dates of bills after a discount is
deducted.
• Creation of Credit – another function of
commercial banks is creating credit, or simply,
manufacturing money.
• Use of Cheques – Cheque transactions is
another service offered by commercial banks,
which is a cheaper medium of transaction. It
73
also provides the public a much more
convenient way to settle debts and payments.
• Financing Internal and Foreign trade – Banks
finance internal and foreign traders through
discounting of exchange bills.
• Remittance of Funds – Commercial banks also
offer remittance service, or the capability to
remit funds from one place to another through
bank drafts, mail transfers, or telegraphic
transfers. It is also a cheaper money-transfer
service than postal money orders.
74
Operations of a Commercial Bank
Commercial banks handle a number of operations
which are then handled by specific departments.
These operations are necessary for the bank to meet
its objectives.
• Deposit Operations – Commercial banks have
the power to accept or create demand
deposits, savings deposits, time deposits, and
NOW accounts, which is a type of savings
account whose balance can be withdrawn
through a Negotiable Order of Withdrawal.
• Borrowing Operations – In order to maintain
other operations, commercial banks may
borrow funds from the Bangko Sentral ng
Pilipinas. These borrowings may be one of the
following:
o Rediscounting – In this type of
borrowing, it is the bank that assigns
eligible borrowers’ papers set in
accordance to the given guidelines,
terms, and conditions. These documents
include: original promissory notes, loan
application, inspections report, loan
75
contract, title of property, tax
declaration, and other supporting
documents.
o Direct Advance or Loan – When a
commercial bank is in a state of
emergency, the BSP may grant them a
loan directly even without eligible
borrowers’ papers.
• Deposit Substitute Operations – Also known as
quasi-banking or money market operations.
Quasi-banking is borrowing funds for the
borrower’s own account for the purpose of
lending or purchasing of receivables.
• Lending Operations – Commercial banks grant
different classifications of loans:
o as to collateral – secured loans,
unsecured loans
o as to purpose – agricultural,
commercial, industrial, real estate, etc.
o as to accounting treatment – demand
loans, bills discounted, time loans
• Trust Operations – Trust operations, also
known as trust business, is the administration,
76
holding, and management by a trustee of
funds for the advantage of the beneficiaries.
Trust operations have two requirements before
it can be offered by commercial banks:
o It should be authorized in its articles of
incorporation to engage in trust
businesses.
o A security of 250,000 Php shall be
deposited to the BSP as collateral before
they transact with trust businesses.
• Other operations – Commercial banks may
engage in sales of securities, such as
government bonds, treasury bills, and others.
Commercial banks may also be authorized to
collect taxes, making it easier for the Bureau of
Internal Revenue. These banks are also given
the power to act as clearing authorities as an
aide to the Philippine Clearing House
Corporation. Lastly, commercial banks may
also engage in buying and selling of foreign
currencies, forming part of our international
reserves.
77
Expanded Commercial Banks and its Powers
Expanded commercial banks are basically commercial
banks with added powers of an investment house,
such as underwriting, securities dealership, and equity
investment.
Powers relating to investment house operations may
be acted upon by commercial banks either in-house
or in-bank, or through the establishment of separate
subsidiary.
78
undertaking, and to acquire 100% of the equity of a
financial institution in accordance with applicable laws
and regulations.
79
• Metropolitan Bank and Trust Company
(Metrobank)
• BPI/Bank of the Philippine Islands – the oldest
bank in Southeast Asia
• LBP/Land Bank of the Philippines – the main
government bank
• Philippine National Bank (PNB)
• Security Bank Corporation (Security Bank)
• China Banking Corporation (Chinabank)
• DBP/Development Bank of the Philippines –
secondary government bank
• Union Bank of the Philippines (Unionbank)
• Rizal Commercial Banking Corporation (RCBC)
• United Coconut Planters Bank (UCPB)
• East West Banking Corporation (EastWest
Bank)
• Citibank Philippines
• Asia United Bank Corporation (AUB)
• The Hongkong and Shanghai Banking
Corporation (HSBC)
• Philippine Trust Company (Philtrust Bank)
• Bank of Commerce (a subsidiary of San Miguel
Corporation)
80
• Maybank Philippines, Inc.
• Robinsons Bank Corporation
• Philippine Bank of Communications (PBCom)
• Mizuho Bank, Ltd. Manila Branch
• The Bank of Tokyo-Mitsubishi UFJ, Ltd.
• BDO Private Bank (subsidiary of Banco de Oro)
• Standard Chartered Bank Philippines
• Deutsche Bank
• Philippine Veterans Bank (Veterans Bank; PVB)
• CTBC Bank (Chinatrust)
• JPMorgan Chase & Co. (JPMorgan Chase)
• Australia and New Zealand Banking Group
(ANZ)
• Sumitomo Mitsui Banking Corporation Manila
Branch
• ING Group N.V.
• Bank of America, N.A.
• Bank of China - Manila Branch
• Mega International Commercial Bank Co. LTD
• KEB Hana Bank - Manila Branch
• Bangkok Bank Co. Ltd.
• Industrial Bank of Korea Manila Branch
• United Overseas Bank Limited Manila Branch
81
• Cathay United Bank Co. Ltd. - Manila Branch
• Shinhan Bank - Manila Branch
• Hua Nan Commercial Bank Ltd. Manila
• First Commercial Bank Manila
• Al-Amanah Islamic Investment Bank of the
Philippines
82
CHAPTER QUIZ NO.5
COMMERCIAL BANKS
NAME DATE
SECTION SCORE
83
rates depending on the purpose of the loan, the
period, and the mode of repayment.
84
PART II. COMPLETION
Deposit Operations
Borrowing Operations
Deposit Substitute
Operations
Lending Operations
Trust Operations
Other Operations
85
PART III. ESSAY
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CHAPTER 6
THRIFT AND RURAL BANKS
Guide Questions
1. What are thrift banks made for?
2. How are the different kinds of thrift banks
different from each other?
3. What is the capitalization requirement for thrift
banks?
4. What operations do thrift banks function in?
89
Thrift banks cater to anyone in need of easier and
more convenient banking services available in their
local community. Thrift banks are not government-
protected, although deposits made into thrift banks
are still protected by the state.
90
Capitalization of Thrift Banks
Thrift banks are required by law to be 40% owned by
citizen of the Philippines. The percentage of foreign-
owned stocks shall depend on the citizenship of
individual stockholders. In the case of corporations
owning shares, the citizenship of each stockholder is
considered.
Capital accounts of thrift banks should not be less
than an amount equal to 10% of its risk assets. Risk
assets is a bank’s total assets subtracted by the
following assets:
• Cash on hand
• Amounts from BSP
• Evidences of indebtedness
• Other non-risk items as declared by the
Monetary Board as assets to be deducted
91
• Open current or checking accounts – this
function requires that the bank possess net
assets of at least 20 million Php
• Act as a correspondent for other financial
institutions
• Act as a collection agent for government
entities
• Act as official depository of national agencies
• Rediscount paper with government financial
institutions
• Issue mortgage and chattel mortgage
certificates
• Purchase, hold, and convey real estate under
the same provisions for commercial banks
• Engage in quasi-banking and money market
operations
• Open domestic letters of credit
• Extend credit facilities to private and
government employees
• Extend credit against the security of jewellery
• Offer other banking services
92
Rural Banks and its Organization
Rural banks in the Philippines were created under
Republic Act No. 720 in June 1952, at a time when
the country is recovering from the devastation of the
Second World War. Republic Act No. 7353, or the
Rural Act of 1992, strengthened the roles played by
rural banks. The act aims to promote rural
development, specifically the establishment of rural
banks for the purpose of adequate financial
institutions and credit facilities to farmers and
merchants and the general people of rural
communities.
