Im Monetary Banking

INSTRUCTIONAL MATERIALS FOR FIMA 30043 MONETARY POLICY AND CENTRAL
BANKING
COMPILED BY: ARIS G. NORBERTE

INTRODUCTION
This instructional material is intended for exclusive use of BSBA Major in Financial Management
students enrolled in the course FIMA 30043 – Monetary Policy and Central Banking.
Knowledge of the role of central bank and monetary policy in the economy. Topics include the
financial services industry, banking and financial regulation, monetary theories, variables
influencing the monetary policies, the functions and operation of the Bangko Sentral ng Pilipinas
and the Monetary Board
Assessment questions and activities are also provided at the end of the material to gauge how
well the student understood the discussions.
Upon completion of this instructional material, the student is expected to have a clear
understanding of Bangko Sentral ng Pilipinas in the Philippine Financial System and Monetary
Policy.
COURSE CODE : FIMA 30043
COURSE TITLE : MONETARY POLICY AND CENTRAL BANKING
CREDIT UNITS : 3 UNITS
COURSE PREREQUISITE : FIMA 30023 – Banking and Financial Institutions
COURSE DESCRIPTION : This course is designed to provide an understanding

about the role of central bank and monetary policy in the
economy. Topics include the financial services industry,
banking and financial regulation, monetary theories, variables
influencing the monetary policies, the functions and
operation of the Bangko Sentral ng Pilipinas and the
Monetary Board
COURSE OUTCOMES : At the end of the course, the learner should be able to:
 Discuss the basic concepts and principles of credit

risk management
 Analyze the risks associated with the company’s credit
policy
 Discuss the internal credit environment of a lender
 Evaluate the credit and collection management
process in a firm
 Analyze business and consumer credit profiles to
determine credit risk
 Evaluate factors that affect the decision in credit and
collection operation
 Formulate control measures in credit and collection
management activities
 Discuss social responsibility and ethics as related to
credit and collections
COURSE CONTENT
Learning
Week Topics Outcomes Resources/References
1 Introduction to the course Demonstrate interest Course Syllabus
contents, activities, and and appreciation of
requirements. the importance of
knowing the course
2 Define Central
Nature and Definition of Banking The New Central Bank
Central Banking in the Act
Philippines Describe the history (RA 7653)
of central banking in
the Philippines Perspective from
Nature and meaning of Bangko Sentral ng
Central Banking Explain the nature of Pilipinas: Money &
central banking Banking in the
Evolution of Central Philippines,
Banking in the BSP Publications 2003
Philippines
The Bangko Sentral &
History of the Central the Philippine Economy
Bank/Bangko Sentral BSP Publications, 2005
ng Pilipinas
Central Banking for
Every Juan and Maria
Bunye, Ignacio
2011
www.bsp.gov.ph
3
Primary Objectives, Significant
Comprehend and The New Central Bank
Characteristics and Importantextrapolate the Act
Services of the Bangko Sentral
primary goals of the (RA 7653)
ng Pilipinas Bangko Sentral ng Cesar, Augustus 2002
Pilipinas as a central
Primary objectives of banker Perspective from
the Bangko Sentral ng Bangko Sentral ng
Pilipinas Explain the Pilipinas: Money &
characteristics of Banking in the
Characteristics of Bangko Sentral ng Philippines,
Bangko Sentral ng Pilipinas and their BSP Publications 2003
Pilipinas significant
differences The Bangko Sentral &
Services performed by the Philippine Economy
the Bangko Sentral ng Categorize the BSP Publications, 2005
Pilipinas services performed
by Bangko Sentral Central Banking for
Comparison of RA No. ng Pilipinas to the Every Juan and Maria
265 and RA No. 7653 general public, to Bunye, Ignacio
banks and other 2011
The new organizational financial institutions
structure of the Bangko Sentral www.bsp.gov.ph
ng Pilipinas and the functions Identify the changes
of each department and improvement
applied to RA No.
7653 from RA No.
265
Differentiate the
functions of Bangko
Sentral ng Pilipinas
departments and
how it affects the
whole organization
4-5 The Bangko Sentral ng Discuss the history The New Central Bank
Pilipinas and the of Philippine Act
Means of Payment Currency (RA 7653)
History of the Philippine Determine issue Perspective from

Currency regulations Bangko Sentral ng
Pilipinas: Money &
Justification of the Comprehend and Banking in the
power to issue notes extrapolate the Philippines,
and coins definition of currency BSP Publications 2003
and demand
Note issue regulation deposits and its The Bangko Sentral &
application the Philippine Economy
BSP Publications, 2005
Express different
opinion about Central Banking for
current events and Every Juan and Maria
explain the role of Bunye, Ignacio
Bangko Sentral ng 2011
Pilipinas for a www.bsp.gov.ph
particular situation
6-7 Domestic and

International Monetary Identify the actions The New Central Bank
Stabilization of the of Bangko Sentral Act
Bangko Sentral ng ng Pilipinas to (RA 7653)
Pilipinas issues about price
level changes, Perspective from
Bangko Sentral ng monetary aggregate- Bangko Sentral ng
Pilipinas action on the credit Pilipinas: Money &
problems of monetary Banking in the
aggregate-credit and Differentiate the use Philippines,
price levels; monetary of Bangko Sentral BSP Publications 2003
tools of the Bangko ng Pilipinas
Sentral ng Pilipinas and monetary tools to The Bangko Sentral &
how they are used to create a balance in the Philippine Economy
solve the above-stated the Philippine BSP Publications, 2005
problems financial system
International reserves, Central Banking for
its objective and Identify the effects of Every Juan and Maria
composition and demand and supply Bunye, Ignacio
Bangko Sentral ng of money circulation 2011
Pilipinas action when in the economy
international stability of www.bsp.gov.ph
peso is threatened Assess the effect of
international reserve
to the international
stability of the peso
Express different
opinions about
current events and
explain the role of
Bangko Sentral ng
Pilipinas for a
8 Bangko Sentral ng Comprehend and

Pilipinas Management extrapolate the The New Central Bank
of Monetary operation of gold Act
Aggregates and bullion (RA 7653)
exchanges and its
Operation in gold and effect to the Perspective from
bullion exchanges, maintenance of the Bangko Sentral ng
purchase and sale of stability of Peso Pilipinas: Money &
gold, purchase and Banking in the
sale of foreign Distinguish different Philippines,
exchange, exchange factors affecting the BSP Publications 2003
rates and its foreign exchange
determination by the rates The Bangko Sentral &
Bangko Sentral ng the Philippine Economy
Pilipinas, and its Recognize foreign BSP Publications, 2005
operation with foreign exchange
entities operations Central Banking for
Every Juan and Maria
Regulation of foreign Identify important Bunye, Ignacio
exchange operations of regulations 2011
the banks regarding foreign
exchange www.bsp.gov.ph
operations of banks
Express different
opinions about
current events and
explain the role of
Bangko Sentral ng
Pilipinas for a
9 MIDTERM EXAMINATION
10 Loans to Banks and Other Interpret the guiding The New Central Bank
Financial Institutions principles of Bangko Act
Sentral ng Pilipinas (RA 7653)
Credit Policy – Bangko about its different
Sentral ng Pilipinas credit policies Perspective from
guiding principles Bangko Sentral ng
Comprehend and Pilipinas: Money &
Normal credit extrapolate the Banking in the
operations rationale of Bangko Philippines,
Sentral ng Pilipinas BSP Publications 2003
Special credit in extending credit to
operations banks and other The Bangko Sentral &
financial institutions the Philippine Economy
Emergency credit BSP Publications, 2005
operations Compare Bangko
Sentral ng Pilipinas Central Banking for
Credit terms processes for Every Juan and Maria
normal credit Bunye, Ignacio
Open market operations, special 2011
operations credit operations
and emergency www.bsp.gov.ph
Other selective regulations: credit operations
Margin Requirements News articles
against Letters of Express different
Credit opinion about
Security Against Bank current events and
Loans explain the role of
Portfolio Ceilings Bangko Sentral ng
Minimum Capital Ratio Pilipinas for a
Explain the
Mechanics and
computation of other
Selective
Regulations, it’s it
impact to the
economy and the
restriction of
imported goods
11 Assess the
The Custodian of Cash significance of The New Central Bank
Reserves of Banking centralized cash Act
Institutions and Non-Bank reserves and (RA 7653)
Financial Intermediaries examine the role of
Bangko Sentral ng Perspective from
Significance of Pilipinas in securing Bangko Sentral ng
centralized cash and facilitating Pilipinas: Money &
reserves reserves in the Banking in the
Philippines Philippines,
Bank reserves: type of BSP Publications 2003
reserves of four lines of Differentiate the four
deposits types/lines of The Bangko Sentral &
Computation of legal deposits the Philippine Economy
reserves in Bangko BSP Publications, 2005
Sentral ng Pilipinas Compute the legal
reserves of different Central Banking for
Objectives of deposit types of banks and Every Juan and Maria
reserves in Bangko other financial Bunye, Ignacio
Sentral ng Pilipinas institutions before its 2011
operation/
Significance of clearing establishment www.bsp.gov.ph
system
Analyze the role of News articles
Bangko Sentral ng
Pilipinas in the
clearing system of
checks and identify
its significance
12 Comprehend and The New Central Bank

Bangko Sentral ng extrapolate the role Act
Pilipinas as of Bangko Sentral (RA 7653)
Government Banker, ng Pilipinas
Agent and Financial as the banker of the
Perspective from
Adviser government Bangko Sentral ng
Pilipinas: Money &
Functions of Banker of Comprehend and Banking in the
the Government extrapolate the role Philippines,
of Bangko Sentral BSP Publications 2003
Functions of agent of ng Pilipinas
government securities as an agent of The Bangko Sentral &
government the Philippine Economy
Purpose of Securities securities BSP Publications, 2005
Stabilization Fund
(SSF) Interpret and Central Banking for
analyze the purpose Every Juan and Maria
Privileges and of securities Bunye, Ignacio
prohibitions of the stabilization fund 2011
Bangko Sentral ng and determine its
Pilipinas effect to the www.bsp.gov.ph
monetary system
News articles
Examine the
privileges and
prohibitions of the
Bangko Sentral ng
Pilipinas
Express different
opinion about
current events and
explain the role of
Bangko Sentral ng
Pilipinas
for a particular
situation
13-14 The New Central Bank

Bangko Sentral ng Interpret and Act
Pilipinas Monetary comprehend and (RA 7653)
Policies extrapolate the
nature and features Monetary Policy
Definition of policy, its of Bangko Sentral Fender, J.
nature and features ng Pilipinas policies 2012
The Monetary Board, Describe the roles of Perspective from

its composition and the Monetary Board, Bangko Sentral ng
functions its functions, tenure Pilipinas: Money &
and employment Banking in the
Monetary Tools of terms Philippines,
Banko Sentral ng BSP Publications 2003
Pilipinas Differentiate the
monetary tools and The Bangko Sentral &
policies of Bangko the Philippine Economy
Sentral ng Pilipinas BSP Publications, 2005
to control money
supply www.bsp.gov.ph
Express different News articles

opinion about
current events and
explain the role of
Bangko Sentral ng
Pilipinas for a
15 The New Central Bank

Act
The Theory of Monetary Policy Explain fully the (RA 7653)
meaning of
Monetary Theory Monetary Theory Monetary Policy
Fender, J.
Demand and Supply of Examine the role of 2012
Money Bangko Sentral ng
Pilipinas in terms of Perspective from
managing the Bangko Sentral ng
demand and supply Pilipinas: Money &
of money in the Banking in the
economy Philippines,
BSP Publications 2003
Assess financial and
Real adjustments The Bangko Sentral &
the Philippine Economy
Compare the BSP Publications, 2005
monetary policy of
the Bangko Sentral www.bsp.gov.ph
ng Pilipinas to other
central banks in
other country
16-17 The International Constraint on The New Central Bank

Monetary Policy Comprehend and Act
extrapolate as to (RA 7653)
The balance of how the Bangko
international payments Sentral ng Pilipinas Monetary Policy
and macroeconomic maintains the Fender, J.
equilibrium balance of 2012
international
Price levels, exchange payments andPerspective from
rates and international macroeconomic Bangko Sentral ng
liquidity problem equilibrium Pilipinas: Money &
Banking in the
Give examples as to Philippines,
how other countries BSP Publications 2003
maintain balance of
international The Bangko Sentral &
payments and the Philippine Economy
macroeconomic BSP Publications, 2005
equilibrium
www.bsp.gov.ph
Appraise the
performance of
Bangko Sentral ng
Pilipinas in
maintaining the
macroeconomic
equilibrium in the
Philippines
Investigate and
analyze problems
about price levels,
exchange rates and
international liquidity
18 FINAL EXAMINATION
GRADING SYSTEM
Class Standing 70%
• Quizzes
• Case Study
• Projects
• Summative Test
• Portfolio
Midterm / Final Examinations 30%

100%
Midterm Grade + Final Term Grade = FINAL GRADE

2
REFERENCES
The New Central Bank Act
(RA 7653)
Cesar, Augustus 2002
Central Banking for Every Juan and Maria

Bunye, Ignacio
2011
Perspective from Bangko Sentral ng Pilipinas: Money & Banking in the Philippines,
BSP Publications 2003
The Bangko Sentral & the Philippine Economy
BSP Publications, 2005

News Articles
www.bsp.gov.ph
Table of Contents
Page
Nature and Definition of Central Banking in the Philippines 1-2
Evolution and History of Central Banking in the Philippines 3-4
Assessment and Activities 5
Primary Objectives, Significant Characteristics and

Important Services of the Bangko Sentral ng Pilipinas 5
Characteristics of BSP 5
Services performed by the Bangko Sentral ng Pilipinas 5-9
Comparison of RA No. 265 and RA No. 7653 10-14
The new organizational structure of the

Bangko Sentral ng Pilipinas and the
functions of each department 15-31
History of the Philippine Currency 32-34
Justification of the power to issue notes and coins 35-38
Domestic and International Monetary Stabilization

of the Bangko Sentral ng Pilipinas 38-42
Monetary Tools of BSP 43-49
Bangko Sentral ng Pilipinas Management of

Monetary Aggregates 49-52
MIDTERM EXAMNINATION 52-63
Loans to Banks and Other Financial Institutions 63-69
The Custodian of Cash Reserves of Banking Institutions

and Non-Bank Financial Intermediaries 70-73
Bangko Sentral ng Pilipinas as Government Banker, Agent
and Financial Adviser 73-75
Bangko Sentral ng Pilipinas Monetary Policies 74-75
The Monetary Board 75-80
Assessment and Actvities 80
The Theory of Monetary Policy 80-82
The International Constraint on Monetary Policy 82-93
FINAL EXAMINATION 93-119