Rural banks promote and expand the rural economy
through providing them with basic financial services.
Rural banks primarily support farmers, beginning from
the purchasing of seedlings up until the marketing of
their produce.
These banks are sponsored or assisted by the
government, but are privately managed and owned.
Rural banks are organized like stock corporations with
no less than five and no more than fifteen
incorporators. These incorporators must be of Filipino
citizenship, possesses good credit ratings, and are of
93
good moral character. Capitalization of rural banks
should not be less than 500,000 Php, with the first
300,000 Php to be put into the start of operations,
while the rest of the 200,000 Php will be paid within
three years from the beginning of bank operation.
Authorized capital for rural banks must not be less
than 1 million Php.
94
• Open current, demand, or NOW accounts
• Act as a trustee over properties of farmers and
other merchants
• Act as official depository of the municipality,
city, or province where the bank is located
• Rediscount paper with the PNB or DBP
• Invest in allied undertakings
95
• Rang-ay Bank, Inc. (a rural bank)
• Katipunan Bank, Inc. (a rural bank)
• Cantilan Bank, Inc. (a rural bank)
• Dumaguete Rural Bank Inc. (DRBI)
• Rizal Bank (a MF RB)
• Banco Dipolog (a rural bank; subsidiary of the
Philippine Bank of Communications)
• Country Builders Bank, Inc. (a rural bank)
• Summit Bank (rural bank of Tublay, Inc.)
• Rural Bank of Angeles, Inc. (A subsidiary of
Asia United Bank Corporation)
• Banco Mabuhay (a rural bank)
• Marayo Bank, Inc. (a rural bank)
• Cooperative Bank of Cotabato
• Insular Savers Bank, Inc. (a rural bank)
• Rural Bank of Cauayan, Inc.
• New Rural Bank of San Leonardo (N.E.) Inc.
• Rural Bank of Pandi (Bulacan) Inc.
• People’s Rural Bank (Gen. Santos City) Inc.
• MVSM Bank (a rural bank since 1953) Inc.
• Camalig Bank, Inc. (a rural bank)
• Consolidated Cooperative Bank
• Rural Bank of Barili (Cebu) Inc.
96
• Imus Rural Bank, Inc.
• Bankways, Inc. (a rural bank)
• ASPAC Rural Bank, Inc.
• PlanBank (Rural Bank of Canlubang Planters,
Inc.)
• Rural Bank of Central Pangasinan (Bayambang)
Inc.
• Rural Bank of Digos, Inc.
• Rural Bank of Magdalena (Laguna) Inc.
• Mount Makiling Rural Bank, Inc.
• First Tagum Rural Bank, Inc.
• Valiant Bank, Inc. (a rural bank)
• Gateway Rural Bank, Inc.
• LifeBank (a rural bank)
• Malarayat Rural Bank, Inc.
• Rural Bank of San Mateo (Isabela) Inc.
• Mallig Plains Rural Bank (ISA) Inc.
• Highland Rural Bank, Inc.
• Cooperative Bank of Quezon Province
• Mactan Rural Bank (Lapu-Lapu City) Inc.
• Rural Bank of Bambang (Nueva Vizcaya) Inc.
• Ilocos Sur Cooperative Bank
• Rural Bank of Pola (Oriental Mindoro)
97
• Cooperative Bank of Ilocos Norte
• RBT Bank, Inc. (a rural bank)
• Rural Bank of Rizal (Zamboanga del Norte) Inc.
• Rural Bank of Gattaran (Cagayan) Inc.
• Laguna Prestige Banking Corporation (a rural
bank)
• Rural Bank of Maria Aurora (Aurora) Inc.
• Rural Bank of Itogon (Benguet) Inc.
• Rural Bank of Pilar (Bataan) Inc.
• BHF Rural Bank, Inc.
• Network Consolidated Cooperative Bank
• Rural Bank of Sta. Ignacia, Inc.
• Entrepreneur Rural Bank, Inc.
• Rural Bank of Rosario (La Union) Inc.
• Saviour Rural Bank, Inc.
• Rural Bank of Tangub City (Misamis
Occidental) Inc.
• Rural Bank of General Trias, Inc.
• D' Asian Hills Bank, Inc. (a rural bank)
• Community Rural Bank of Catmon (Cebu) Inc.
• Aliaga Farmers Rural Bank, Inc.
• Rural Bank of San Antonio, Inc.
• Rural Bank of Dumangas, Inc.
98
• Rural Bank of Bayombong, Inc.
• Rural Bank of San Pascual (Obando, Bulacan)
Inc.
• Cooperative Bank of Nueva Vizcaya
• Rural Bank of Bagabag (N.V.) Inc.
• Rural Bank of Solano (Nueva Vizcaya) Inc.
• Sugbuanon Rural Bank, Inc.
• Rural Bank of Montalban, Inc.
• RBG Imperial Bank, Inc. (a rural bank)
• Banco Laguna, Inc. (a rural bank since 1965)
• Rural Bank of Dolores (Quezon) Inc.
• Cebuana Lhuillier Rural Bank, Inc.
• Rural Bank of Lebak (Sultan Kudarat) Inc.
• Rural Bank of Cardona (Rizal) Inc.
• Innovative Bank, Inc. (a rural bank)
• Common Wealth Rural Bank, Inc.
• Cooperative Bank of Bohol
• Liberty Bank (a rural bank)
• Sta. Maria Rural Bank, Inc.
• Rural Bank of Guinobatan, Inc.
• Balanga Rural Bank, Inc.
• Rural Bank of Maragondon, Inc.
• Rural Bank of Jaen, Inc.
99
• Rural Bank of Paracale (Camarines Norte) Inc.
• Community Rural Bank of Dapitan City, Inc.
• Cavite United Rural Bank Corporation (A
subsidiary of Asia United Bank Corporation)
• Rural Bank of Mangaldan
• Rural Bank of Mabalacat, Inc.
• Opportunity Kauswagan Inc. (a microfinance
rural bank)
• First Agro-Industrial Rural Bank, Inc. /
FAIRBANK Inc.
• BPI Family Savings Bank
• Philippine Savings Bank
• RCBC Savings Bank
• Philippine Business Bank
• China Bank Savings
• City Savings Bank
• PNB Savings Bank
• Sterling Bank of Asia
• Bank of Makati
• UCPB Savings Bank
100
CHAPTER QUIZ NO.6
THRIFT AND RURAL BANKS
NAME DATE
SECTION SCORE
PART I. IDENTIFICATION
101
_____________ 4. Through Republic Act No. 7353,
the role of this bank was further strengthened in law.
102
PART II. ESSAY
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CHAPTER 7
OFFSHORE BANKING
Guide Questions
1. What is offshore banking and how does it
work?
2. What financial services do offshore banks
offer?
Offshore Banking
In 30 September 1976, Presidential Decree No. 1034,
an Act Authorizing the Establishment of an Offshore
Banking System in the Philippines, was signed and
made effective. This led to the creation of offshore
banking.
Offshore banking refers to the conduct of banking
transactions in foreign currencies involving the receipt
of funds from external and internal sources and
utilization of such funds.
Offshore banking contributes a lot to the country’s
economy as it opens doors for new opportunities and
106
investments. Offshore banks increase the country’s
connection with foreign lenders, creating more
employment opportunities and contributing to the
national development effort.
107
According to CBP Circular No. 1389, or the
Consolidated Foreign Exchange Rules and
Regulations, authorized banks in the Philippines are
required to pay an annual fee of not less than
US$20,000 to the Bangko Sentral ng Pilipinas.
108
CHAPTER QUIZ NO.7
OFFSHORE BANKING
NAME DATE
SECTION SCORE
109
_____________ 4. Philippine-based offshore banks
are allowed to engage in offshore fund generation
and placements in foreign currency.
110
_____________ 10. Offshore banks operates not
only for foreigners, and operations involve domestic
banking services.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
111
PART III. ESSAY
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CHAPTER 8
NON BANK FINANCIAL
INSTITUTIONS
Guide Questions
114
instabilities of its members acquired from death,
disability or old age.
• Life Insurance
o Life Endowment Policy (LEP) -GSIS
started with the LEP program. Designed
to provide members with life insurance
coverage while still in active service, LEP
provides maturity benefits to policy
holders upon reaching the maturity of
their policy.
o Enhanced Life Policy (ELP) - ELP took
effect on August 1, 2003. It provides an
115
automatic yearly insurance coverage to
new members of GSIS based on their
monthly compensation. ELP is designed
to provide an enhanced death benefit
for the family of the deceased member.
The following members are covered
under this program:
1. Those who entered the service
starting August 1, 2003;
2. Those whose policies matured on or
after July 31, 2003, and who will
continue to be active members after
the maturity date; and
3. Those who opted or will opt to
convert their LEP into ELP.
• Retirement Plan
o Retirement under Republic Act 8291 -
Retirement under RA 8291 may be
availed by those who have rendered at
least 15 years of service in government
and must be at least 60 years of age
upon retirement. Also, they must not
be permanent total disability pensioners.
116
The last three years of service need
not be continuous under RA 8291.
o Retirement under Republic Act 660
(Magic 87) - Retirement under RA 660
(also known as ‘Magic 87’), may be
availed by members who are 52 years
old for as long as they have already
been in government service for the past
35 years.
o Retirement under Republic Act 1616
(Take all Retirement Mode) - Retirement
under RA 1616 may be availed by those
who entered government service on or
before May 31, 1977 and who rendered
at least 20 years of service regardless of
age and employment status. Further,
the last three years of service prior to
retirement must be continuous, except
in cases of death, disability, abolition or
phase out of position due to
reorganization.
o Retirement under Presidential Decree
1146 - Retirement under PD 1146 may
117
be availed by those who were separated
/ retired from service before June 24,
1997.
o Retirement under Republic Act 7699 -
Under RA 7699, otherwise known as the
Portability Law, government retirees
who do not meet the required number
of years provided under PD 1146 and
RA 8291 may still avail themselves of
retirement and other benefits. Under
this law, retirees may combine their
years of service in the private sector
represented by contributions to the
Social Security System (SSS) with their
government service and contributions to
the GSIS to satisfy the required years of
service under PD 1146 and RA 8291.
However, if retirees have already
satisfied the required years of service
under the GSIS retirement option they
have chosen, they would not be allowed
to incorporate their contributions to the
SSS anymore for availment of additional
118
benefits. In case of death, disability and
old age, the periods of creditable
services or contributions to the SSS and
GSIS shall be added to entitle retirees to
receive the benefits under either PD
1146 or RA 8291. If qualified under RA
8291, all the benefits shall apply
EXCEPT the cash payment. The
Portability Law provides that only
benefits common to both Systems (GSIS
and SSS) shall be paid. Cash payment is
NOT included in the benefits provided
by the SSS.
• Separation Benefit - The Separation benefit is
given to employees who have not reached the
retirement age of 60 but have been separated
from the service. The benefit can either be in
the form of cash payment or both cash
payment or pension.
o Unemployment Or Involuntary
Separation - The unemployment benefit
is paid when permanent government
employees who have paid the required
119
12 months integrated contributions
under RA 8291 are involuntarily
separated from the service as a result of
the abolition of their office or position
usually resulting from reorganization.
The benefit is in the form of monthly
cash payments equivalent to 50% of the
average monthly compensation (AMC).
The duration of the benefit depends on
the length of service and ranges
from two months to a maximum of six
months.
o Disability - Disability refers to any loss
or impairment of the normal functions of
the physical and/or mental faculties
of members, which permanently or
temporarily prevents them to continue
with work or engage in any other gainful
occupation resulting in the loss of
income. The corresponding disability
benefits for each kind of
disability granted to members are based
on the duration of incapacity to work
120
and actual loss of income. There are
three kinds of disability determined by
GSIS:
1. Permanent Total Disability
(PTD) – disability due to injury or
disease causing complete,
irreversible and permanent
incapacity that will permanently
disable a member to work or to
engage in any gainful occupation
resulting to loss of income.
2. Permanent Partial
Disability (PPD) – arises due to
the complete and permanent loss
of the use of any of the following
resulting to the disability to work
for a limited period of time:
i. any finger
ii. one arm
iii. one foot
iv. any toe
v. one hand
vi. one leg
121
vii. one or both ears
viii. hearing of one or both
ears
ix. sight of one eye
x. such other cases as may
be determined and
approved by the GSIS
3. Temporary Total Disability
(TTD) – accrues or arises when
the impaired physical and/or
mental faculties can be
rehabilitated and/or restored to
their normal functions, but such
disability will result in temporary
incapacity to work or to engage
in any gainful occupation.
• Survivorship
Recognizing that pension is an earned right
and not a privilege, the Board of Trustees restored
the survivorship benefit of surviving spouses of
members and pensioners even if they are gainfully
employed and receiving other sources of income
or pension.
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Implemented in December 2010, the new basic
survivorship pension (BSP) payable to the
surviving spouse is equivalent to 50% of the basic
minimum pension received by the deceased
member or pensioner. However, the maximum
limit for survivorship pension should not exceed
Step 8 of the current salary of an undersecretary
under the Salary Standardization Law.
• Funeral
123
The benefit is payable to the members of the
family of the deceased, according to the following
priorities:
1. Legitimate spouse
2. Legitimate child who spent for the funeral
services, or
3. any other person who can show
unquestionable proof of his having borne the
funeral expenses of the deceased.
A. EMPLOYEES COMPENSATION
The employees’ compensation benefit (or
disability benefit) is a compensation package for
public and private sector employees and their
dependents in the event of work-related injury,
sickness, disability or death.
124
SSS (Social Security System)
125
In 1997, President Fidel V. Ramos signed Republic Act
no. 8282, or the Social Security Act of 1997, an act to
further strengthen the SSS. This act paved the way to
more sound benefit packages, expansion of coverage,
flexibility in investments, stiffer penalties for violators
of the law, condonation of penalties for delinquent
employers, and the establishment of a voluntary
provident fund for members.
126
The SSS offers a variety of benefits and loans to its
members. Mainly, there are two programs being
administered by the SSS.
127
delivery, miscarriage, ectopic pregnancy
without operation, hydatidiform mole, or
by 78 days for caesarean section
delivery, or ectopic pregnancy with
operation.
o Disability - A cash benefit granted,
either as a monthly pension or a lump
sum amount, to a member who
becomes permanently disabled, either
partially or totally. If qualified, the
member is granted a monthly Disability
Pension, plus a P500 monthly
Supplemental Allowance.
o Retirement - A cash benefit granted,
either as a monthly pension or a lump
sum amount, to a member who can no
longer work due to old age. If qualified,
the member is granted a monthly
Retirement Pension, plus a 13th Month
Pension payable every December.
o Death - A cash benefit granted, either
as a monthly pension or a lump sum
amount, to the beneficiaries of a
128
deceased member. The beneficiary may
be the legitimate spouse, until he or she
remarries, or the dependent legitimate,
legitimated or legally adopted, and
illegitimate children. If qualified, the
member’s primary beneficiary is granted
a monthly Death Pension, plus a 13th
Month Pension payable every
December.
o Funeral - A cash benefit is given to
whoever paid for the burial expenses of
the deceased member. The Funeral
benefit is a variable amount ranging
from a minimum of P20,000 to a
maximum of P40,000, depending on the
member’s paid contributions and
credited years of service.