Nature and Meaning of Central Banking
A central bank is a financial institution given privileged control over the production and
distribution of money and credit for a nation or a group of nations. In modern economies,
the central bank is usually responsible for the formulation of monetary policy and the regulation
of member banks.
In the Philippines, The Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of
the Philippines. It was established on 3 July 1993 pursuant to the provisions of the 1987
Philippine Constitution and the New Central Bank Act of 1993. The BSP took over from Central
Bank of Philippines, which was established on 3 January 1949, as the country’s central
monetary authority. The BSP enjoys fiscal and administrative autonomy from the National
Government in the pursuit of its mandated responsibilities.
Evolution of Central Banking in the Philippines

A group of Filipinos had conceptualized a central bank for the Philippines as early as 1933. It
came up with the rudiments of a bill for the establishment of a central bank for the country after
a careful study of the economic provisions of the Hare-Hawes Cutting bill, the Philippine
independence bill approved by the US Congress.
During the Commonwealth period (1935-1941), the discussion about a Philippine central bank
that would promote price stability and economic growth continued. The country’s monetary
system then was administered by the Department of Finance and the National Treasury. The
Philippines was on the exchange standard using the US dollar—which was backed by 100
percent gold reserve—as the standard currency.
In 1939, as required by the Tydings-McDuffie Act, the Philippine legislature passed a law
establishing a central bank. As it was a monetary law, it required the approval of the United
States president. However, President Franklin D. Roosevelt disapproved it due to strong
opposition from vested interests. A second law was passed in 1944 during the Japanese
occupation, but the arrival of the American liberalization forces aborted its implementation.
Shortly after President Manuel Roxas assumed office in 1946, he instructed then Finance
Secretary Miguel Cuaderno, Sr. to draw up a charter for a central bank. The establishment of a
monetary authority became imperative a year later as a result of the findings of the Joint
Philippine-American Finance Commission chaired by Mr. Cuaderno. The Commission, which
studied Philippine financial, monetary and fiscal problems in 1947, recommended a shift from
the dollar exchange standard to a managed currency system. A central bank was necessary to
implement the proposed shift to the new system.
1
Immediately, the Central Bank Council, which was created by President Manuel Roxas to
prepare the charter of a proposed monetary authority, produced a draft. It was submitted to
Congress in February1948. By June of the same year, the newly-proclaimed President Elpidio
Quirino, who succeeded President Roxas, affixed his signature on Republic Act No. 265, the
Central Bank Act of 1948. The establishment of the Central Bank of the Philippines was a
definite step toward national sovereignty. Over the years, changes were introduced to make the
charter more responsive to the needs of the economy. On 29 November 1972, Presidential
Decree No. 72 adopted the recommendations of the Joint IMF-CB Banking Survey Commission
which made a study of the Philippine banking system. The Commission proposed a program
designed to ensure the system’s soundness and healthy growth. Its most important
recommendations were related to the objectives of the Central Bank, its policy-making
structures, scope of its authority and procedures for dealing with problem financial institutions.
Subsequent changes sought to enhance the capability of the Central Bank, in the light of a
developing economy, to enforce banking laws and regulations and to respond to emerging
central banking issues. Thus, in the 1973 Constitution, the National Assembly was mandated to
establish an independent central monetary authority. Later, PD 1801 designated the Central
Bank of the Philippines as the central monetary authority (CMA). Years later, the 1987
Constitution adopted the provisions on the CMA from the 1973 Constitution that were aimed
essentially at establishing an independent monetary authority through increased capitalization
and greater private sector representation in the Monetary Board.
The administration that followed the transition government of President Corazon C. Aquino saw
the turning of another chapter in Philippine central banking. In accordance with a provision in
the 1987 Constitution, President Fidel V. Ramos signed into law Republic Act No. 7653, the
New Central Bank Act, on 14 June 1993. The law provides for the establishment of an
independent monetary authority to be known as the Bangko Sentral ng Pilipinas, with the
maintenance of price stability explicitly stated as its primary objective. This objective was only
implied in the old Central Bank charter. The law also gives the Bangko Sentral fiscal and
administrative autonomy which the old Central Bank did not have. On 3 July 1993, the New
Central Bank Act took effect.
2
Chronology of Events: Central Banking in the Philippines
Act No. 52 was passed by the First Philippine Commission placing all banks under
the Bureau of Treasury. The Insular Treasurer was authorized to supervise and
1900 examine banks and banking activities.
February The Bureau of Banking under the Department of Finance took over the task of
1929 banking supervision.
A bill establishing a central bank was drafted by Secretary of Finance Manuel

Roxas and approved by the Philippine Legislature. However, the bill was returned
1939 by the US government, without action, to the Commonwealth Government.
A joint Philippine-American Finance Commission was created to study the

Philippine currency and banking system. The Commission recommended the
reform of the monetary system, the formation of a central bank and the regulation
of money and credit.
The charter of the Central Bank of Guatemala was chosen as the model of the
1946 proposed central bank charter.
August A Central Bank Council was formed to review the Commission’s report and prepare
1947 the necessary legislation for implementation.
February President Manuel Roxas submitted to Congress a bill “Establishing the Central
1948 Bank of the Philippines, defining its powers in the administration of the monetary
and banking system, amending pertinent provisions of the Administrative Code with
respect to the currency and the Bureau of Banking, and for other purposes.
15 June The bill was signed into law as Republic Act No. 265 (The Central Bank Act) by
1948 President Elpidio Quirino.
3 January The Central Bank of the Philippines (CBP) was inaugurated and formally opened
1949 with Hon. Miguel Cuaderno, Sr. as the first governor.
3
The broad policy objectives contained in RA No. 265 guided the CBP in the
implementation of its duties and responsibilities, particularly in relation to the
promotion of economic development in addition to the maintenance of internal and
external monetary stability.
RA No. 265 was amended by Presidential Decree No. 72 to make the CBP more
responsive to changing economic conditions.
PD No. 72 emphasized the maintenance of domestic and international monetary

stability as the primary objective of the CBP. Moreover, the CBP’s authority was
November expanded to include not only the supervision of the banking system but also the
1972 regulation of the entire financial system.
Further amendments were made with the issuance of PD No. 1771 to improve and
January strengthen the financial system, among which was the increase in the capitalization
1981 of the CBP from P10 million to P10 billion.
Executive Order No. 16 amended the Monetary Board membership to promote

1986 greater harmony and coordination of government monetary and fiscal policies.
Republic Act No. 7653 was passed establishing the Bangko Sentral ng Pilipinas
3 July 1993 (BSP), replacing CBP as the country's central monetary authority.
14 Republic Act No. 11211 was passed amending RA No. 7653. The charter
February amendments bolster the capability of the BSP to safeguard price stability and
2019 financial system stability.
The Evolution of the Central Bank Mandate

3 January 1949, the Central Bank of the Philippines (CBP) was inaugurated and formally
opened with Hon. Miguel Cuaderno, Sr. as the first governor. The broad policy objectives
contained in RA No. 265 guided the CBP in the implementation of its duties and responsibilities,
particularly in relation to the promotion of economic development in addition to the maintenance
of internal and external monetary stability.
4
November 1972, RA No. 265 was amended by Presidential Decree No. 72 to make the CBP
more responsive to changing economic conditions. PD No. 72 emphasized the maintenance of
domestic and international monetary stability as the primary objective of the CBP. Moreover, the
CBP’s authority was expanded to include not only the supervision of the banking system but
also the regulation of the entire financial system.
3 July 1993, Republic Act No. 7653 was passed establishing the Bangko Sentral ng Pilipinas
(BSP), replacing CBP as the country's central monetary authority.
14 February 2019, Republic Act No. 11211 was passed amending RA No. 7653. The charter
amendments bolster the capability of the BSP to safeguard price stability and financial system
stability.
Assessment and Activities

1. Discuss the evolution of central banking and the reason why it needs evolution?
Primary Objectives of the Bangko Sentral ng Pilipinas
According to Section 3 of RA 7653 or The New Central Bank Act of the Philippines
Responsibility and Primary Objective. - The Bangko Sentral shall provide policy directions in the
areas of money, banking, and credit. It shall have supervision over the operations of banks and
exercise such regulatory powers as provided in this Act and other pertinent laws over the
operations of finance companies and non-bank financial institutions performing quasi-banking
functions, hereafter referred to as quasi-banks, and institutions performing similar functions.
The primary objective of the Bangko Sentral is to maintain price stability conducive to a
balanced and sustainable growth of the economy. It shall also promote and maintain monetary
stability and the convertibility of the peso.
Characteristics of Bangko Sentral ng Pilipinas
1. Profit motive is only secondary;

2. Operations are controlled by government laws; and,
3. Does not deal directly with the public.
Services performed by the Bangko Sentral ng Pilipinas
Financial Supervision
The Bangko Sentral has supervision over the operations of banks and exercises such regulatory
powers as provided in the New Central Bank Act and other pertinent laws over the operations of
finance companies and non-bank financial institutions performing quasi-banking functions.
5
Financial Stability
Financial systems play a critical role for consumers – both corporates and individuals – because
they bridge the aspirations of today with the economic fortunes of tomorrow. Historically,
financial systems develop through the banking industry because of the nature of fiat money. In
this context, making sure that banks operate in a safe and sound manner is in the public
interest. Banks, after all, manage our savings, offer critical services in the transfer of funds and
the payment of obligations, while providing a venue for entrepreneurs to pursue their economic
plans through credit. Banking authorities nurture this by defining the regulatory framework that
encourages innovation while monitoring that banks operate within prescribed governance
guidelines.
The Global Financial Crisis (GFC), however, highlighted how the financial system is more than
just the sum of its parts. There is a unique sense of “systemic-ness” that arises from the way
each market player interacts with another party, creating a network of interconnected and
sequenced transactions. This leads to risk choices being interlinked within the network and as a
result, societal outcomes that can differ from the intentions of private entities. This provides the
basis for the global initiative to manage the health of the financial system as an explicit and
separate policy objective. Its focus is on managing so-called “systemic risks” and this is done
through macroprudential policy.
Payments and Settlements

Payment systems are essential to the effective functioning of financial systems worldwide. They
provide the channels through which funds are transferred among banks and other institutions to
discharge payment obligations arising from economic and financial transactions across the
entire economy. An efficient, secure and reliable payment system reduces the cost of
exchanging goods and services, and it is an essential tool for the effective implementation of
monetary policy, and the smooth functioning of money and capital markets. It is this key role
played by payment and settlement system (PSS) in the smooth functioning of an economy in
general and its financial and monetary system in particular that gives the central bank (CB) a
strong incentive for ensuring that an effective, reliable and secure payment and settlement
system is in place.
6
In the Philippines, the BSP takes the lead in promoting an efficient payments and settlements
system by providing:
 a. the necessary infrastructure through the operations of the Philippine Payment and Settlement
System or the “PhilPaSS”; and
 b. a policy and regulatory framework, also known as the National Retail Payment System or
NRPS, to establish safe, efficient and reliable retail payment system in the country.
Payments and Settlements

1. Operator of the real time gross settlement system known as PhilPaSS
The BSP, through its Payments and Settlements Office (PSO), serves as the payment system
operator responsible for the operation and maintenance of PhilPaSS and its critical
components. It ensures that the operation of PhilPaSS is continuous, safe and efficient so that
time-critical payments are completed as expected to facilitate and enhance economic
processes, manage risks, and absorb shocks in order to promote financial stability.
2. Provider of credit facilities to banks as a lender of last resort
As payment systems affect the daily demand for liquidity of banks/financial institutions and may
therefore affect the level of money market interest rates, the BSP, as a lender of last resort,
provides the following liquidity tools to PhilPaSS participants:
i. Intraday Liquidity Facility (ILF) – a fully collateralized facility established to maintain the smooth
and efficient operation of the payments system in order to avoid interbank payments gridlock in
the settlement process within PhilPaSS business hours.
ii. Overdraft Credit Line (OCL) – another collateralized facility which aims to assist bank
experiencing unexpected or higher than usual volume of inward check transactions. The
governing policies and procedures are provided under BSP Circular 681 in order to provide
additional liquidity for banks encountering liquidity problems due to check clearing losses as well
as protect the BSP against settlement exposures.
3. Overseer of the payments and settlements system
The BSP, through the Payment Systems Oversight Department of the Supervision and
Examination Sector, oversees the payment systems in the country to ensure safeguards are in
place to mitigate systemic risks arising from settlement, credit and liquidity risks of payments
and settlement systems participants.
7
4. User of its own RTGS system
The BSP, through its different departments, also make use of the payments and settlements
system for the settlement of its own transactions with its stakeholders, such as:
The automated collection and settlement of Supervision and Examination Sector annual
supervisory fees;
Online processing of eRediscounting loan proceeds and collection of banks’ maturing loans with
Department of Loans and Credit;
Processing/posting of banks’ cash deposit and withdrawal transactions with Cash Department;
Investment/maturities of funds placed by the Provident Fund Office; and
Trading transactions as well as payments of maturing RRP/SDA placements with Treasury
Department
5. Initiate changes/reforms for the payments system
The BSP initiates the conduct of studies/research relating to payments system to ensure that it
grows and matures in accordance with the global standards. Among the studies conducted
which initiated reform to the retail payment systems in the country is the National Retail
Payment System.
Coins and Notes

The Bangko Sentral ng Pilipinas has the exclusive power and authority to issue coins and notes
for circulation in the Philippines. The BSP has recently launched enhanced Philippine coins
and notes that are more responsive to the needs of the elderly and the visually impaired, and
feature the latest anti-counterfeiting technology. It also issues legal tender commemorative
coins and notes of limited quantity to celebrate or recognize the significance of a person, place
and event in Philippine history.
Loans and Credits
The BSP extends discounts, loans and advances to banking institutions in order to influence the
volume of credit consistent with objective of price stability and maintenance of financial stability.
It also grants loans or advances to banking institutions in precarious financial condition or under
serious financial pressures, subject to certain conditions.
The BSP's rediscount facilities have two categories, namely Peso Rediscount Facility and
Exporters' Dollar and Yen Rediscount Facility, which are administered by the Department of
Loans and Credit (DLC).
8
Rediscounting
Rediscounting is a standing credit facility provided by the BSP to help banks meet temporary
liquidity needs by refinancing the loans they extend to their clients. Through the facility, the BSP
also makes possible the timely delivery of credit to all productive sectors of the economy.
Moreover, rediscounting is one of the monetary tools of the BSP to regulate the level of liquidity
in the financial system. The BSP’s rediscounting is administered by the Department of Loans
and Credit.
You may find more details on Rediscounting.
Overdraft Credit Line
The BSP also makes available an overdraft credit line (OCL) to banks participating directly in
the clearing operations of the Philippine Clearing House Corporation to cover shortfalls in the
banks’ demand deposit accounts with the BSP arising from clearing operations. The BSP
imposes a ceiling on the amount of overdraft a bank may incur due to failure to cover clearing
losses through interbank borrowings and/or repurchase agreements with BSP. The ceiling is
defined as the sum of clean OCL equivalent to 15% of the bank’s rediscounting line with BSP
and the collateralized OCL that will be extended by the BSP. The mechanics of OCL are
governed by Section 802 and Appendix 25 of the Manual of Regulations for Banks (MORB).
Emergency Loan
The BSP also extends financial assistance to banking institutions in the form of fully secured
Emergency Loan as a temporary remedial measure to help solvent banks overcome their
liquidity problems arising from causes beyond their control, pursuant to Section 84 of R.A. No.
7653, as amended by R.A. No. 11211. The assistance shall be limited to the amount needed by
the applicant bank to overcome the emergency or financial predicament but shall not exceed
50% of its deposits and deposit substitutes and provided that any emergency advance should
be collateralized by government securities and other unencumbered first-class collaterals
(primarily real estate). For more details on Emergency Loan, please see Section 285 of
the MORB.
International Reserves Management

The BSP maintains a healthy level of international reserves to provide liquidity support in times
of volatility in the exchange rate and balance of payments.
9
Comparison of RA No. 265 and RA No. 7653
Republic Act 265 Republic Act 7653
Section 2. Creation of the Bangko Sentral. -

SECTION 1. Creation of the Central Bank.— There is hereby established an independent
There is hereby created a body corporate to central monetary authority, which shall be a
be known as the Central Bank of the body corporate known as the Bangko Sentral
Philippines, which shall be governed by the ng Pilipinas, hereafter referred to as the Bangko
provisions of this Act. Sentral.
Section 3. Responsibility and Primary Objective.