129
Starting June 1984, the benefits under the EC
Program may be enjoyed simultaneously with
benefits under the Social Security Program,
thus, allowing double compensation for
covered members who suffer work-related
contingencies.
Salary Loans
130
A one-month loan is equivalent to the average of
member’s last twelve monthly salary credits or the
amount applied for, whichever is lower. The loan is
charged with an interest rate of 10 percent, per
annum until fully paid, based on diminishing principal
balance, and shall be amortized over a period of 24
months.
131
Philippines, the Bureau of Fire Protection, the
Bureau of Jail Management and Penology, and
the Philippine National Police.
• Filipinos employed by foreign-based employers.
• Spouses who devote full-time to managing the
household and family affairs, unless they also
engage in another vocation or employment
which is subject to mandatory coverage, may
be covered by the Fund on a voluntary basis
adopting as a basis of contributions one half of
the monthly compensation income of the
employed spouse.
132
• Purchase of a residential house and lot,
townhouse or condominium unit, inclusive of a
parking slot, which may be:
o Old or brand new;
o A property mortgaged with the Fund; or
o An acquired asset, which is disposed of
through sealed public bidding, negotiated
sale, the Rent-to-Own Program, or the
“Magaang Pabahay, Disenteng Buhay”
Program.
• Construction or completion of a residential unit
on a lot owned by the member;
• Home improvement, i.e. any alteration in an
existing residential unit intended by a
homeowner to be a permanent integral part
thereof, which will enhance its durability and
material value;
• Refinancing of an existing mortgage with an
institution acceptable to the Fund, provided
that:
o The loan is not in default within 12 months
prior to the date of application;
133
o The said loan has a repayment history of at
least two (2) years with the original
mortgagee
• Combination of loan purposes, which shall be
limited to the following:
o Purchase of a fully developed lot not
exceeding 1,000 square meters and
construction of a residential unit thereon;
o Purchase of a residential unit, whether old
or new, with home improvement;
o Refinancing of an existing mortgage with
home improvement;
o Refinancing of an existing mortgage,
specifically a lot loan, with construction of a
residential unit thereon.
134
and controlled corporation of the Philippines, and is
attached to the Department of Health.
135
Powers And Functions Of Philhealth
136
• To establish branch offices as mandated in
Article V of this Act;
• To receive and manage grants, donations,
and other forms of assistance;
• To sue and be sued in court;
• To acquire property, real and personal, this
may be necessary or expedient for the
attainment of the purposes of this Act;
• To collect, deposit, invest, administer, and
disburse the National Health Insurance
Fund in accordance with the provisions of
this Act;
• To negotiate and enter into contracts with
health care institutions, professionals, and
other persons, juridical or natural,
regarding the pricing, payment
mechanisms, design and implementation of
administrative and operating systems and
procedures, financing, and delivery of
health services in behalf of its members;
• To authorize Local Health Insurance Offices
to negotiate and enter into contracts in the
name and on behalf of the Corporation with
137
any accredited government or private
sector health provider organization,
including but not limited to health
maintenance organizations, cooperatives
and medical foundations, for the provision
of at least the minimum package of
personal health services prescribed by the
Corporation;
• To determine requirements and issue
guidelines for the accreditation of health
care providers for the Program in
accordance with this Act;
• To visit, enter and inspect facilities of
health care providers and employers during
office hours, unless there is reason to
believe that inspection has to be done
beyond office hours, and where applicable,
secure copies of their medical, financial,
and other records and data pertinent to the
claims, accreditation, premium contribution,
and that of their patients or employees,
who are members of the Program;
138
• To organize its office, fix the compensation
of and appoint personnel as may be
deemed necessary and upon the
recommendation of the president of the
Corporation;
• To submit to the President of the
Philippines and to both Houses of Congress
its Annual Report which shall contain the
status of the National Health Insurance
Fund, its total disbursements, reserves,
average costing to beneficiaries, any
request for additional appropriation, and
other data pertinent to the implementation
of the Program and publish a synopsis of
such report in two (2) newspapers of
general circulation;
• To keep records of the operations of the
Corporation and investments of the
National Health Insurance Fund;
• To establish and maintain an electronic
database of all its members and ensure its
security to facilitate efficient and effective
services;
139
• To invest in the acceleration of the
Corporation’s information technology
systems;
• To conduct information campaign on the
principles of the NHIP to the public and to
accredited health care providers. This
campaign must include the current benefit
packages provided by the Corporation, the
mechanisms to avail of the current benefit
packages, the list of accredited and
disaccredited health care providers, and the
list of offices/branches where members can
pay or check the status of paid health
premiums;
• To conduct post audit on the quality of
services rendered by health care providers;
• To establish an office, or where it is not
feasible, designate a focal person in every
Philippine Consular Office in all countries
where there are Filipino citizens. The office
or the focal person shall, among others,
process, review and pay the claims of the
overseas Filipino workers (OFWs);
140
• Notwithstanding the provisions of any law
to the contrary, to impose interest and/or
surcharges of not exceeding three percent
(3%) per month, as may be fixed by the
Corporation, in case of any delay in the
remittance of contributions which are due
within the prescribed period by an
employer, whether public or private.
Notwithstanding the provisions of any law
to the contrary, the Corporation may also
compromise, waive or release, in whole or
in part, such interest or surcharges imposed
upon employers regardless of the amount
involved under such valid terms and
conditions it may prescribe;
• To endeavour and support the use of
technology in the delivery of health care
services especially in farflung areas such as,
but not limited to, telemedicine, electronic
health record, and the establishment of a
comprehensive health database;
• To monitor compliance by the regulatory
agencies with the requirements of this Act
141
and to carry out necessary actions to
enforce compliance;
• To mandate the national agencies and
LGUs to require proof of PhilHealth
membership before doing business with a
private individual or group;
• To accredit independent pharmacies and
retail drug outlets; and
• To perform such other acts as it may deem
appropriate for the attainment of the
objectives of the Corporation and for the
proper enforcement of the provisions of this
Act.
Membership Categories
142
• Indigents – These are members
subsidized by the National Government
National Targeting System for Poverty
Reduction. These members are also
known as the “PhilHealth sa Masa”
members.
• Sponsored Members – These are
members that are subsidized by their
respective Local Governments.
• Lifetime Members – These are non-
paying members who are retirees and
pensioners who have already paid
premiums for 120 months of
membership and are 60 years and older.
• Senior Citizens – Under RA 10645, it
states that all citizens age 60 years old
and above must have free PhilHealth
coverage.
• Informal Economy – This is composed of
Informal Sectors, Self-earning
individuals, organized groups, Filipinos
with dual citizenships, naturalized born
citizens and migrant or OFW workers.
143
Benefits of PhilHealth
144
animal bite treatment, cataract operations and
vasectomy and tubal ligation.
145
CHAPTER QUIZ NO. 8
NON BANK FINANCIAL INSTITUTIONS
NAME DATE
SECTION SCORE
PART I. IDENTIFICATION
GSIS PhilHealth
PagIbig SSS
146
_______________ 3. It is a non bank financial
institution that is aimed to implement universal health
coverage in the Philippines.