- The Bangko Sentral shall provide policy
directions in the areas of money, banking, and
credit. It shall have supervision over the
operations of banks and exercise such
regulatory powers as provided in this Act and
The capital of the Central Bank shall be ten other pertinent laws over the operations of
million (P10,000,000) pesos, which are finance companies and non-bank financial
hereby appropriated from the assets of the institutions performing quasi-banking functions,
Exchange Standard Fund, as provided in hereafter referred to as quasi-banks, and
section 134 of this Act. institutions performing similar functions.
The primary objective of the Bangko

SEC. 2. Responsibilities and objectives.—It Sentral is to maintain price stability conducive to
shall be the responsibility of the Central a balanced and sustainable growth of the
Bank of the Philippines to administer the economy. It shall also promote and maintain
monetary and banking system of the monetary stability and the convertibility of the
Republic. peso.
Section 6. Composition of the Monetary

Board. - The powers and functions of the
Bangko Sentral shall be exercised by the
Bangko Sentral Monetary Board, hereafter
It shall be the duty of the Central Bank to referred to as the Monetary Board, composed of
use the powers granted to it under this Act seven (7) members appointed by the President
to achieve the following objectives: of the Philippines for a term of six (6) years.
(a) To maintain monetary stability in the
Philippines; The seven (7) members are:
10
(a) the Governor of the Bangko Sentral, who
shall be the Chairman of the Monetary Board.
The Governor of the Bangko Sentral shall be
head of a department and his appointment shall
be subject to confirmation by the Commission
on Appointments. Whenever the Governor is
unable to attend a meeting of the Board, he
shall designate a Deputy Governor to act as his
(b) To preserve the international value of the alternate: Provided, That in such event, the
peso and the convertibility of the peso into Monetary Board shall designate one of its
other freely convertible currencies; and members as acting Chairman;
(b) a member of the Cabinet to be designated

by the President of the Philippines. Whenever
the designated Cabinet Member is unable to
(c) To promote a rising level of production, attend a meeting of the Board, he shall
employment and real income in the designate an Undersecretary in his Department
Philippines. to attend as his alternate; and
(c) five (5) members who shall come from the

SEC. 5. Composition of the Monetary private sector, all of whom shall serve full-time:
Board.—The powers and functions of the Provided, however, That of the members first
Central Bank shall be exercised by a appointed under the provisions of this
Monetary Board, which shall be composed subsection, three (3) shall have a term of six (6)
of seven members, as follows: years, and the other two (2), three (3) years.
(a) The Secretary of Finance, who shall
preside at the meeting’s of the Monetary
Board. Whenever the Secretary of Finance
is unable to attend a meeting of the Board,
the Undersecretary of Finance shall act as No member of the Monetary Board may
his alternate, but shall not preside. be reappointed more than once.
(b) The Governor of the Central Bank, who

shall preside at the meetings of the Board in Section 8. Qualifications. - The members of the
the absence of the Secretary of Finance. Monetary Board must be natural-born citizens
The Governor shall be appointed for a term of the Philippines, at least thirty-five (35) years
of six years by the President of the of age, with the exception of the Governor who
Philippines with the consent of the should at least be forty (40) years of age, of
Commission on Appointments. Whenever good moral character, of unquestionable
the Governor is unable to attend a meeting integrity, of known probity and patriotism, and
of the Board, the ranking deputy-governor with recognized competence in social and
shall act in his stead. economic disciplines.
11
Section 9. Disqualifications. - In addition to the
disqualifications imposed by Republic Act No.
6713, a member of the Monetary Board is
disqualified from being a director, officer,
employee, consultant, lawyer, agent or
stockholder of any bank, quasi-bank or any
other institution which is subject to supervision
or examination by the Bangko Sentral, in which
case such member shall resign from, and divest
(c) The President of the Philippine National himself of any and all interests in such
Bank, whose alternate shall be the senior institution before assumption of office as
vice-president of said bank. member of the Monetary Board.
(d) The Chairman of the Board of Governors The members of the Monetary Board
of the Rehabilitation Finance Corporation, coming from the private sector shall not hold
whose alternate shall be the ranking any other public office or public employment
governor of said corporation. during their tenure.
No person shall be a member of the

Monetary Board if he has been connected
directly with any multilateral banking or financial
(e) Three other members, to be appointed institution or has a substantial interest in any
for terms of six years by the President with private bank in the Philippines, within one (1)
the consent of the Commission on year prior to his appointment; likewise, no
Appointments: Provided, however, That the member of the Monetary Board shall be
first members appointed under the employed in any such institution within two (2)
provisions of this subsection shall have years after the expiration of his term except
terms of office of two, four and six years, when he serves as an official representative of
respectively. the Philippine Government to such institution.
In making appointments to the Monetary

Board, the President of the Philippines shall
give due regard to affording fair
representation of the financial, agricultural, Section 10. Removal. - The President may
industrial and commercial interests, in the remove any member of the Monetary Board for
composition of the said Board. any of the following reasons:
12
SEC. 7. Qualifications.—No person shall be
appointed as a member of the Monetary
Board or as a deputy-governor of the
Central Bank unless he be of good moral
character and of unquestionable integrity
and responsibility, and who is of recognized
competence in the economics of banking,
finance, commerce, agriculture or
industry: Provided, however, That the
Governor and deputy-governors of the
Central Bank must be of recognized
competence in the field of
banking: Provided, further, That the
Governor and the members of the Monetary (a) If the member is subsequently disqualified
Board shall be natural-born Filipino citizens. under the provisions of Section 8 of this Act; or
SEC. 8. Disqualifications.—With the

exception of the ex-officio members and (b) If he is physically or mentally
their respective alternates, none of the incapacitated that he cannot properly discharge
following may be a member of the Monetary his duties and responsibilities and such
Board or a deputy-governor of the Central incapacity has lasted for more than six (6)
Bank: months; or
(c) If the member is guilty of acts or
(a) Persons holding any public position or operations which are of fraudulent or illegal
office, either by election or by appointment, character or which are manifestly opposed to
except academic positions; and the aims and interests of the Bangko Sentral; or
(b) Directors, officers or employees of other (d) If the member no longer possesses the
banking institutions. qualifications specified in Section 8 of this Act.
Section 19. Authority of the Governor in

Emergencies. - In case of emergencies where
time is sufficient to call a meeting of the
Monetary Board, the Governor of the Bangko
Sentral, with the concurrence of two (2) other
SEC. 9. Removal.—The President may members of the Monetary Board, may decide
remove any member of the Monetary Board any matter or take any action within the
for any of the following reasons: authority of the Board.
The Governor shall submit a report to
(a) If the member is disqualified under the the President and Congress within seventy-two
provisions of section 8 of this Act; or (72) hours after the action has been taken.
(b) If the member is guilty of acts or
operations which are of a fraudulent or
illegal character or which are manifestly At the soonest possible time, the
opposed to the aims and interests of the Governor shall call a meeting of the Monetary
Central Bank; or Board to submit his action for ratification.
(c) If the member no longer possesses the
qualifications specified in section 7.
13
SEC. 10. Meetings.—The Monetary Board
shall convene as frequently as is necessary
to discharge its responsibilities properly, but
shall meet at least once every two weeks.
The Board may be convoked either by the
Secretary of Finance, in his capacity as
presiding officer of the Board, or by the
Governor of the Central Bank.
SEC. 18. Authority of the Governor in

emergencies.— In the event of war or other
emergencies which require immediate
action and in which there is insufficient time
to call a meeting of the Monetary Board, the
Governor of the Central Bank, with the
concurrence of the Secretary of Finance or,
in his absence, with the concurrence of any
two other members of the Monetary Board,
may decide any matter or take any action
within the authority of the Board itself and
may suspend any resolution or decision of
the Board.
In such cases, the Governor shall call a

meeting of the Monetary Board as soon as
possible, in order to explain his action and
the reasons for departing from normal
procedures. The Board may then confirm,
revoke or modify such action as the
circumstances warrant.
SEC. 21. Deputy-Governor.—The Governor

of the Central Bank, with the approval of the
Monetary Board, shall appoint one deputy-
governor who shall perform such duties as
may be assigned to him by the Governor
and the Board.
In the absence of the Governor of the
Central Bank, the deputy-governor shall act
as chief executive of the Central Bank and
shall exercise the powers and perform the
duties of the Governor.
14
The new organizational structure of the Bangko Sentral ng Pilipinas and the functions of
each department
BSP Hierarchical Structure 1 In the case of the Head of the Financial Market Operations Sub-Sector,
Office of the General Counsel and Legal Services, and Security Plant Complex
15
Financial Supervision Sector (FSS) – mainly responsible for the regulation of banks and other
BSP-supervised financial institutions, as well as the oversight and supervision of financial
technology and payment systems  Monetary and Economics Sector (MES) – mainly
responsible for the operations/activities related to monetary policy formulation, implementation,
and assessment  Corporate Services Sector (CSS) – mainly responsible for the effective
management of corporate strategy and communications, as well as the BSP’s human, financial,
technological, and physical resources to support the BSP’s core functions.
16
17
18
OFFICES DIRECTLY REPORTING TO THE MONETARY BOARD  Office of the General
Counsel and Legal Services • Renders legal advisory services to the Monetary Board, the
Governor, the Deputy Governors and BSP units on matters relating to policies, functions,
operations, and regulations of the BSP • Prepares and/or reviews: (i) international and local
agreements where BSP is a party or has an interest; and (ii) draft legislation, circulars, rules and
regulations relating to the money, banking and credit policies of the government, including
internal policies and rules and regulations of BSP • Investigates and prosecutes criminal cases
involving fraud, irregularities and anomalies committed by directors/trustees/officers of BSP-
supervised financial institutions  Office of the Secretary, Monetary Board • Provides secretarial
and administrative support to the Monetary Board  Internal Audit Office • Assists the BSP in
achieving its objectives and improving its operations, through the conduct of independent,
19
objective assurance and consulting activities • Evaluates the effectiveness and adequacy of
controls in responding to risks within the BSP’s governance, operations, and information
systems, and provides appropriate recommendations with regard to the: (i) achievement of the
BSP’s strategic objectives; (ii) reliability and integrity of financial and operational information; (iii)
effectiveness and efficiency of operations and programs; (iv) safeguarding of assets; and (v)
compliance with laws, regulations, policies, procedures, and contracts
OFFICES DIRECTLY REPORTING TO THE GOVERNOR  Executive Offices Operations

Management Department  Implements internal rules, regulations, and policies of the BSP
involving personnel administration, employee services, learning services, budget administration,
and property and supplies management  Responsible for catering to the unique requirements
of the Offices under the Monetary Board and the Governor in the exigencies of the service 
Risk and Compliance Office  Develops, recommends, maintains, and amends frameworks,
policies, guidelines, standards, and procedures covering risk management (RM), business
continuity management (BCM), and compliance matters  Monitors the implementation of RM,
BCM, and compliance frameworks, policies, procedures, guidelines, and processes to ensure
that BSP units perform the following: (i) updating of risk templates, business continuity plans,
and other risk and compliance- 2020 Bangko Sentral ng Pilipinas Organization Primer 15
related reports; (ii) conduct of business continuity exercises and submission of action plans; and
(iii) institutionalization of RM, BCM, and compliance processes/practices through their inclusion
in management systems and performance reviews  Corporate Planning Office • Manages the
strategic planning process in the BSP to ensure a high level of integration and alignment across
all of BSP’s operational areas, towards the achievement of BSP’s mandate  Center for
Learning & Inclusion Advocacy • Develops enabling regulations and maximizes multi-
stakeholder partnerships to support building an inclusive financial system responsive to the
diverse and changing needs of the market • Designs and implements financial education and
consumer protection policies and programs to help the public acquire knowledge, develop skills
for well-informed financial decision-making, and promote a customer-centric and responsible
financial services industry  Office of Systemic Risk Management • Develops and implements
the financial stability frameworks for: (i) continuing surveillance and tracking of systemic risks
and their channels of contagion; (ii) identifying, analyzing and addressing financial stability
issues arising from domestic and international macro-financial developments; (iii) crafting
communication responses to identified issues and assessing the effectiveness of such
20
interventions; and (iv) designing, delivering and evaluating the impact of capacity programs,
advocacy programs and learning roadmaps • Identifies, measures and monitors potential
systemic risk vulnerabilities through continuing research and analysis of the domestic and
international financial environment, interconnectedness of macro-financial agents, and roles of
leverage, liquidity and cyclicality
HUMAN RESOURCE SUB-SECTOR  Human Resource Management Department •

Formulates policies and sets standards on recruitment, selection and placement, administration
of employee benefits and other employee services of the BSP • Takes the lead in promoting the
BSP’s corporate social responsibility and its participation in various government advocacies and
programs 2020 Bangko Sentral ng Pilipinas Organization Primer 16  Human Resource
Development Department • Manages the development of the Bank as an organization through
organizational change and development, organizational planning and staffing, and succession
management  Data Management and Analytics Group • Handles the application of HR data
management and analysis techniques on HR issues and concerns, and provides HRSS with
evidence-based business intelligence and insights to steer specific HR strategies, answer
critical concerns, measure the impact of HR initiatives, and support policy decision
CENTER FOR COMMUNICATION AND INVESTOR RELATIONS  Communication Office 