147
_______________ 9. It offers housing loan
availment, which may be used to purchase a
residential house and lot, to improve a home, or to
construct or complete a unit.
148
_______________ 3. If a member wishes to get a
housing loan with the purpose of refinancing an
existing mortgage with home improvement, they may
not be granted.
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150
CHAPTER 9
PAWNSHOPS
Guide Questions
Governing Law
151
Definition Of Terms
152
Roles and Functions Of The Central Bank In The
Pawning Business
Nature Of Pawnshops
• Registration
153
A pawnshop may be established as a single
proprietorship, partnership or corporation. Any person
or entity who wishes to engage in the pawning
business must do the following:
• Citizenship Requirements
154
While only Filipino citizens may establish and own a
pawnshop formed in a single proprietorship,
partnerships may be possible, provided that 70% of
its capital is owned by Filipino citizens. In the case of
a corporation, at least 70% of the voting capital stock
shall be owned by citizens of the Philippines, or if
there be no capital stock, at least 70% of the
members entitled to vote, shall be citizens of the
Philippines.
• Amount of Loan
• Rate of Interest
155
transactions. It shall be unlawful for a pawnshop to
divide the pawn offered by a pawner in order to
collect greater interest and/or to require the pawner
to pay an additional charge as insurance premium for
the safekeeping and conservation of the article
pawned. In addition to interest charges, pawnshops
may impose a maximum service charge of five pesos
(P5.00), but in no case to exceed one per cent (1%)
of the principal loan.
• Redemption
• Penalties
156
A fine of not less than one hundred pesos (P100.00)
and not more than one thousand pesos (P1,000.00)
or imprisonment for not less than thirty days and not
more than one year, or both, at the discretion of the
court, shall be imposed for violations of the provisions
of this Decree and its implementing rules and
regulations: Provided, That if the violation is
committed by a corporation, partnership or an
association, the penalty provided for in this Decree
shall be imposed upon the directors, officers,
employees or persons therein responsible for the
offense, without prejudice to civil liabilities arising
from the criminal offense.
157
CHAPTER QUIZ NO. 9
PAWNSHOPS
NAME DATE
SECTION SCORE
158
given control to the pawnshop. However, there is still
a higher power that governs pawnshops, which is the
(8) ____________________________________.
They are given the authority to issue rules and
regulations so that pawnshops are in compliance with
PD No. 114.
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159
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160
CHAPTER 10
BUILDING AND LOAN ASSOCIATES,
NON-STOCK SAVINGS & LOAN
ASSOCIATES AND TRUST
COMPANIES
Guide Questions
Governing Law
The Republic Act No. 8367 or the Revised Non-Stock
Savings and Loan Association Act of 1997 was
promulgated for the following functions:
161
• encourage industry, frugality and the
accumulation of savings, and judicious
utilization of credit among the members of
non-stock savings and loan associations;
• regulate and supervise the activities of non-
stock savings and loan associations in order to
place their operations on a sound, stable, and
efficient basis to the end that they may be able
to better provide for the establishment of
additional savings and credit facilities in a fair
manner to their members and to curtail or
prevent acts or practices of these Associations
which are prejudicial to their members'
interest;
• lay down the minimum requirements and the
standards under which non-stock savings and
loan Associations may organize and operate;
• maximize the protection of members of non-
stock savings and loan associations against
misfeasance and malfeasance of the trustees
and officers thereof.
162
Nature Of Building And Loan Association
163
CHAPTER QUIZ NO. 10
BUILDING AND LOAN ASSOCIATES, NON-
STOCK SAVINGS & LOAN ASSOCIATES AND
TRUST COMPANIES
NAME DATE
SECTION SCORE
164
________________ lending. On the other hand, a
building and loan association focus on
________________ mortgage lending.
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165
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166
CHAPTER 11
INSURANCE COMPANIES
Guide Questions
Brief History
167
acknowledged because of the entry of Sun Life
Assurance of Canada in the Philippines.
Governing Law
168
Anyone except a public enemy may be insured, as
well.
169
• Marine Insurance - insurance against, or
against legal liability of the insured for loss,
damage, or expense incident to ownership,
operation, chartering, maintenance, use,
repair, or construction of any vessel, craft
or instrumentality in use of ocean or inland
waterways, including liability of the insured
for personal injury, illness or death or for
loss of or damage to the property of
another person.
• Fire Insurance - insurance against loss by
fire, lightning, windstorm, tornado or
earthquake and other allied risks, when
such risks are covered by extension to fire
insurance policies or under separate
policies.
• Casualty Insurance - insurance covering
loss or liability arising from accident or
mishap, excluding certain types of loss
which by law or custom are considered as
falling exclusively within the scope of other
types of insurance such as fire or marine. It
includes, but is not limited to, employer’s
170
liability insurance, motor vehicle liability
insurance, plate glass insurance, burglary
and theft insurance, personal accident and
health insurance as written by non-life
insurance companies, and other
substantially similar kinds of insurance.
• Suretyship - an agreement whereby a party
called the surety guarantees the
performance by another party called the
principal or obligor of an obligation or
undertaking in favor of a third party called
the obligee. It includes official
recognizances, stipulations, bonds or
undertakings issued by any company by
virtue of and under the provisions of Act
No. 536, as amended by Act No. 2206.
• Life Insurance - insurance on human lives
and insurance appertaining thereto or
connected therewith.
• Microinsurance - a financial product or
service that meets the risk protection needs
of the poor where:
171
o The amount of contributions, premiums,
fees or charges, computed on a daily
basis, does not exceed seven and a half
percent (7.5%) of the current daily
minimum wage rate for nonagricultural
workers in Metro Manila.
o The maximum sum of guaranteed
benefits is not more than one thousand
(1,000) times of the current daily
minimum wage rate for nonagricultural
workers in Metro Manila.
172
education and interment, must also be licensed by the
Insurance Commission.
173
BPI Philam Life Assurance
Php 20,329,487,893
Corp. Inc.
Philippine American Life &
Php 19,896,346,899
Gen. Ins. Co. (Life Unit)
Pru Life Insurance Corp.
Php 19,221,205,565
of U.K.
Manufacturers Life Ins.
Php 17,638,454,537
Co. (Phil.) Inc.
Insular Life Assce. Co.
Php 11,675,268,038
Ltd.
BDO Life Assce. Co., Inc. Php 9,871,458,393
Manulife Chinabank Life
Php 8,211,129,912
Assce. Corp.
United Coconut Planters
Php 6,506,929,156
Life Assce. Corp.
174
CHAPTER QUIZ NO. 11
INSURANCE COMPANIES
NAME DATE
SECTION SCORE
PART I. IDENTIFICATION
175
performance by another party called the principal or
obligor of an obligation or undertaking in favor of a
third party called the obligee.
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176
2. What are the roles if the Insurance Commission?
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CHAPTER 12
INVESTMENT COMPANIES
Guide Questions
179
employment for the economy and enhancing skills of
Filipino workers.
Definition Of Terms
180
benefit of Philippine nationals: Provided, That
where a corporation and its non-Filipino
stockholders own stocks in a Securities and
Exchange Commission (SEC) registered
enterprise, at least 60% of the capital stock
outstanding and entitled to vote of each of
both corporations must be owned and held by
citizens of the Philippines and at least 60% of
the members of the Board of Directors of each
of both corporations must be citizens of the
Philippines, in order that the corporation shall
be considered a Philippine national.
• Investment - equity participation in any
enterprise organized or existing under the laws
of the Philippines.
• Foreign Investment - equity investment
made by a non-Philippine national in the form
of foreign exchange and/or other assets
actually transferred to the Philippines and duly
registered with the Central Bank which shall
assess and appraise the value of such assets
other than foreign exchange.
181
• Export Enterprise - enterprise wherein a
manufacturer, processor or service (including
tourism) enterprise exports sixty percent
(60%) or more of its output, or wherein a
trader purchases products domestically and
exports sixty percent (60%) or more of such
purchases.
• Domestic Market Enterprise - enterprise
which products goods for sale, or renders
services to the domestic market entirely or if
exporting a portion of its output fails to
consistency export at least 60% thereof.
• Foreign Investments Negative List or
Negative List - a list of areas of economic
activity whose foreign ownership is limited to a
maximum of 40% of the equity capital of the
enterprises engaged therein.
Types of Investments
182
institutions using promissory notes. A
corporation can also borrow publicly by issuing
commercial papers which are registered with
the SEC. On the other hand, the government
can borrow from the public through
instruments such as treasury bills, notes and
bonds. Since debt instruments are normally
longer-term investments, interest payments
tend to be higher than term deposits.
• Stocks - A common stock is a unit of
ownership in a corporation for which the holder
can vote on corporate matters and receive
dividends from the company's earnings.
Therefore, when the investor purchases a
stock, he becomes a part-owner of the whole
company.
183
Furthermore, stock investments have in
general outperformed bond and money market
instruments over time.
184
institutional investors. Funds make it possible
for investors to buy instruments at a lower
cost. When the fund buys different
instruments, the cost of buying these
instruments is divided among all investors
versus the sole investor bearing the total cost.
• Savings Account - Savings accounts are
a safe haven to store your emergency funds.
They provide easy access to your money and
are generally insured. If you or your family’s
deposit accounts at one FDIC-insured bank or
savings association total $100,000 or less, your
funds are fully insured. The chief drawback of
such accounts is that interest rates tend to be
low since they offer a very high degree of
safety.
• Certificates of Deposit or CDs - A CD is a
special type of deposit account that typically
offers a higher rate of interest than a regular
savings account. Just like savings accounts,
CDs are also insured up to $100,000. When
you purchase a CD, you invest a fixed sum of
money for fixed period of time. Usually, the
185
longer the period, higher is the interest rate.
There are penalties for early withdrawal.
• Money Market Deposit Accounts - These
accounts generally earn higher interest than
savings accounts. They are very safe and
provide easy access to your money. They are
also insured by the FDIC. They offer many of
the services that checking accounts offer,
however, a limit is normally placed on the
number of withdrawals or transfers you can
make during a given period of time.
• Bonds - A bond is a certificate of debt
issued by the government or a company with a
promise to pay a specified sum of money at a
future date and carries interest at a fixed rate.
Bond terms can range from a few months to 30
years. Bonds are tradable instruments and are
generally considered safer than stocks because
bondholders are paid before stockholders if a
company becomes bankrupt. Independent
bond-rating agencies rate the likelihood that
any given bond will default.
186
• Mutual Funds - A mutual fund is
generally a professionally managed pool of
money from a group of investors. A mutual
fund manager invests your funds in securities,
including stocks and bonds, money market
instruments or some combination of these,
based upon the fund’s investment objectives.
• Annuities - Annuities are contracts sold
by an insurance company designed to provide
payments to the holder at specified intervals,
usually after retirement. Earnings cannot be
withdrawn without penalty until a specified age
and are taxed only at the time of withdrawal.
Annuities are relatively safe, low-yielding
investments. An annuity has a death benefit
equivalent to the higher of the current value of
the annuity or the amount the buyer has paid
into it.
187
Investment Houses And Securities Broker /
Dealer
188
governance (CG); empowerment of investors,
corporators, and entrepreneurs; and effective
access to financial products and resources. The
following laws are enacted to widen the
Commission’s mandates, powers and functions.
1. The SEC Reorganization Act or
Presidential Decree (PD) 902-A in 1976,
as subsequently amended by PDs 1653,
1758 and 1799, reorganized the
Commission to give it ample powers to
protect the public and their investments.
Under the Act, the Commission was
reorganized into a collegial body; and
was given additional powers and
functions, including quasi-judicial powers
over intra-corporate disputes as well as
absolute jurisdiction, supervision and
control over all corporations,
partnerships or associations, that are the
grantees of primary franchise and/or a
license or permit issued by the
government to operate in the
Philippines.
189
2. The Corporation Code of the
Philippines or the Batas Pambansa
(BP) 68 in 1980 gave the SEC the
mandate to register corporations, collect
fees from registering corporations, and
prescribe reportorial requirements.
Along with the granting of authority to
register 19 corporations, it empowered
the SEC to reject articles of
incorporation or disapprove any
amendment thereto if the same is not in
compliance with the requirements of BP
68.
3. The Revised Securities Act or
BP 178 in 1982 repealed CA 83 in its
entirety to give way to a new statute
that would enable the SEC to keep pace
with new and more complex securities
instruments, trading vehicles and
strategies. The BP 178 provided, among
others, for a more sophisticated
disclosure mechanism of securities to be
offered to investors.
190
4. The Securities Regulation
Code (SRC) or Republic Act (RA) 8799
in 2000 provided for the SEC
reorganization to give greater focus on
the Commission’s role in capital market
development, fostering good CG and
enhancing investor protection. The SRC
also provided for the transfer of the
Commission’s jurisdiction over all cases
enumerated under Section 5 of PD 902-
A to the Courts of general jurisdiction or
the appropriate Regional Trial Court
(RTC). The SRC also defined in clear
terms fraud and criminal offenses
related to securities transactions, and
strengthened SEC regulatory functions
over all entities dealing in securities such
as Self-Regulatory Organizations (SROs)
or the Philippine Stock Exchange (PSE),
Philippine Dealing and Exchange
Corporation (PDEx) and Capital Market
Integrity Corporation (CMIC), as well as
191
market professionals such as brokers
and dealers, among others.
5. The Credit Information
System Act (CISA) or RA 9510 in 2008
mandated the SEC to be the lead
government agency to implement and
enforce the said Act. It designated the
Chairman of the SEC to be the Chairman
of the Board of Directors of the Credit
Information Corporation, whose primary
purpose is to receive and consolidate
basic credit data; to act as a central
registry or central repository of credit
information; and to provide access to
reliable, standardized information on
credit history and financial condition of
borrowers.
6. The Microfinance
Nongovernment Organizations
(NGOs) Act or RA 10693 in 2015
mandated the SEC to establish an
accrediting body to be known as the
Microfinance NGO 21 Regulatory Council
192
which shall, among others, institute and
operationalize a system of accreditation
for Microfinance NGOs; issue certificate
of accreditation as a Microfinance NGO
upon determination that the criteria set
for this purpose have been fully
satisfied; and monitor the performance
of Microfinance NGOs to ensure
continuing compliance with the
provisions of the Act and its IRR. The
Chairman of the SEC or designated
representative shall serve as the
Chairperson of the Council; and the
Council shall be assisted by a secretariat
to be lodged in the SEC, which shall
coordinate the activities involved in the
accreditation process.