Serves as BSP’s core communication team, a clearinghouse for all messages and
communication of the organization to ensure, among others, consistent and insightful
messaging capability representative of a world-class institution.  Handles BSP’s media/public
relations, enterprise communication plan, issues crisis communication management, production
of BSP publications including newsletter, writing the Governor’s speeches, and creation of
content for distribution through various channels  Corporate Affairs Office  Serves the needs
of BSP departments/offices for creative design and production, management of corporate
events, administration of the BSP Museum, and guest/frontline services  Investor Relations
Office • Assists in developing relations with the international financial community and promotes
the Philippines as an investment site INFORMATION TECHNOLOGY OFFICE  IT Systems
Management Department • Evaluates the requirements of various business units, defines
application architecture, and develops programs and systems to meet business needs that are
aligned with the overall Corporate Business Strategy of the Bank  IT Infrastructure and
Operations Department • Maintains the operational integrity of the technologies and services
21
provided, and keeps hardware and software functioning 2020 Bangko Sentral ng Pilipinas
Organization Primer 17  IT Strategy and Governance Department  Oversees the operations,
projects, plans and commitments of the Office, ensuring that they are implemented successfully,
and provides Management with technical and relevant inputs on strategic direction for activities/
programs/ initiatives of the ITO, in IT Planning and Strategy, IT Project Management, IT Policy
and Quality Management and IT Procurement Management and Contracts Monitoring
FINANCIAL MARKET OPERATIONS SUB-SECTOR  Reserves Management Department I 

Manages the internal reserve portfolios, including gold, aligned with the overall risk and return
objectives of the BSP  Participates in the formulation of policies and recommendations relating
to reserves management and provides information relating to financial markets  Reserves
Management Department II  Oversees the externally-managed portfolios of the international
reserves, primarily by implementing the External Funds Management Program of the BSP 
Ensures that external fund managers abide by contractual provisions stated in the Investment
Management Agreement, and amendments and addendums thereto  Domestic Market
Operations Department  Implements the Bank’s monetary and foreign exchange policies,
which are critical in performing the BSP’s primary mandate of maintaining price stability, through
market operations and surveillance  Investment Risk and Analytics Office  Formulates
investment and risk policies covering the management of the international reserves (both gold
and non-gold international reserves)  Acts as the Middle Office of the Sub-Sector which is
responsible for the identification, analysis, assessment, and control of various financial risks
inherent in the management of international reserves; enforcement of performance
measurement and appraisal; and implementation of compliance checks across the BSP’s
reserve portfolios  Market Support Services Office  Provides banking services to the National
Government (NG), its political subdivisions and instrumentalities, as well as government-owned
and controlled corporations in line with the BSP’s role as fiscal agent of the NG  Performs
accounting functions and manages the information technology requirements of the FMOSS
Provides technical and operational services related to reserves management and domestic
market operations including settlement of transactions 2020 Bangko Sentral ng Pilipinas
Organization Primer 18 CURRENCY MANAGEMENT CURRENCY ISSUE AND INTEGRITY
OFFICE  Issues currency to Cash Department and Regional Operations Sub-Sector based on
their requisitions  Preserves and maintains the integrity of currency SECURITY PLANT
COMPLEX  Department of General Services  Implements internal rules, regulations, and
22
policies of the BSP involving personnel administration, employee services, learning services,
budget administration, and property and supplies management  Provides procurement support
to the Bids and Awards Committee in the Security Plant Complex  Responsible for catering to
the unique requirements of the Sector in the exigencies of the service  Financial Services
Group • Prepares financial statements, records financial receipts/disbursements, and processes
bills for payment  Bids and Awards Committee SPC Secretariat • Provides administrative,
secretariat, and technical support to the Bids and Awards Committees in the Security Plant
Complex  Currency Production Sub-Sector  Banknotes and Securities Production
Management Department  Handles various control and support functions in relation to the
printing of banknotes and other security documents  Banknotes and Securities Printing
Department  Performs the printing of banknotes, judicial forms, and other security documents
 Mint and Refinery Operations Department  Manages and performs the minting of coins and
commemorative medals, and the refinery of gold purchased from local panners and miners
2020 Bangko Sentral ng Pilipinas Organization Primer 19
REGIONAL OPERATIONS SUB-SECTOR  Supervises the BSP Regional Offices/Branches in

performing the following functions: cash operations, cash administration, gold buying
operations, and economic and financial literacy programs.  La Union Regional Office o
Cabanatuan Branch o Tuguegarao Branch o Batac Branch o San Fernando (Pampanga)
Branch o Dagupan Branch o Legazpi Branch o Lucena Branch o Naga Branch  Cebu Regional
Office o Bacolod Branch o Dumaguete Branch o Iloilo Branch o Roxas Branch o Tacloban
Branch  Davao Regional Office o Cotabato Branch o Zamboanga Branch o Ozamiz Branch o
Cagayan de Oro Branch o General Santos Branch o Butuan Branch
METRO MANILA CURRENCY OPERATIONS SUB-SECTOR  Cash Department 

Responsible for the supply, issuance, and exchange of currency  Serves as depository and
custodian of cash, securities, gold, and other forms of valuable assets
ANTI-MONEY LAUNDERING COUNCIL (AMLC) The BSP Governor acts as the Chairman of
the AMLC, which was created pursuant to Republic Act (R.A.) No. 9160, otherwise known as
the “Anti-Money Laundering Act of 2001” (AMLA), to protect the integrity and confidentiality of
bank accounts and to ensure that the Philippines shall not be used as a money laundering site
for the proceeds of any unlawful activity. The Council performs its functions through the AMLC
23
Secretariat, which is primarily tasked to receive transaction reports from covered institutions,
investigate suspicious transactions, and cause the filing of complaints or petitions for the
prosecution of money laundering offenses and other AMLA violations. Section 8 of R.A. No.
9160 provides that all members of the AMLC Secretariat shall hold full-time permanent positions
within the BSP.
 Sectoral Operations Management Department  Implements internal rules, regulations, and

budget administration, and property and supplies management  Responsible for catering to the
unique requirements of the Sector in the exigencies of the service
24
POLICY AND SPECIALIZED SUPERVISION SUB-SECTOR  Supervisory Policy and
Research Department  Develops policies through the use of quantitative models, research, and
analytical tools for financial system surveillance and banking supervision, and ensures
alignment of proposed policy studies with the FSS policy agenda  Oversees and manages the
preparation of timely, comprehensive, and coherent reports, messages, briefers, and technical
papers related to financial supervision  Department of Supervisory Analytics  Designs and
implements strategies, processes, policies, and procedures that enable the Financial
Supervision Sector and the BSP to govern, acquire, manage, store, provide, and analyze the
BSP’s supervisory data and information assets  Collaborates with various units to maximize the
power of data and analytics to unlock insights, inform policy making, enhance supervision and
surveillance, and make regulatory compliance more cost-effective  Financial System Integrity
Department  Ensures that BSFIs comply with anti-money laundering (AML) and combating the
financing of terrorism (CFT) laws and regulations, and effectively implement a robust money
laundering and terrorist financing risk management system appropriate to their risk profile 
Develops AML/CFT supervisory strategies, rules, regulations, guidelines, and examination
procedures for BSFIs, aligned with international AML/CFT standards and best practices
adjusted according to Philippines’ AML risk and context  Treasury and Asset Management
Supervision Department  Conducts effective onsite and offsite supervision of BSFIs,
particularly their capital market activities; treasury, fund management, and investment
management activities; sales and marketing practices, and other related areas  conducts
regular system-wide surveillance activities and thematic reviews to determine emerging trends
and risks affecting treasury and trust businesses 2020 Bangko Sentral ng Pilipinas Organization
Primer 22 FINANCIAL SUPERVISION SUB-SECTOR I  Financial Supervision Departments I –

III  In-charge of the onsite examination of: o universal banks and their subsidiaries/affiliates; o
commercial banks and their subsidiaries/affiliates; o foreign banks and their
subsidiaries/affiliates; and o thrift, cooperative, and rural banks  Maintains the Institutional
Overview (a document that represents a continuously updated report of examination), handles
critical requests of banks and non-banks that require BSP approval, and supports
implementation of new supervisory processes and concerns
FINANCIAL SUPERVISION SUB-SECTOR II  Financial Supervision Departments IV – VI  In-

charge of the onsite examination of: o universal banks and their subsidiaries/affiliates; o
25
subsidiaries/affiliates; and o thrift, cooperative, and rural banks  Maintains the Institutional
Overview (a document that represents a continuously updated report of examination), handles
critical requests of banks and non-banks that require BSP approval, and supports
implementation of new supervisory processes and concerns
FINANCIAL SUPERVISION SUB-SECTOR III  Financial Supervision Departments VII – VIII 

In-charge of the onsite examination of: o universal banks and their subsidiaries/affiliates; o
subsidiaries/affiliates; o thrift, cooperative, and rural banks; and o government-owned banks 
Maintains the Institutional Overview (a document that represents a continuously updated report
of examination), handles critical requests of banks and non-banks that require BSP approval,
and supports implementation of new supervisory processes and concerns  Financial
Supervision Department IX  Monitors and supervises non-bank financial institutions, including
investment houses with quasi-banking and/or trust license, and non-stock savings and loans
associations  Conducts spot checking of pawnshops and money changers to determine
compliance 2020 Bangko Sentral ng Pilipinas Organization Primer 23 with applicable laws and
regulations
FINANCIAL TECHNOLOGY SUB-SECTOR  Payment System Oversight Department  Serves

as the Bank’s dedicated unit for the formal oversight of the national payment system (NPS) 
Issues policies and regulations relevant to the NPS and ensures that BSFIs and other
participants in the payment system adhere to payments-related policies and applicable
international standards  Technology Risk and Innovation Supervision Department  Conducts
Information Technology (IT) supervision of BSFIs and ensures a safe and sound cybersecurity
environment for the Philippine financial services industry through cybersecurity surveillance and
oversight  Promotes digital innovation in the financial services industry through active
engagement with fintech players, development and implementation of regulatory sandbox, and
conduct of fintech policy research initiatives and accelerator projects
26
Sectoral Operations Management Department  Implements internal rules, regulations, and
budget administration, and property and supplies management  Responsible for catering to the
unique requirements of the Sector in the exigencies of the service  Department of Loans and
Credit  Implements the credit policies of the BSP and undertakes studies on credit policies 
Conducts credit examination of banks and extends loans and advances to banks MONETARY
27
POLICY SUB-SECTOR  Department of Economic Research • Principal policy research and
technical arm of the Bank • Produces monetary and economic data needed in the formulation
and implementation of monetary policy  Department of Economic Statistics • Generates
monetary and economic statistics needed in the formulation and implementation of monetary
policy  Center for Monetary and Financial Policy • Develops a comprehensive and integrated
research program that will provide the research resources required for the formulation of
monetary policies  Economic and Financial Learning Center • Central arm of the Bank in
providing monetary, financial, and economic information to the public
INTERNATIONAL MONETARY AFFAIRS AND SURVEILLANCE SUB-SECTOR  International

Operations Department  Supports the promotion and maintenance of monetary stability and
external sustainability through the management of external debt, foreign investments, and other
foreign exchange transactions  International Relations Department  Monitors and analyzes
regional and global economic, financial, and trade development issues, and assesses their
impact on the Philippine economy  Strengthens and initiates relations with foreign entities by
complying with the commitments arising from membership and participating in international and
regional associations and groupings
28
Provident Fund Office • Administers the Provident and Housing Funds, and implements policies
and directives of the Provident Fund’s Board of Trustees • Manages the Funds’ investment
portfolio and its earnings  Systems and Methods Office • Ensures a well-organized and
integrated Bank-wide effort to develop and maintain efficient systems and procedures • Provides
recommendations along the areas of manualization, business process reengineering, and
systems support  Sectoral Operations Management Department  Implements internal rules,
29
regulations, and policies of the BSP involving personnel administration, employee services,
learning services, budget administration, and property and supplies management  Responsible
for catering to the unique requirements of the Sector in the exigencies of the service  Bids and
Awards Committee Secretariat  Provides administrative, secretariat, and technical support to
the Bids and Awards Committees in the BSP-Head Office  Payments and Settlements Office •
Ensures the smooth flow of the country’s payments and settlements system through the
management of the Philippine Payments and Settlements System or PhilPaSS Responsible for
the implementation and operation of the Personal Equity and Retirement Account Registry
System  Information Security Office • Responsible for the development, adoption,
implementation, and enforcement of information security policies, standards, and procedures,
and data privacy and protection policies covering digital and non-digital information assets of the
BSP  BSP Institute • Provides learning and leadership strategies through various trainings and
educational programs, facilitates workplace development interventions, manages the
performance management system, and ensures that the holistic talent development programs
meet the needs of every employee in the BSP • 2020 Bangko Sentral ng Pilipinas Organization
Primer 28  Health and Wellness Department  Manages programs and services on physical
wellness such as clinical services, health programs, and gym facilities  Coordinates programs
and services aimed at social, emotional and mental wellness, and the other domains of
employee well-being  Knowledge Management Group  Develops, implements, and assesses
the BSP’s knowledge management (KM) Strategic Plan, including related programs, policies
and guidelines  Sustains existing KM initiatives and develops programs aimed at further
strengthening a culture that enables the capture, sharing, and learning of tacit knowledge
MANAGEMENT SERVICES SUB-SECTOR  Facilities Management and Engineering