193
In addition to the aforementioned laws, the
Commission also implements and acts either as lead
or support agency in administering and enforcing
special laws, the more significant of which are:
194
• Anti-Dummy Law (CA 108, as amended)
• Civil Code of the Philippines (RA 386, Title IX –
Partnership)
• Securitization Act of 2004 (RA 9267)
• Real Estate Investment Trust Act of 2009 (RA
9856)
• Personal Equity and Retirement Account Act of
2008 (RA 9505)
195
and/or a license or permit issued by the
Government;
• Formulate policies and
recommendations on issues concerning the
securities market, advise Congress and other
government agencies on all aspects of the
securities market and propose legislation
and amendments thereto;
• Approve, reject, suspend, revoke or
require amendments to registration
statements, and registration and licensing
applications;
• Regulate, investigate or supervise the
activities of persons to ensure compliance;
• Supervise, monitor, suspend or take
over the activities of exchanges, clearing
agencies and other SROs;
• Impose sanctions for the violation of
laws and the rules, regulations and orders
issued pursuant thereto;
• Prepare, approve, amend or repeal
rules, regulations and orders, and issue
opinions and provide guidance on and
196
supervise compliance with such rules,
regulations and orders;
• Enlist the aid and support of and/or
deputize any and all enforcement agencies
of the Government, civil or military as well
as any private institution, corporation, firm,
association or person in the implementation
of its powers and functions under this Code;
• Issue cease and desist orders to prevent
fraud or injury to the investing public;
• Punish for contempt of the Commission,
both direct and indirect, in accordance with
the pertinent provisions of and penalties
prescribed by the Rules of Court;
• Compel the officers of any registered
corporation or association to call meetings of
stockholders or members thereof under its
supervision;
• Issue subpoena duces tecum and
summon witnesses to appear in any
proceedings of the Commission and in
appropriate cases, order the examination,
search and seizure of all documents, papers,
197
files and records, tax returns, and books of
accounts of any entity or person under
investigation as may be necessary for the
proper disposition of the cases before it,
subject to the provisions of existing laws;
• Suspend, or revoke, after proper notice
and hearing the franchise or certificate of
registration of corporations, partnerships or
associations, upon any of the grounds
provided by law;
• Exercise such other powers as may be
provided by law as well as those which may
be implied from, or which are necessary or
incidental to the carrying out of, the express
powers granted the Commission to achieve
the objectives and purposes of these laws.
198
CHAPTER QUIZ NO. 12
INVESTMENT COMPANIES
NAME DATE
SECTION SCORE
199
__________ 4. Stocks are certificates of debt issued
by the government or a company with a promise to
pay a specified sum of money at a future date and
carries interest at a fixed rate.
200
__________ 9. A mutual fund pools money from
unrelated investors with similar investment objectives.
c. Mutual Funds
c. Debt Instruments
201
a. Mutual Funds b. Annuities
c. Bonds
c. Export Enterprise
c. Export Enterprise
202
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203
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CHAPTER 13
FINANCING COMPANIES
Guide Questions
Governing Law
205
Definition of Terms
206
corporate sector, the capital market
participants, the securities and investment
instruments market, and the investing
public.
• Credit - any loan, mortgage, financial
lease, deed of trust, advance or discount,
any conditional sales contract, contract to
sell, or sale or contract of sale of property
or service, either for present or future
delivery, under which, part of all or the
price is payable subsequent to the making
of such sale or contract; any contract, any
option, demand, lien or pledge, or to the
other claims against, or for the delivery of,
property or money, any purchase, or other
acquisition of or any credit upon the
security of, any obligation or claim arising
out of the foregoing, and any transaction
or series of transactions having similar
purpose or effect.
• Financial Leasing - a mode of extending
credit through a non-cancelable lease
contract under which the lessor purchases
207
or acquires, at the instance of the lessee,
machinery, equipment, motor vehicles,
appliances, business and office machines,
and other movable or immovable property
in consideration of the periodic payment by
the lessee of a fixed amount of money
sufficient to amortize at least seventy
(70%) of the purchase price or acquisition
cost.
• Purchase Discount - the difference
between the value of the receivable
purchased or credit assigned, and the net
amount paid by the finance company for
such purchases or assignment, exclusive of
fees, services, charges, interest and other
charges incident to the extension of credit.
• Lease Rentals - the periodic payments
made by the lessee to the lessor.
208
• Engage in trust operations subject to the
provisions of the General Banking Act upon
prior approval by the Bangko Sentral ng
Pilipinas;
• Issue bonds and other capital instruments
subject to pertinent rules and regulations
of the Bangko Sentral ng Pilipinas;
• Rediscount their paper with government
financial institutions subject to relevant
laws, rules and regulation;
• Participate in special loan or credit
programs sponsored by or made available
through government financial institutions;
• Provide foreign currency loans and leases
to enterprises who earn foreign currency
by exports or other means, subject to
existing laws and rules and regulations
promulgated by the Bangko Sentral ng
Pilipinas.
209
Finance Companies in the Philippines
210
Bankard is known for being the first
card company to launch a catalog-free
Rewards Program and a simplified, no-
hassle installment conversion feature that
allows cardholders to convert their retail
purchases to installment just by calling the
RCBC Bankard Customer Service.
Cardholders can likewise avail themselves
of flexible and easy-on-the-pocket
installment packages through the RCBC
Bankard Installment facility that also
includes 0% interest installment.
• Beep (AF Payments Inc.) - AF Payments
Inc. is a joint venture of the Ayala and First
Pacific groups that provides contactless
payment solutions to the Filipino public.
The company was forged by the
partnership of two of the largest
conglomerates in the Philippines through
their participation in a Public-Private
Partnership (PPP) Project to unify the
Automated Fare Collection System of three
211
rail transport lines (LRT1, LRT2, and
MRT3).
• MegaLink - It is a Philippine-based
developer of mobile and banking software
as well as a service provider for banks,
specifically for ATM networks and point of
sale systems of banks in the country. From
its establishment in 1989 until 2015, it
pioneered the interconnectivity of several
banks in the country by way of being the
first interbank network with different banks
as its members.
• Expressnet - Expressnet was founded on
February 14, 1986, when the ATMs of Bank
of the Philippine Islands (BPI) and its
subsidiary, BPI Family Savings Bank, the
founders of Expressnet, were connected
for the first time. However it wasn’t until
late in 1991, that a non linked bank,
Landbank, joined the consortium, with
HSBC following in 1992 and Banco de Oro
(BDO) in 1995. Effectively, Expressnet was
the third ATM consortium to be created in
212
the Philippines. The current bank members
using Expressnet as their primary network
are BDO, BPI, BPI Family Savings Bank,
BPI Direct Savings Bank, Land Bank of the
Philippines.
• Encash Network Services - Electronic
Network Cash Tellers, Inc. or ENCASH, has
made great inroads in providing ATM
service to the Philippine countryside. As the
first Independent ATM Deployer in the
Philippines, ENCASH provides privately-
owned ATMs to areas not deemed viable
by commercial banks, allowing users in
remote locations to conveniently obtain
access to their finances. More than 300
ENCASH ATMs may be found in over 150
partner rural banks, cooperatives, tourist
destinations, town halls, and other partner
entities in more than 55 provinces all over
the country. Recently, ENCASH introduced
the Retail Teller Machine (RTM) to the
country. Similar to an ATM, it dispenses
vouchers that can be exchanged for
213
money. The ENCASH RTMs may be found
in resorts and some financial institutions.
ENCASH started its operations on
December 2007 with only five (5) ATMs. In
less than 7 years, ENCASH has more than
300 ATMs and RTMs deployed and running
with others in early stages of
implementation in Luzon, Visayas and
Mindanao. In the cooperative space,
ENCASH has partnered with more than 30
Cooperatives throughout the country.
Several more partnerships are in the
pipeline. ENCASH is the first non-bank
member of MegaLink. It has the second-
largest number of ATMs in the MegaLink
network.
• The Philippine Dealing and Exchange Corp
- The Philippine Dealing & Exchange Corp.