Department • Responsible for the general upkeep of the BSP main building complex and
premises • Responsible for the operations and maintenance of all mechanical, electrical,
electronic, and auxiliary/accessory equipment systems of the Bank  Project Development and
Management Office • Supervises the construction and renovation of offices and buildings in the
BSP Main Office, Security Plant Complex, and BSP Regional Offices/Branches, and the
maintenance of the Philippine International Convention Center  Procurement Office •
Processes purchase requisitions from departments/offices • Assists the Bids and Awards
Committees in the BSP Head Office in the conduct of procurement activities • Conducts
procurement-related studies, market research, and price verification, and drafts internal
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procurement standards and procedures for the BSP  Administrative Services Department •
Responsible for property control, insurance of real and movable properties, warehousing,
records management, provision of printing services, and mail/ newspaper distribution  Asset
Management Department • Administers, preserves, and disposes properties acquired or
foreclosed by the BSP in payment for loans secured from the Bank, including real estate
holdings which are not utilized or earmarked for use pursuant to its objectives/regular business
2020 Bangko Sentral ng Pilipinas Organization Primer 29  Security Services Department 
Protects and safeguards installations, properties, currency documents/information, and
personnel of the BSP Head Office, Security Plant Complex, and Regional Offices and Branches,
and BSP acquired assets against loss thru robbery, theft, and other crimes, fire, natural and
man-made hazards; manages, maintains and operates the integrated electronic security
systems; and develops and implements BSP security training programs
COMPTROLLERSHIP SUB-SECTOR  Financial Accounting Department • Responsible for the

accounting, bookeeping, budget administration, and disbursement activities of the Bank 
Budget Planning and Special Studies Group • Serves as technical staff of the BSP Budget
Committee in the formulation of budget guidelines, preparation of budget forms, and
dissemination of information • Reviews and analyzes budgetary estimates of income and
expenses submitted by the sector heads Human Resource Development Department A. Mabini.
St., Malate 1004, Manila, Philippines Trunkline (632) 8 708-7701 www.bsp.gov.ph bsp
1. Discuss the Primary objectives of Bangko Sentral ng Pilipinas and explain
31
The Bangko Sentral ng Pilipinas and the Means of Payment
History of the Philippine Currency
32
33
34
Justification of the power to issue notes and coins
Coins and Notes
The Bangko Sentral ng Pilipinas has the exclusive power and authority to issue coins and notes
for circulation in the Philippines. The BSP has recently launched enhanced Philippine coins
and notes that are more responsive to the needs of the elderly and the visually impaired, and
feature the latest anti-counterfeiting technology. It also issues legal tender commemorative
coins and notes of limited quantity to celebrate or recognize the significance of a person, place
and event in Philippine history.
The following sections derived from RA 7653 or the New Central Bank Act of the Philippines
that the Bangko Sentral is the bank of issue meaning they are sole government agency that
print money and mint coins as Philippine currency.
THE UNIT OF MONETARY VALUE
Section 48. The Peso. - The unit of monetary value in the Philippines is the "peso,"
which is represented by the sign "P."
The peso is divided into one hundred (100) equal parts called "centavos," which are
represented by the sign "c."
ARTICLE II
ISSUE OF MEANS OF PAYMENT
A. CURRENCY
Section 49. Definition of Currency. - The word "currency" is hereby defined, for
purposes of this Act, as meaning all Philippine notes and coins issued or circulating in
accordance with the provisions of this Act.
Section 50. Exclusive Issue Power. - The Bangko Sentral shall have the sole power and
authority to issue currency, within the territory of the Philippines. No other person or entity,
public or private, may put into circulation notes, coins or any other object or document which, in
35
the opinion of the Monetary Board, might circulate as currency, nor reproduce or imitate the
facsimiles of Bangko Sentral notes without prior authority from the Bangko Sentral.
The Monetary Board may issue such regulations as it may deem advisable in order to
prevent the circulation of foreign currency or of currency substitutes as well as to prevent the
reproduction of facsimiles of Bangko Sentral notes.
The Bangko Sentral shall have the authority to investigate, make arrests, conduct
searches and seizures in accordance with law, for the purpose of maintaining the integrity of the
currency.
Violation of this provision or any regulation issued by the Bangko Sentral pursuant
thereto shall constitute an offense punishable by imprisonment of not less than five (5) years but
not more than ten (10) years. In case the Revised Penal Code provides for a greater penalty,
then that penalty shall be imposed.
Section 51. Liability for Notes and Coins. - Notes and coins issued by the Bangko
Sentral shall be liabilities of the Bangko Sentral and may be issued only against, and in amounts
not exceeding, the assets of the Bangko Sentral. Said notes and coins shall be a first and
paramount lien on all assets of the Bangko Sentral.
The Bangko Sentral's holdings of its own notes and coins shall not be considered as
part of its currency issue and, accordingly, shall not form part of the assets or liabilities of the
Bangko Sentral.
Section 52. Legal Tender Power. - All notes and coins issued by the Bangko Sentral
shall be fully guaranteed by the Government of the Republic of the Philippines and shall be legal
tender in the Philippines for all debts, both public and private: Provided, however, That, unless
otherwise fixed by the Monetary Board, coins shall be legal tender in amounts not exceeding
Fifty pesos (P50.00) for denominations of Twenty-five centavos and above, and in amounts not
exceeding Twenty pesos (P20.00) for denominations of Ten centavos or less.
Section 53. Characteristics of the Currency. - The Monetary Board, with the approval of
the President of the Philippines, shall prescribe the denominations, dimensions, designs,
inscriptions and other characteristics of notes issued by the Bangko Sentral: Provided, however,
That said notes shall state that they are liabilities of the Bangko Sentral and are fully guaranteed
36
by the Government of the Republic of the Philippines. Said notes shall bear the signatures, in
facsimile, of the President of the Philippines and of the Governor of the Bangko Sentral.
Similarly, the Monetary Board, with the approval of the President of the Philippines, shall
prescribe the weight, fineness, designs, denominations and other characteristics of the coins
issued by the Bangko Sentral. In the minting of coins, the Monetary Board shall give full
consideration to the availability of suitable metals and to their relative prices and cost of minting.
Section 54. Printing of Notes and Mining of Coins. - The Monetary Board shall prescribe
the amounts of notes and coins to be printed and minted, respectively, and the conditions to
which the printing of notes and the minting of coins shall be subject. The Monetary Board shall
have the authority to contract institutions, mints or firms for such operations.
All expenses incurred in the printing of notes and the minting of coins shall be for the
account of the Bangko Sentral.
Section 55. Interconvertibility of Currency. - The Bangko Sentral shall exchange, on

demand and without charge, Philippine currency of any denomination for Philippine notes and
coins of any other denomination requested. If for any reason the Bangko Sentral is temporarily
unable to provide notes or coins of the denominations requested, it shall meet its obligations by
delivering notes and coins of the denominations which most nearly approximate those
requested.
Section 56. Replacement of Currency Unfit for Circulation. - The Bangko Sentral shall
withdraw from circulation and shall demonetize all notes and coins which for any reason
whatsoever are unfit for circulation and shall replace them by adequate notes and coins:
Provided, however, That the Bangko Sentral shall not replace notes and coins the identification
of which is impossible, coins which show signs of filing, clipping or perforation, and notes which
have lost more than two-fifths (2/5) of their surface or all of the signatures inscribed thereon.
Notes and coins in such mutilated conditions shall be withdrawn from circulation and
demonetized without compensation to the bearer.
Section 57. Retirement of Old Notes and Coins. - The Bangko Sentral may call in for
replacement notes of any series or denomination which are more than five (5) years old and
coins which are more than (10) years old.
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Notes and coins called in for replacement in accordance with this provision shall remain
legal tender for a period of one (1) year from the date of call. After this period, they shall cease
to be legal tender but during the following year, or for such longer period as the Monetary Board
may determine, they may be exchanged at par and without charge in the Bangko Sentral and by
agents duly authorized by the Bangko Sentral for this purpose. After the expiration of this latter
period, the notes and coins which have not been exchanged shall cease to be a liability of the
Bangko Sentral and shall be demonetized. The Bangko Sentral shall also demonetize all notes
and coins which have been called in and replaced.
1. State the reason why the BSP is the bank of issue. Is it possible for the amusement park
to mint their own coins and bills?
Domestic and International Monetary Stabilization of the Bangko Sentral ng Pilipinas
CHAPTER III — GUIDING PRINCIPLES OF MONETARY ADMINISTRATION BY THE

BANGKO SENTRAL
ARTICLE I
DOMESTIC MONETARY STABILIZATION
Section 61. Guiding Principle. - The Monetary Board shall endeavor to control any
expansion or contraction in monetary aggregates which is prejudicial to the attainment or
maintenance of price stability.
Section 62. Power to Define Terms. - For purposes of this article and of this Act, the
Monetary Board shall formulate definitions of monetary aggregates, credit and prices and shall
make public such definitions and any changes thereof.
Section 63. Action When Abnormal Movements Occur in the Monetary Aggregates,
Credit, or Price Level. - Whenever abnormal movements in the monetary aggregates, in credit,
or in prices endanger the stability of the Philippine economy or important sectors thereof, the
Monetary Board shall:
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(a) take such remedial measures as are appropriate and within the powers
granted to the Monetary Board and the Bangko Sentral under the provisions of
this Act; and
(b) submit to the President of the Philippines and the Congress, and make public,
a detailed report which shall include, as a minimum, a description and analysis
of:
(1) the causes of the rise or fall of the monetary aggregates, of credit or of
prices;
(2) the extent to which the changes in the monetary aggregates, in credit,
or in prices have been reflected in changes in the level of domestic
output, employment, wages and economic activity in general, and the
nature and significance of any such changes; and
(3) the measures which the Monetary Board has taken and the other
monetary, fiscal or administrative measures which it recommends to be
adopted.
Whenever the monetary aggregates, or the level of credit, increases or decreases by

more than fifteen percent (15%), or the cost of living index increases by more than ten percent
(10%), in relation to the level existing at the end of the corresponding month of the preceding
year, or even though any of these quantitative guidelines have not been reached when in its
judgment the circumstances so warrant, the Monetary Board shall submit the reports mentioned
in this section, and shall state therein whether, in the opinion of the Board, said changes in the
monetary aggregates, credit or cost of living represent a threat to the stability of the Philippine
economy or of important sectors thereof.
The Monetary Board shall continue to submit periodic reports to the President of the
Philippines and to Congress until it considers that the monetary, credit or price disturbances
have disappeared or have been adequately controlled.
ARTICLE II
INTERNATIONAL MONETARY STABILIZATION
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Section 64. International Monetary Stabilization. - The Bangko Sentral shall exercise its
powers under this Act to preserve the international value of the peso and to maintain its
convertibility into other freely convertible currencies primarily for, although not necessarily
limited to, current payments for foreign trade and invisibles.
Section 65. International Reserves. - In order to maintain the international stability and
convertibility of the Philippine peso, the Bangko Sentral shall maintain international reserves
adequate to meet any foreseeable net demands on the Bangko Sentral for foreign currencies.
In judging the adequacy of the international reserves, the Monetary Board shall be
guided by the prospective receipts and payments of foreign exchange by the Philippines. The
Board shall give special attention to the volume and maturity of the Bangko Sentral's own
liabilities in foreign currencies, to the volume and maturity of the foreign exchange assets and
liabilities of other banks operating in the Philippines and, insofar as they are known or can be
estimated, the volume and maturity of the foreign exchange assets and liabilities of all other
persons and entities in the Philippines.
Section 66. Composition of the International Reserves. - The international reserves of

the Bangko Sentral may include but shall not be limited to the following assets:
(a) gold; and
(b) assets in foreign currencies in the form of: documents and instruments
customarily employed for the international transfer of funds; demand and time
deposits in central banks, treasuries and commercial banks abroad; foreign
government securities; and foreign notes and coins.
The Monetary Board shall endeavor to hold the foreign exchange resources of the
Bangko Sentral in freely convertible currencies; moreover, the Board shall give particular
consideration to the prospects of continued strength and convertibility of the currencies in which
the reserve is maintained, as well as to the anticipated demands for such currencies. The
Monetary Board shall issue regulations determining the other qualifications which foreign
exchange assets must meet in order to be included in the international reserves of the Bangko
Sentral.
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The Bangko Sentral shall be free to convert any of the assets in its international
reserves into other assets as described in subsections (a) and (b) of this section.
Section 67. Action When the International Stability of the Peso Is Threatened. -
Whenever the international reserve of the Bangko Sentral falls to a level which the Monetary
Board considers inadequate to meet prospective net demands on the Bangko Sentral for foreign
currencies, or whenever the international reserve appears to be in imminent danger of falling to
such a level, or whenever the international reserve is falling as a result of payments or
remittances abroad which, in the opinion of the Monetary Board, are contrary to the national
welfare, the Monetary Board shall:
(a) take such remedial measures as are appropriate and within the powers
granted to the Monetary Board and the Bangko Sentral under the provisions of
this Act; and
(b) submit to the President of the Philippines and to Congress a detailed report
which shall include, as a minimum, a description and analysis of:
(1) the nature and causes of the existing or imminent decline;
(2) the remedial measures already taken or to be taken by the Monetary

Board;
(3) the monetary, fiscal or administrative measures further proposed; and
(4) the character and extent of the cooperation required from other
government agencies for the successful execution of the policies of the
Monetary Board.
If the resultant actions fail to check the deterioration of the reserve position of the
Bangko Sentral, or if the deterioration cannot be checked except by chronic restrictions on
exchange and trade transactions or by sacrifice of the domestic objectives of a balanced and
sustainable growth of the economy, the Monetary Board shall propose to the President, with
appropriate notice of the Congress, such additional action as it deems necessary to restore
equilibrium in the international balance of payments of the Philippines.
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The Monetary Board shall submit periodic reports to the President and to Congress until
the threat to the international monetary stability of the Philippines has disappeared.
Bangko Sentral ng Pilipinas action on the problems of monetary aggregate-credit and

price levels
CHAPTER IV — INSTRUMENTS OF BANGKO SENTRAL ACTION
ARTICLE I
GENERAL CRITERION
Section 68. Means of Action. - In order to achieve the primary objective of price stability,
the Monetary Board shall rely on its moral influence and the powers granted to it under this Act
for the management of monetary aggregates.
Monetary tools of the Bangko Sentral ng Pilipinas
E. CREDIT TERMS
Section 85. Interest and Rediscount. - The Bangko Sentral shall collect interest and
other appropriate charges on all loans and advances it extends, the closure, receivership or
liquidations of the debtor-institution notwithstanding. This provision shall apply prospectively.
The Monetary Board shall fix the interest and rediscount rates to be charged by the
Bangko Sentral on its credit operations in accordance with the character and term of the
operation, but after due consideration has been given to the credit needs of the market, the
composition of the Bangko Sentral's portfolio, and the general requirements of the national
monetary policy. Interest and rediscount rates shall be applied to all banks of the same category
uniformly and without discrimination.
Section 86. Endorsement. - The documents rediscounted, discounted, bought or

accepted as collateral by the Bangko Sentral in the course of the credit operations authorized in
this article shall bear the endorsement of the institution from which they are received.
Section 87. Repayment of Credits. - Documents rediscounted, discounted or accepted

as collateral by the Bangko Sentral must be withdrawn by the borrowing institution on the dates
42
of their maturities, or upon liquidation of the obligations which they represent or to which they
relate whenever said obligations have been liquidated prior to their dates of maturity.
Banks shall have the right at any time to withdraw any documents which they have
presented to the Bangko Sentral as collateral, upon payment in full of the corresponding debt to
the Bangko Sentral, including interest charges.
Section 88. Other requirements. - The Monetary Board may prescribe, within the
general powers granted to it under this Act, additional conditions which borrowing institutions
must satisfy in order to have access to the credit of the Bangko Sentral. These conditions may
refer to the rates of interest charged by the banks, to the purposes for which their loans in
general are destined, and to any other clearly definable aspect of the credit policy of the bank.
Section 89. Provisional Advances to the National Government. - The Bangko Sentral
may make direct provisional advances with or without interest to the National Government to
finance expenditures authorized in its annual appropriation: Provided, That said advances shall
be repaid before the end of three (3) months extendible by another three (3) months as the
Monetary Board may allow following the date the National Government received such
provisional advances and shall not, in their aggregate, exceed twenty percent (20%) of the
average annual income of the borrower for the last three (3) preceding fiscal years.
ARTICLE V
OPEN MARKET OPERATIONS FOR THE ACCOUNT OF THE BANGKO SENTRAL
Section 90. Principles of Open Market Operations. - The open market purchases and
sales of securities by the Bangko Sentral shall be made exclusively in accordance with its
primary objective of achieving price stability.
Section 91. Purchases and Sales of Government Securities. - In order to achieve the
objectives of the national monetary policy, the Bangko Sentral may, in accordance with the
principle stated in Section 90 of this Act and with such rules and regulations as may be
prescribed by the Monetary Board, buy and sell in the open market for its own account:
(a) evidences of indebtedness issued directly by the Government of the