(PDEx) was incorporated in 2003 to
provide trading infrastructure for the fixed-
income (FI) market. As a Securities and
Exchange Commission (SEC)-registered FI
Securities Market, PDEx operates the
214
organized secondary market for the trading
of FI securities which includes both
Government and Corporate Securities.
PDEx, as an SRO, has been given authority
by the SEC to create and enforce its own
rules, monitor and enforce compliance with
securities laws and regulations, and
enforce fair, ethical and efficient practices
in the securities market with the primordial
objective of investor protection. It enables
the maintenance of a level playing field
among players in the market, to assure
investors of fairness and safety in the
marketplace. PDEx is also responsible for
calculating the Philippine Dealing System
Treasury Reference Rates (PDST Rates).
This system may be used as the basis for
valuing and marking-to-market interest
rate-sensitive instruments.
• The Philippine Stock Exchange - It is the
only stock exchange in the Philippines. It is
one of the oldest stock exchanges in Asia,
having been in continuous operation since
215
the establishment of the Manila Stock
Exchange in 1927. It currently maintains a
trading floor at the PSE Tower in Bonifacio
Global City, Taguig City. The PSE is
composed of a 15-man Board of Directors
with Jose T. Pardo as Chairman. The main
index for PSE is the PSEi, which is
composed of a fixed basket of thirty (30)
listed companies. The PSEi measures the
relative changes in the free float-adjusted
market capitalization of the 30 largest and
most active common stocks listed at the
PSE. The selection of companies in the
PSEi is based on a specific set of public
float, liquidity and market capitalization
criteria. There are also six sector-based
indices as well as a broader all shares
index.
216
CHAPTER QUIZ NO. 13
FINANCING COMPANIES
NAME DATE
SECTION SCORE
PART I. IDENTIFICATION
217
credit assigned, and the net amount paid by the
finance company for such purchases or assignment
a. Bankard b. Beep
c. Expressnet
a. Bankard b. PDex
c. Encash
218
3. It is the only stock exchange in the Philippines. It is
one of the oldest stock exchanges in Asia, having
been in continuous operation since the establishment
of the Manila Stock Exchange in 1927.
a. MegaLink b. Expressnet
c. Phippine Stock Exchange
a. Expressnet b. Beep
c. Encash
a. PDex b. MegaLink
c. Beep
219
PART III. SELF-TEST QUESTIONS
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220
CHAPTER 14
NONBANK FINANCIAL
INSTITUTIONS, CREDIT
COOPERATIVES AND LENDING
COMPANIES
Guide Questions
221
Despudol permission to move to that place and found
a colony under the cooperative plan of Robert Owen.
Instead, he was arrested for treason and banished to
Dapitan, Zamboanga del Norte.
222
As soon as Civil Government was established, Filipino
participation in government was encouraged.
223
Rural Credit Law was entrusted to the Bureau of
Agriculture.
224
cooperative marketing societies were also designed to
be present. The apparent weakness of the rural credit
cooperatives, however, failed the enthusiasm of
farmers to organize themselves into cooperative
marketing associations.
225
• To assist small farmers in securing liberal
credit.
• To promote the effective groupings of
farmers into cooperative associations.
• To establish an orderly and systematic
marketing machinery for, and controlled
by, the small farmers.
• To place agriculture on a basis of economic
equality with other industries.
226
cooperatives and shall create an atmosphere that is
conducive to the growth and development of these
cooperatives.
227
accountable to the membership. In primary
cooperatives, members have equal voting
rights of one-member, one-vote. Cooperatives
at other levels are organized in the same
democratic manner.
• Member Economic Participation - Members
contribute equitably to, and democratically
control, the capital of their cooperatives. At
least part of that capital is the common
property of the cooperative. They shall receive
limited compensation or limited interest, if any,
on capital subscribed and paid as a condition of
membership. Members allocate surpluses for
any or all of the following purposes: developing
the cooperative by setting up reserves, part of
which should at least be indivisible; benefitting
members in proportion to their patronage of
the cooperative's business; and, supporting
other activities approved by the membership.
• Autonomy and Independence - Cooperatives
are autonomous, self-help organizations
controlled by their members. If they enter into
agreements with other organizations, including
228
government, or raise capital from external
sources, they shall do so on terms that ensure
democratic control of their members and
maintain their cooperative autonomy.
• Education, Training and Information -
Cooperatives shall provide education and
training for their members, elected and
appointed representatives, managers, and
employees, so that they can contribute
effectively and efficiently to the development
of their cooperatives.
• Cooperation Among Cooperatives -
Cooperatives serve their members most
effectively and strengthen the cooperative
movement by working together through local,
national, regional and international structures.
• Concern for Community - Cooperatives work
for the sustainable development of their
communities through policies approved by their
members.
229
Lending Companies
Money lending business in the Philippines has been an
integral part of the financial stability of the country.
In order to regulate the lending companies
established in the Philippines, the Lending Company
Regulation Act of 2007 was established.
230
CHAPTER QUIZ NO. 14
NONBANK FINANCIAL INSTITUTIONS, CREDIT
COOPERATIVES AND LENDING COMPANIES
NAME DATE
SECTION SCORE
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231
3. Member Economic Participation
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232
7. Concern for Community
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233
__________ 4. The rural credit associations were
designed to help finance the efforts of the farmers for
more production.
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234
2. What is the Cooperative Code of the Philippines?
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235
CHAPTER 15
INTERNATIONAL FINANCIAL
INSTITUTIONS
Guide Questions
236
have more than 10,000 employees in more than 120
offices worldwide.
237
civil society, and promoting peace and development
in Mindanao.
238
availability of more timely and improved
measurements of poverty;
• Rapid, inclusive and sustained economic
growth: promoting economic policy
reform for inclusive growth, boosting
private sector development by
improving the investment climate for
firms of all sizes, and increasing
productivity and job creation –
especially in rural areas;
• Climate change, environment and
disaster risk management: increasing
physical, financial and institutional
resilience to natural disaster and climate
change impacts, and improving natural
resource management and sustainable
development;
• Peace, institution building, and social
and economic opportunity: supporting
governance, social and economic
development and citizen security and
justice in conflict-affected regions in
Mindanao, including the territory of the
239
proposed new Bangsamoro autonomous
political entity.
240
enables countries and their citizens to transact with
each other. Their primary aims are as follows:
241
East in 1963 set that vision on the way to becoming
reality.
242
The forthcoming ADB country partnership strategy,
2018–2023 for the Philippines will focus on three
main pillars:
243
CHAPTER QUIZ NO. 15
INTERNATIONAL FINANCIAL INSTITUTIONS
NAME DATE
SECTION SCORE
PART I. IDENTIFICATION
244
people living on less than $1.90 a day to no more
than 3%.
245
enables countries and their citizens to transact with
each other.
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BIBLIOGRAPHY
ADB History Https://Www.Adb.Org/About/History
Bancnet Company Profile
Https://Www.Bancnetonline.Com/Bancnetweb/Vi
ew/Gotositemappage.Do
Encash Https://Www.Encash-Ph.Com/
248
Espenilla Jr., N. (2007). BANKING SUPERVISION AND
EXAMINATION IN THE PHILIPPINES.
Presentation, Tokyo, Japan.
Expressnet Http://Www.Expressnet.Ph
249
Lex Mundi. (2006). Banking Finance And Regulation -
Philippines [Ebook].
Megalink Http://Www.Megalink.Com.Ph/
PDS Group
Http://Www.Pds.Com.Ph/Index.Html%3Fpage_Id
=222.Html
250
RURAL BANKS, AND FOR OTHER PURPOSES.
(1992).
251
OPERATION OF NON-STOCK SAVINGS AND
LOAN ASSOCIATIONS October 21, 1997
252