Philippines or by its political subdivisions; and
43
(b) evidences of indebtedness issued by government instrumentalities and fully
guaranteed by the Government.
The evidences of indebtedness acquired under the provisions of this section must be
freely negotiable and regularly serviced and must be available to the general public through
banking institutions and local government treasuries in denominations of a thousand pesos or
more.
Section 92. Issue and Negotiation of Bangko Sentral Obligations. - In order to provide
the Bangko Sentral with effective instruments for open market operations, the Bangko Sentral
may, subject to such rules and regulations as the Monetary Board may prescribe and in
accordance with the principles stated in Section 90 of this Act, issue, place, buy and sell freely
negotiable evidences of indebtedness of the Bangko Sentral: Provided, That issuance of such
certificates of indebtedness shall be made only in cases of extraordinary movement in price
levels. Said evidences of indebtedness may be issued directly against the international reserve
of the Bangko Sentral or against the securities which it has acquired under the provisions of
Section 91 of this Act, or may be issued without relation to specific types of assets of the
Bangko Sentral.
The Monetary Board shall determine the interest rates, maturities and other
characteristics of said obligations of the Bangko Sentral, and may, if it deems it advisable,
denominate the obligations in gold or foreign currencies.
Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness
of the Bangko Sentral to which this section refers may be acquired by the Bangko Sentral
before their maturity, either through purchases in the open market or through redemptions at par
and by lot if the Bangko Sentral has reserved the right to make such redemptions. The
evidences of indebtedness acquired or redeemed by the Bangko Sentral shall not be included
among its assets, and shall be immediately retired and cancelled.
ARTICLE VI
COMPOSITION OF BANGKO SENTRAL'S PORTFOLIO
Section 93. Review of the Bangko Sentral's Portfolio. - At least once every month the
Monetary Board shall review the portfolio of the Bangko Sentral in relation to its future credit
policy.
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In reviewing the Bangko Sentral's portfolio, the Monetary Board shall especially consider
whether a sufficiently large part of the portfolio consists of assets with early maturities, in order
that a contraction in Bangko Sentral credit may be effected promptly whenever the national
monetary policy so requires.
ARTICLE VII
BANK RESERVES
Section 94. Reserve Requirements. - In order to control the volume of money created
by the credit operations of the banking system, all banks operating in the Philippines shall be
required to maintain reserves against their deposit liabilities: Provided, That the Monetary Board
may, at its discretion, also require all banks and/or quasi-banks to maintain reserves against
funds held in trust and liabilities for deposit substitutes as defined in this Act. The required
reserves of each bank shall be proportional to the volume of its deposit liabilities and shall
ordinarily take the form of a deposit in the Bangko Sentral. Reserve requirements shall be
applied to all banks of the same category uniformly and without discrimination.
Reserves against deposit substitutes, if imposed, shall be determined in the same

manner as provided for reserve requirements against regular bank deposits, with respect to the
imposition, increase, and computation of reserves.
The Monetary Board may exempt from reserve requirements deposits and deposit
substitutes with remaining maturities of two (2) years or more, as well as interbank borrowings.
Since the requirement to maintain bank reserves is imposed primarily to control the
volume of money, the Bangko Sentral shall not pay interest on the reserves maintained with it
unless the Monetary Board decides otherwise as warranted by circumstances.
Section 95. Definition of Deposit Substitutes. - The term "deposit substitutes" is defined
as an alternative form of obtaining funds from the public, other than deposits, through the
issuance, endorsement, or acceptance of debt instruments for the borrower's own account, for
the purpose of relending or purchasing of receivables and other obligations. These instruments
may include, but need not be limited to, bankers acceptances, promissory notes, participations,
certificates of assignment and similar instruments with recourse, and repurchase agreements.
The Monetary Board shall determine what specific instruments shall be considered as deposit
substitutes for the purposes of Section 94 of this Act: Provided, however, That deposit
45
substitutes of commercial, industrial and other non-financial companies for the limited purpose
of financing their own needs or the needs of their agents or dealers shall not be covered by the
provisions of Section 94 of this Act.
Section 96. Required Reserves Against Peso Deposits. - The Monetary Board may fix
and, when it deems necessary, alter the minimum reserve ratios to peso deposits, as well as to
deposit substitutes, which each bank and/or quasi-bank may maintain, and such ratio shall be
applied uniformly to all banks of the same category as well as to quasi-banks.
Section 97. Required Reserves Against Foreign Currency Deposits. - The Monetary
Board is similarly authorized to prescribe and modify the minimum reserve ratios applicable to
deposits denominated in foreign currencies.
Section 98. Reserves Against Unused Balances of Overdraft Lines. - In order to

facilitate Bangko Sentral control over the volume of bank credit, the Monetary Board may
establish minimum reserve requirements for unused balances of overdraft lines.
The powers of the Monetary Board to prescribe and modify reserve requirements
against unused balances of overdraft lines shall be the same as its powers with respect to
reserve requirements against demand deposits.
Section 99. Increase in Reserve Requirements. - Whenever in the opinion of the

Monetary Board it becomes necessary to increase reserve requirements against existing
liabilities, the increase shall be made in a gradual manner and shall not exceed four percentage
points in any thirty-day period. Banks and other affected financial institutions shall be notified
reasonably in advance of the date on which such increase is to become effective.
Section 100. Computation on Reserves. - The reserve position of each bank or quasi-
bank shall be calculated daily on the basis of the amount, at the close of business for the day, of
the institution's reserves and the amount of its liability accounts against which reserves are
required to be maintained: Provided, That with reference to holidays or non-banking days, the
reserve position as calculated at the close of the business day immediately preceding such
holidays and non-banking days shall apply on such days.
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For the purpose of computing the reserve position of each bank or quasi-bank, its
principal office in the Philippines and all its branches and agencies located therein shall be
considered as a single unit.
Section 101. Reserve Deficiencies. - Whenever the reserve position of any bank or
quasi-bank, computed in the manner specified in the preceding section of this Act, is below the
required minimum, the bank or quasi-bank shall pay the Bangko Sentral one-tenth of one
percent (1/10 of 1%) per day on the amount of the deficiency or the prevailing ninety-one-day
treasury bill rate plus three percentage points, whichever is higher: Provided, however, That
banks and quasi-banks shall ordinarily be permitted to offset any reserve deficiency occurring
on one or more days of the week with any excess reserves which they may hold on other days
of the same week and shall be required to pay the penalty only on the average daily deficiency
during the week. In cases of abuse, the Monetary Board may deny any bank or quasi-bank the
privilege of offsetting reserve deficiencies in the aforesaid manner.
If a bank or quasi-bank chronically has a reserve deficiency, the Monetary Board may
limit or prohibit the making of new loans or investments by the institution and may require that
part or all of the net profits of the institution be assigned to surplus.
The Monetary Board may modify or set aside the reserve deficiency penalties provided
in this section, for part or the entire period of a strike or lockout affecting a bank or a quasi-bank
as defined in the Labor Code, or of a national emergency affecting operations of banks or quasi-
banks. The Monetary Board may also modify or set aside reserved deficiency penalties for
rehabilitation program of a bank.
Section 102. Interbank Settlement. - The Bangko Sentral shall establish facilities for
interbank clearing under such rules and regulations as the Monetary Board may prescribe:
Provided, That the Bangko Sentral may charge administrative and other fees for the
maintenance of such facilities.
The deposit reserves maintained by the banks in the Bangko Sentral in accordance with
the provisions of Section 94 of this Act shall serve as basis for the clearing of checks and the
settlement of interbank balances, subject to such rules and regulations as the Monetary Board
may issue with respect to such operations: Provided, That any bank which incurs on
overdrawing in its deposit account with the Bangko Sentral shall fully cover said overdraft,
47
including interest thereon at a rate equivalent to one-tenth of one percent (1/10 of 1%) per day
or the prevailing ninety-one-day treasury bill rate plus three percentage points, whichever is
higher, not later than the next clearing day: Provided, further, That settlement of clearing
balances shall not be effected for any account which continues to be overdrawn for five (5)
consecutive banking days until such time as the overdrawing is fully covered or otherwise
converted into an emergency loan or advance pursuant to the provisions of Section 84 of this
Act: Provided, finally, That the appropriate clearing office shall be officially notified of banks with
overdrawn balances. Banks with existing overdrafts with the Bangko Sentral as of the effectivity
of this Act shall, within such period as may be prescribed by the Monetary Board, either convert
the overdraft into an emergency loan or advance with a plan of payment, or settle such
overdrafts, and that, upon failure to so comply herewith, the Bangko Sentral shall take such
action against the bank as may be warranted under this Act.
Section 103. Exemption from Attachment and Other Purposes. - Deposits maintained
by banks with the Bangko Sentral as part of their reserve requirements shall be exempt from
attachment, garnishments, or any other order or process of any court, government agency or
any other administrative body issued to satisfy the claim of a party other than the Government,
or its political subdivisions or instrumentalities.
ARTICLE VIII
SELECTIVE REGULATION OF BANK OPERATIONS
Section 104. Guiding Principle. - The Monetary Board shall use the powers granted to it
under this Act to ensure that the supply, availability and cost of money are in accord with the
needs of the Philippine economy and that bank credit is not granted for speculative purposes
prejudicial to the national interests. Regulations on bank operations shall be applied to all banks
of the same category uniformly and without discrimination.
Section 105. Margin Requirements Against Letters of Credit. - The Monetary Board may
at any time prescribe minimum cash margins for the opening of letters of credit, and may relate
the size of the required margin to the nature of the transaction to be financed.
Section 106. Required Security Against Bank Loans. - In order to promote liquidity and
solvency of the banking system, the Monetary Board may issue such regulations as it may
deem necessary with respect to the maximum permissible maturities of the loans and
48
investments which the banks may make, and the kind and amount of security to be required
against the various types of credit operations of the banks.
Section 107. Portfolio Ceilings. - Whenever the Monetary Board considers it advisable
to prevent or check an expansion of bank credit, the Board may place an upper limit on the
amount of loans and investments which the banks may hold, or may place a limit on the rate of
increase of such assets within specified periods of time. The Monetary Board may apply such
limits to the loans and investments of each bank or to specific categories thereof.
In no case shall the Monetary Board establish limits which are below the value of the
loans or investments of the banks on the date on which they are notified of such restrictions.
The restrictions shall be applied to all banks uniformly and without discrimination.
Section 108. Minimum Capital Ratios. - The Monetary Board may prescribe minimum
ratios which the capital and surplus of the banks must bear to the volume of their assets, or to
specific categories thereof, and may alter said ratios whenever it deems necessary.
Assignment:
1. What are the 3 Financial Instrument under Open Market Operation
2. What are the reasons why the BSP impose Margin Requirements Against Letters of
Credit
3. What are the Deposit Liabilities subject to Reserve Requirement
4. What is the certificate that BSP uses in buying and selling of securities
5. What are the composition of International Reserve of BSP and give examples
ARTICLE IX
COORDINATION OF CREDIT POLICIES BY GOVERNMENT INSTITUTIONS
Section 109. Coordination of Credit Policies. - Government-owned corporations which

perform banking or credit functions shall coordinate their general credit policies with those of the
Monetary Board.
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Toward this end, the Monetary Board may, whenever it deems it expedient, make
suggestions or recommendations to such corporations for the more effective coordination of
their policies with those of the Bangko Sentral.
Bangko Sentral ng Pilipinas Management of Monetary Aggregates, operation in gold and

bullion exchanges, purchase and sale of gold, purchase and sale of foreign exchange,
exchange rates and its determination by the Bangko Sentral ng Pilipinas, and its
operation with foreign entities and regulation of foreign exchange operations of the
banks
ARTICLE II
OPERATIONS IN GOLD AND FOREIGN EXCHANGE
Section 69. Purchases and Sales of Gold. - The Bangko Sentral may buy and sell gold
in any form, subject to such regulations as the Monetary Board may issue.
The purchases and sales of gold authorized by this section shall be made in the national
currency at the prevailing international market price as determined by the Monetary Board.
Section 70. Purchases and Sales of Foreign Exchange. - The Bangko Sentral may buy
and sell foreign notes and coins, and documents and instruments of types customarily
employed for the international transfer of funds. The Bangko Sentral may engage in future
exchange operations.
The Bangko Sentral may engage in foreign exchange transactions with the following
entities or persons only:
(a) banking institutions operating in the Philippines;
(b) the Government, its political subdivisions and instrumentalities;
(c) foreign or international financial institutions;
(d) foreign governments and their instrumentalities; and
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(e) other entities or persons which the Monetary Board is hereby empowered to
authorize as foreign exchange dealers, subject to such rules and regulations as
the Monetary Board shall prescribe.
In order to maintain the convertibility of the peso, the Bangko Sentral may, at the request
of any banking institution operating in the Philippines, buy any quantity of foreign exchange
offered, and sell any quantity of foreign exchange demanded, by such institution, provided that
the foreign currencies so offered or demanded are freely convertible into gold or United States
dollars. This requirement shall not apply to demands for foreign notes and coins.
The Bangko Sentral shall effect its exchange transactions between foreign currencies
and the Philippine peso at the rates determined in accordance with the provisions of Section 74
of this Act.
Section 71. Foreign Asset Position of the Bangko Sentral. - The Bangko Sentral shall
endeavor to maintain at all times a net positive foreign asset position so that its gross foreign
exchange assets will always exceed its gross foreign liabilities. In the event that the equivalent
amount in pesos of the foreign exchange liabilities of the Bangko Sentral exceed twice the
equivalent amount in pesos of the foreign exchange assets of the bank, the Bangko Sentral
shall, within sixty (60) days from the date the limit is exceeded, submit a report to the Congress
stating the origin of these liabilities, and the manner in which they will be paid.
Section 72. Emergency Restrictions on Exchange Operations. - In order to achieve the

primary objective of the Bangko Sentral as set forth in Section 3 of this Act, or protect the
international reserves of the Bangko Sentral in the imminence of, or during an exchange crisis,
or in time of national emergency and to give the Monetary Board and the Government time in
which to take constructive measures to forestall, combat, or overcome such a crisis or
emergency, the Monetary Board, with the concurrence of at least five (5) of its members and
with the approval of the President of the Philippines, may temporarily suspend or restrict sales
of exchange by the Bangko Sentral, and may subject all transactions in gold and foreign
exchange to license by the Bangko Sentral, and may require that any foreign exchange
thereafter obtained by any person residing or entity operating in the Philippines be delivered to
the Bangko Sentral or to any bank or agent designated by the Bangko Sentral for the purpose,
at the effective exchange rate or rates: Provided, however, That foreign currency deposits made
under Republic Act No. 6426 shall be exempt from these requirements.
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Section 73. Acquisition of Inconvertible Currencies. - The Bangko Sentral shall avoid
the acquisition and holding of currencies which are not freely convertible, and may acquire such
currencies in an amount exceeding the minimum balance necessary to cover current demands
for said currencies only when, and to the extent that, such acquisition is considered by the
Monetary Board to be in the national interest. The Monetary Board shall determine the
procedures which shall apply to the acquisition and disposition by the Bangko Sentral of foreign
exchange which is not freely utilizable in the international market.
Section 74. Exchange Rates. - The Monetary Board shall determine the exchange rate
policy of the country.
The Monetary Board shall determine the rates at which the Bangko Sentral shall buy
and sell spot exchange, and shall establish deviation limits from the effective exchange rate or
rates as it may deem proper. The Bangko Sentral shall not collect any additional commissions
or charges of any sort, other than actual telegraphic or cable costs incurred by it.
The Monetary Board shall similarly determine the rates for other types of foreign
exchange transactions by the Bangko Sentral, including purchases and sales of foreign notes
and coins, but the margins between the effective exchange rates and the rates thus established
may not exceed the corresponding margins for spot exchange transactions by more than the
additional costs or expenses involved in each type of transactions.
Section 75. Operations with Foreign Entities. - The Monetary Board may authorize the
Bangko Sentral to grant loans to and receive loans from foreign banks and other foreign or
international entities, both public and private, and may engage in such other operations with
these entities as are in the national interest and are appropriate to its character as a central
bank. The Bangko Sentral may also act as agent or correspondent for such entities.
Upon authority of the Monetary Board, the Bangko Sentral may pledge any gold or other
assets which it possesses as security against loans which it receives from foreign or
international entities.
MIDTERM EXAMINATION
1. The State shall maintain a that shall function and operate

as an independent and accountable body corporate in the discharge of its mandated
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responsibilities concerning money, banking and credit. In line with this policy, and
considering its unique functions and responsibilities, the central monetary authority
established under this Act, while being a government-owned corporation, shall enjoy
fiscal and administrative autonomy.
a. Central Bank
b. Banko Sentral ng Pilipinas
c. Monetary Policy
d. Central Monetary Authority
2. The primary objective of the Bangko Sentral is to maintain conducive to a

balanced and sustainable growth of the economy...
a. Monetary Stability
b. Stability of Monetary
c. Monetary Price
d. Price Stabilty
3. It refers to the purchasing power of the peso and it’s convertibility to other currencies.
a. Price Stability
b. Exchange Rate
c. Monetary Stability
d. Legal Tender
4. It is one that can be easily identified / distinguished or recognize in the absence of

corporate name. In short this is what is known as
a. BSP Logo
b. Legal Tender
c. Corporate Seal
d. Trade Name
5. a member of the Cabinet to be designated by the . Whenever the
designated Cabinet Member is unable to attend a meeting of the Board, he shall
designate an Undersecretary in his Department to attend as his alternate;
53
a. Monetary Board
b. BSP Governor
c. Congress
d. President of the Philippines
6. The Bangko Sentral shall maintain and preserve a complete record of the proceedings
and deliberations of the Monetary Board, including the tapes and transcripts of the
stenographic notes, either in their original form or in .
a. Hard Copy
b. Micro Film
c. Universal Serial Bus
d. Disc
7. Section 11 of R.A. 7653 Meeting. is a number of members present in

meeting to make the transaction valid.
a. Attendance
b. Votes
c. Quorum
d. Presence Meeting
8. The signature of the Governor may be in whenever appropriate in a contract

and documents.
a. Original Form
b. Facsimile
c. Photocopy
d. Reproduction
9. Section 20. Outside Interests of the Governor and the Full-time Members of the Board. -
The Governor of the Bangko Sentral and the full-time members of the Board shall limit
their professional activities to those pertaining directly to their positions with the Bangko
Sentral. Accordingly, they may not accept any other employment, whether public or
private, remunerated or ad honorem, with the exception of positions in
....
a. Monetray Board
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b. Eleemosynary
c. Government
d. Private Sector
10 . The Governor of the Bangko Sentral, with the approval of the Monetary Board, shall
appoint not more than three who shall perform duties as may be assigned to
them by the Governor and the Board.
a. 3 Deputy Governor
b. 4 Deputy Governor
c. 5 Members of the Monetary Board
d. 3 Members from the Private Sectors
11. Section 25. Supervision and Examination. - The Bangko Sentral shall have supervision
over, and conduct periodic or special examinations of, banking institutions and quasi-banks,
including their subsidiaries and affiliates engaged in allied activities.For purposes of this section,
a subsidiary means a corporation more than ...
a. 50% of Voting Stock
b. 75% of Voting Stock
c. 80% of Voting Stock
d. 100% of Voting Stock
12. Section 26. Bank Deposits and Investments. Compute for the loan limit of Capital plus
Surplus of a Directors, Officers and Stockholders in his bank, to wit:
Capital : P467M
Surplus: P 39M
Total :P506M
a. P25,300,000
b. P50,600,000
c. P379,500,000
d. P253,000,000
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13. What are the laws that prohibits Bangko Sentral ng Pilipinas Personnel in relation to Section
27 of RA 7653.
a. RA 3019 and 6713
b. RA 3098 and 3465
c. RA 3424 and 5602
d. RA 2397 and 4315
14. Whenever, on the basis of a report submitted by the appropriate supervising or examining
department, the Monetary Board finds that a bank or a quasi-bank is in a state of continuing
inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the
interest of depositors and creditors, the Monetary Board may appoint a
a. Deputy Governor
b. Conservator
c. Ex Officio
d. Arbitrator
15. Section 31. Distribution of Assets. - In case of liquidation of a bank or quasi-bank, after
payment of the cost of proceedings, including reasonable expenses and fees of the receiver to
be allowed by the court, the receiver shall pay the debts of such institution, under order of the
court, in accordance with the rules on concurrence and preference of credit as provided in the
.
a. Code of Ethics of Government Employee
b. RA 7653
c. Civil Code of the Philippines
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d. RA 2397
16. Section 33. Disposition of Banking Franchise. - The Bangko Sentral may, if public interest
so requires, award to an institution, upon such terms and conditions as the Monetary Board may
approve, the banking franchise of a bank under liquidation to operate in the area where said
bank or its branches were previously operating: Provided, That whatever proceeds may be
realized from such award shall be subject to the appropriate exclusive disposition of the
.
a. Monetary Board
b. Bangko Sentral
c. President of the Philippines
d. Financial Institution
17. Section 35. False Statement. - The willful making of a false or misleading statement on a
material fact to the Monetary Board or to the of the Bangko Sentral shall be
punished by a fine of not less than One hundred thousand pesos (P100,000) nor more than Two
hundred thousand pesos (P200,000), or by imprisonment of not more than (5) years, or both, at
the discretion of the court.
a. Officials
b. Examiners
c. Deputy Governor
d. Governor
18. The petition for may only be filed by the stockholders of record representing
the majority of the capital stock within ten (10) days from receipt by the board of directors of the
institution of the order directing receivership, liquidation or conservatorship.
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a. Certiorari
b. Bank Settlement
c. The Court
d. Penalties
19. Who is the agency appointed as receiver by the Monetary Board in Banking Institution?
a. BSP
b. Central Clearing House
c. PDIC
d. LBP
20. Who is the person appointed as receiver by the Monetary Board in Quasi-Banking
Institution?
a. Jose Mari Chan
b. Jojo Ong
c. Any person of recognize competence in Banking and Finance
d. Any members of the receivership
21. For how long the receivership last?
a. 90 days
b. 30 days
c. 30 banking days
d. None of the above
22. means closing or winding the affairs of the banks business.
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a. Consolidation
b. Liquidation
c. Liquidity
d. Window Dressing
23. It is the right or license granted to banking instituion to operate in particular teritory.
a. Business Permit
b. Franchise
c. Municipal Permits
d. Regulation Papers
24. An adjustment made to a portfolio or financial statement of a financial institution to create

false appearance that it creates of a successful portfolio management.
a. Security against bank loans
b. Margin requirements against letters of credit
c. Window Dressing
d. Auditing
25. Which is not included in the computation of annual profit and losses because there is no
actual or exchange of transaction.
a. Revaluation Profits and Losses
b. Bank Reserve Penalties
c. Letters of Credit issued by Financial Institution
d. Individual Loans as Guarantee

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26. Section 28. Examination and Fees. - The supervising and examining department head,
personally or by deputy, shall examine the books of every once in every twelve
(12) months...
a. Banking Institution
b. Quasi Banking Institution
c. Non-Bank Financial Institution
d. Investment Company
27. how long shall the conservatorship last?
a. 6 months
b. 1 Year
c. 2 Years
d. 4 Years
28. The assets of an institution under receivership or liquidation shall be deemed in

in the hands of the receiver and shall, from the moment the institution was
placed under such receivership or liquidation, be exempt from any order of garnishment, levy,
attachment, or execution.
a. Certiorari
b. Custodia Legis
c. Affiximatis
d. Duces Tecum
29. Foreign Loan Liability: Assume that a foreign loan was contacted as follows:
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As per records: Year 2020
$1000 x P50 P50,000
In Year 2030 the exchange rate is P66/$
Compute for the losses:
a. P16,000
b. P116,000
c. $16
d. $3,300
30. The unit of monetary value in the Philippines is:
a. Peso
b. Centavo
c. Coins
d. Notes
31. If we divide the peso in 100 equal parts then it becomes a:
a. Peso
b. Centavo
c. Coins
d. Notes
32. Bangko Sentral shall begin on January first and end on December thirty-first of each year.
a. Fiscal Year
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b. Calendar Year
c. Gregorian Calendar
d. Year of the Snake
33. The Bangko Sentral shall have the sole power and authority to issue
a. Notes
b. Coins
c. Currencies
d. Peso
34. Notes and coins issued by the Bangko Sentral shall be liabilities of the Bangko Sentral and
may be issued only against, and in amounts not exceeding, the assets of the Bangko Sentral.
a. Issue Power
b. Legal Tender Power
c. Liabilities for Notes and Coins
d. Counterfeit
35. The power of notes and coins that make it acceptable for the payment of debt both private
and public.
a. Counterfeit
b. Medium of Exchange
c. Legal Tender
d. Loans
36. Who shall prescribe the printing of notes and minting of coins?
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a. Bangko Sentral ng Pilipinas
b. Governor of BSP
d. Monetary Board
37. Suppose Bank of the Philippine Islands wanted to change it’s P500,000 bills all in P1000
peso denomination into P50, what do you call this exchange?
a. Denomination
b. Denominator
c. Exchanging
d. Intercovertibility
Loans to Banks and Other Financial Institutions
ARTICLE IV
LOANS TO BANKING AND OTHER FINANCIAL INSTITUTIONS
A. CREDIT POLICY
Section 81. Guiding Principles. - The rediscounts, discounts, loans and advances which
the Bangko Sentral is authorized to extend to banking institutions under the provisions of the
present article of this Act shall be used to influence the volume of credit consistent with the
objective of price stability.
B. NORMAL CREDIT OPERATIONS
Section 82. Authorized Types of Operations. - Subject to the principle stated in the
preceding section of this Act, the Bangko Sentral may normally and regularly carry on the
following credit operations with banking institutions operating in the Philippines:
(a) Commercial credits. - The Bangko Sentral may rediscount, discount, buy and
sell bills, acceptances, promissory notes and other credit instruments with
maturities of not more than one hundred eighty (180) days from the date of their
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rediscount, discount or acquisition by the Bangko Sentral and resulting from
transactions related to:
(1) the importation, exportation, purchase or sale of readily saleable
goods and products, or their transportation within the Philippines; or
(2) the storing of non-perishable goods and products which are duly
insured and deposited, under conditions assuring their preservation, in
authorized bonded warehouses or in other places approved by the
Monetary Board.
(b) Production credits. - The Bangko Sentral may rediscount, discount, buy and
sell bills, acceptances, promissory notes and other credit instruments having
maturities of not more than three hundred sixty (360) days from the date of their
rediscount, discount or acquisition by the Bangko Sentral and resulting from
transactions related to the production or processing of agricultural, animal,
mineral, or industrial products. Documents or instruments acquired in accordance
with this subsection shall be secured by a pledge of the respective crops or
products: Provided, however, That the crops or products need not be pledged to
secure the documents if the original loan granted by the Bangko Sentral is
secured by a lien or mortgage on real estate property seventy percent (70%) of
the appraised value of which equals or exceeds the amount of the loan granted.
(c) Other credits. - Special credit instruments not otherwise rediscountable under
the immediately preceding subsections (a) and (b) may be eligible for
rediscounting in accordance with rules and regulations which the Bangko Sentral
shall prescribe. Whenever necessary, the Bangko Sentral shall provide funds
from non-inflationary sources: Provided, however, That the Monetary Board shall
prescribe additional safeguards for disbursing these funds.
(d) Advances. - The Bangko Sentral may grant advances against the following
kinds of collaterals for fixed periods which, with the exception of advances
against collateral named in clause (4) of the present subsection, shall not exceed
one hundred eighty (180) days:
(1) gold coins or bullion;
(2) securities representing obligations of the Bangko Sentral or of other
domestic institutions of recognized solvency;
(3) the credit instruments to which reference is made in subsection (a) of
this section;
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(4) the credit instruments to which reference is made in subsection (b) of
this section, for periods which shall not exceed three hundred sixty (360)
days;
(5) utilized portions of advances in current amount covered by regular
overdraft agreements related to operations included under subsections
(a) and (b) of this section, and certified as to amount and liquidity by the
institution soliciting the advance;
(6) negotiable treasury bills, certificates of indebtedness, notes and other
negotiable obligations of the Government maturing within three (3) years
from the date of the advance; and
(7) negotiable bonds issued by the Government of the Philippines, by
Philippine provincial, city or municipal governments, or by any Philippine
Government instrumentality, and having maturities of not more than ten
(10) years from the date of advance.
The rediscounts, discounts, loans and advances made in accordance with the provisions of this
section may not be renewed or extended unless extraordinary circumstances fully justify such
renewal or extension.
Advances made against the collateral named in clauses (6) and (7) of subsection (d) of
this section may not exceed eighty percent (80%) of the current market value of the collateral.
C. SPECIAL CREDIT OPERATION
Section 83. Loans for Liquidity Purposes. - The Bangko Sentral may extend loans and
advances to banking institutions for a period of not more than seven (7) days without any
collateral for the purpose of providing liquidity to the banking system in times of need.
D. EMERGENCY CREDIT OPERATION
Section 84. Emergency Loans and Advances. - In periods of national and/or local
emergency or of imminent financial panic which directly threaten monetary and banking stability,
the Monetary Board may, by a vote of at least five (5) of its members, authorize the Bangko
Sentral to grant extraordinary loans or advances to banking institutions secured by assets as
defined hereunder: Provided, That while such loans or advances are outstanding, the debtor
institution shall not, except upon prior authorization by the Monetary Board, expand the total
volume of its loans or investments.
The Monetary Board may, at its discretion, likewise authorize the Bangko Sentral to
grant emergency loans or advances to banking institutions, even during normal periods, for the
purpose of assisting a bank in a precarious financial condition or under serious financial
65
pressures brought by unforeseen events, or events which, though foreseeable, could not be
prevented by the bank concerned: Provided, however, That the Monetary Board has
ascertained that the bank is not insolvent and has the assets defined hereunder to secure the
advances: Provided, further, That a concurrent vote of at least five (5) members of the Monetary
Board is obtained.
The amount of any emergency loan or advance shall not exceed the sum of fifty percent
(50%) of total deposits and deposit substitutes of the banking institution and shall be disbursed
in two (2) or more tranches. The amount of the first tranche shall be limited to twenty-five
percent (25%) of the total deposit and deposit substitutes of the institution and shall be secured
by government securities to the extent of their applicable loan values and other unencumbered
first class collaterals which the Monetary Board may approve: Provided, That if as determined
by the Monetary Board, the circumstances surrounding the emergency warrant a loan or
advance greater than the amount provided hereinabove, the amount of the first tranche may
exceed twenty-five percent (25%) of the bank's total deposit and deposit substitutes if the same
is adequately secured by applicable loan values of government securities and unencumbered
first class collaterals approved by the Monetary Board, and the principal stockholders of the
institution furnish an acceptable undertaking to indemnify and hold harmless from suit a
conservator whose appointment the Monetary Board may find necessary at any time.
Prior to the release of the first tranche, the banking institution shall submit to the Bangko
Sentral a resolution of its board of directors authorizing the Bangko Sentral to evaluate other
assets of the banking institution certified by its external auditor to be good and available for
collateral purposes should the release of the subsequent tranche be thereafter applied for.
The Monetary Board may, by a vote of at least five (5) of its members, authorize the
release of a subsequent tranche on condition that the principal stockholders of the institution:
(a) furnish an acceptable undertaking to indemnify and hold harmless from suit a
conservator whose appointment the Monetary Board may find necessary at any
time; and
(b) provide acceptable security which, in the judgment of the Monetary Board,
would be adequate to supplement, where necessary, the assets tendered by the
banking institution to collateralize the subsequent tranche.
In connection with the exercise of these powers, the prohibitions in Section 128 of this
Act shall not apply insofar as it refers to acceptance as collateral of shares and their acquisition
as a result of foreclosure proceedings, including the exercise of voting rights pertaining to said
shares: Provided, however, That should the Bangko Sentral acquire any of the shares it has
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accepted as collateral as a result of foreclosure proceedings, the Bangko Sentral shall dispose
of said shares by public bidding within one (1) year from the date of consolidation of title by the
Bangko Sentral.
Whenever a financial institution incurs an overdraft in its account with the Bangko
Sentral, the same shall be eliminated within the period prescribed in Section 102 of this Act.
E. CREDIT TERMS
Section 85. Interest and Rediscount. - The Bangko Sentral shall collect interest and
other appropriate charges on all loans and advances it extends, the closure, receivership or
liquidations of the debtor-institution notwithstanding. This provision shall apply prospectively.
The Monetary Board shall fix the interest and rediscount rates to be charged by the
Bangko Sentral on its credit operations in accordance with the character and term of the
operation, but after due consideration has been given to the credit needs of the market, the
composition of the Bangko Sentral's portfolio, and the general requirements of the national
monetary policy. Interest and rediscount rates shall be applied to all banks of the same category
uniformly and without discrimination.
Section 86. Endorsement. - The documents rediscounted, discounted, bought or
accepted as collateral by the Bangko Sentral in the course of the credit operations authorized in
this article shall bear the endorsement of the institution from which they are received.
Section 87. Repayment of Credits. - Documents rediscounted, discounted or accepted
as collateral by the Bangko Sentral must be withdrawn by the borrowing institution on the dates
of their maturities, or upon liquidation of the obligations which they represent or to which they
relate whenever said obligations have been liquidated prior to their dates of maturity.
Banks shall have the right at any time to withdraw any documents which they have
presented to the Bangko Sentral as collateral, upon payment in full of the corresponding debt to
the Bangko Sentral, including interest charges.
Section 88. Other requirements. - The Monetary Board may prescribe, within the
general powers granted to it under this Act, additional conditions which borrowing institutions
must satisfy in order to have access to the credit of the Bangko Sentral. These conditions may
refer to the rates of interest charged by the banks, to the purposes for which their loans in
general are destined, and to any other clearly definable aspect of the credit policy of the bank.
Section 89. Provisional Advances to the National Government. - The Bangko Sentral
may make direct provisional advances with or without interest to the National Government to
finance expenditures authorized in its annual appropriation: Provided, That said advances shall
be repaid before the end of three (3) months extendible by another three (3) months as the
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Monetary Board may allow following the date the National Government received such
provisional advances and shall not, in their aggregate, exceed twenty percent (20%) of the
average annual income of the borrower for the last three (3) preceding fiscal years.
ARTICLE V
OPEN MARKET OPERATIONS FOR THE ACCOUNT OF THE BANGKO SENTRAL
Section 90. Principles of Open Market Operations. - The open market purchases and
sales of securities by the Bangko Sentral shall be made exclusively in accordance with its
primary objective of achieving price stability.
Section 91. Purchases and Sales of Government Securities. - In order to achieve the
(a) evidences of indebtedness issued directly by the Government of the
Philippines or by its political subdivisions; and
(b) evidences of indebtedness issued by government instrumentalities and fully
guaranteed by the Government.
The evidences of indebtedness acquired under the provisions of this section must be
freely negotiable and regularly serviced and must be available to the general public through
banking institutions and local government treasuries in denominations of a thousand pesos or
more.
Section 92. Issue and Negotiation of Bangko Sentral Obligations. - In order to provide
the Bangko Sentral with effective instruments for open market operations, the Bangko Sentral
may, subject to such rules and regulations as the Monetary Board may prescribe and in
accordance with the principles stated in Section 90 of this Act, issue, place, buy and sell freely
negotiable evidences of indebtedness of the Bangko Sentral: Provided, That issuance of such
certificates of indebtedness shall be made only in cases of extraordinary movement in price
levels. Said evidences of indebtedness may be issued directly against the international reserve
of the Bangko Sentral or against the securities which it has acquired under the provisions of
Section 91 of this Act, or may be issued without relation to specific types of assets of the
Bangko Sentral.
The Monetary Board shall determine the interest rates, maturities and other
characteristics of said obligations of the Bangko Sentral, and may, if it deems it advisable,
denominate the obligations in gold or foreign currencies.
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Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness
of the Bangko Sentral to which this section refers may be acquired by the Bangko Sentral
before their maturity, either through purchases in the open market or through redemptions at par
and by lot if the Bangko Sentral has reserved the right to make such redemptions. The
evidences of indebtedness acquired or redeemed by the Bangko Sentral shall not be included
among its assets, and shall be immediately retired and cancelled.
Other Selective Regulations
ARTICLE VIII
SELECTIVE REGULATION OF BANK OPERATIONS
Section 104. Guiding Principle. - The Monetary Board shall use the powers granted to it
under this Act to ensure that the supply, availability and cost of money are in accord with the
needs of the Philippine economy and that bank credit is not granted for speculative purposes
prejudicial to the national interests. Regulations on bank operations shall be applied to all banks
of the same category uniformly and without discrimination.
Section 105. Margin Requirements Against Letters of Credit. - The Monetary Board may
at any time prescribe minimum cash margins for the opening of letters of credit, and may relate
the size of the required margin to the nature of the transaction to be financed.
Section 106. Required Security Against Bank Loans. - In order to promote liquidity and
solvency of the banking system, the Monetary Board may issue such regulations as it may
deem necessary with respect to the maximum permissible maturities of the loans and
investments which the banks may make, and the kind and amount of security to be required
against the various types of credit operations of the banks.
Section 107. Portfolio Ceilings. - Whenever the Monetary Board considers it advisable
to prevent or check an expansion of bank credit, the Board may place an upper limit on the
amount of loans and investments which the banks may hold, or may place a limit on the rate of
increase of such assets within specified periods of time. The Monetary Board may apply such
limits to the loans and investments of each bank or to specific categories thereof.
In no case shall the Monetary Board establish limits which are below the value of the
loans or investments of the banks on the date on which they are notified of such restrictions.
The restrictions shall be applied to all banks uniformly and without discrimination.
Section 108. Minimum Capital Ratios. - The Monetary Board may prescribe minimum
ratios which the capital and surplus of the banks must bear to the volume of their assets, or to
specific categories thereof, and may alter said ratios whenever it deems necessary.
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1. What are the Monetary Tools of BSP and explain each
The Custodian of Cash Reserves of Banking Institutions and Non-Bank Financial

Intermediaries
ARTICLE VII
BANK RESERVES
Section 94. Reserve Requirements. - In order to control the volume of money created
by the credit operations of the banking system, all banks operating in the Philippines shall be
required to maintain reserves against their deposit liabilities: Provided, That the Monetary Board
may, at its discretion, also require all banks and/or quasi-banks to maintain reserves against
funds held in trust and liabilities for deposit substitutes as defined in this Act. The required
reserves of each bank shall be proportional to the volume of its deposit liabilities and shall
ordinarily take the form of a deposit in the Bangko Sentral. Reserve requirements shall be
applied to all banks of the same category uniformly and without discrimination.
Reserves against deposit substitutes, if imposed, shall be determined in the same
manner as provided for reserve requirements against regular bank deposits, with respect to the
imposition, increase, and computation of reserves.
The Monetary Board may exempt from reserve requirements deposits and deposit
substitutes with remaining maturities of two (2) years or more, as well as interbank borrowings.
Since the requirement to maintain bank reserves is imposed primarily to control the
volume of money, the Bangko Sentral shall not pay interest on the reserves maintained with it
unless the Monetary Board decides otherwise as warranted by circumstances.
Section 95. Definition of Deposit Substitutes. - The term "deposit substitutes" is defined
as an alternative form of obtaining funds from the public, other than deposits, through the
issuance, endorsement, or acceptance of debt instruments for the borrower's own account, for
the purpose of relending or purchasing of receivables and other obligations. These instruments
may include, but need not be limited to, bankers acceptances, promissory notes, participations,
certificates of assignment and similar instruments with recourse, and repurchase agreements.
The Monetary Board shall determine what specific instruments shall be considered as deposit
substitutes for the purposes of Section 94 of this Act: Provided, however, That deposit
substitutes of commercial, industrial and other non-financial companies for the limited purpose
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of financing their own needs or the needs of their agents or dealers shall not be covered by the
provisions of Section 94 of this Act.
Section 96. Required Reserves Against Peso Deposits. - The Monetary Board may fix
and, when it deems necessary, alter the minimum reserve ratios to peso deposits, as well as to
deposit substitutes, which each bank and/or quasi-bank may maintain, and such ratio shall be
applied uniformly to all banks of the same category as well as to quasi-banks.
Section 97. Required Reserves Against Foreign Currency Deposits. - The Monetary
Board is similarly authorized to prescribe and modify the minimum reserve ratios applicable to
deposits denominated in foreign currencies.
Section 98. Reserves Against Unused Balances of Overdraft Lines. - In order to
facilitate Bangko Sentral control over the volume of bank credit, the Monetary Board may
establish minimum reserve requirements for unused balances of overdraft lines.
The powers of the Monetary Board to prescribe and modify reserve requirements
against unused balances of overdraft lines shall be the same as its powers with respect to
reserve requirements against demand deposits.
Section 99. Increase in Reserve Requirements. - Whenever in the opinion of the
Monetary Board it becomes necessary to increase reserve requirements against existing
liabilities, the increase shall be made in a gradual manner and shall not exceed four percentage
points in any thirty-day period. Banks and other affected financial institutions shall be notified
reasonably in advance of the date on which such increase is to become effective.
Section 100. Computation on Reserves. - The reserve position of each bank or quasi-
bank shall be calculated daily on the basis of the amount, at the close of business for the day, of
the institution's reserves and the amount of its liability accounts against which reserves are
required to be maintained: Provided, That with reference to holidays or non-banking days, the
reserve position as calculated at the close of the business day immediately preceding such
holidays and non-banking days shall apply on such days.
For the purpose of computing the reserve position of each bank or quasi-bank, its
principal office in the Philippines and all its branches and agencies located therein shall be
considered as a single unit.
Section 101. Reserve Deficiencies. - Whenever the reserve position of any bank or
quasi-bank, computed in the manner specified in the preceding section of this Act, is below the
required minimum, the bank or quasi-bank shall pay the Bangko Sentral one-tenth of one
percent (1/10 of 1%) per day on the amount of the deficiency or the prevailing ninety-one-day
treasury bill rate plus three percentage points, whichever is higher: Provided, however, That
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banks and quasi-banks shall ordinarily be permitted to offset any reserve deficiency occurring
on one or more days of the week with any excess reserves which they may hold on other days
of the same week and shall be required to pay the penalty only on the average daily deficiency
during the week. In cases of abuse, the Monetary Board may deny any bank or quasi-bank the
privilege of offsetting reserve deficiencies in the aforesaid manner.
If a bank or quasi-bank chronically has a reserve deficiency, the Monetary Board may
limit or prohibit the making of new loans or investments by the institution and may require that
part or all of the net profits of the institution be assigned to surplus.
The Monetary Board may modify or set aside the reserve deficiency penalties provided
in this section, for part or the entire period of a strike or lockout affecting a bank or a quasi-bank
as defined in the Labor Code, or of a national emergency affecting operations of banks or quasi-
banks. The Monetary Board may also modify or set aside reserved deficiency penalties for
rehabilitation program of a bank.
Section 102. Interbank Settlement. - The Bangko Sentral shall establish facilities for
interbank clearing under such rules and regulations as the Monetary Board may prescribe:
Provided, That the Bangko Sentral may charge administrative and other fees for the
maintenance of such facilities.
The deposit reserves maintained by the banks in the Bangko Sentral in accordance with
the provisions of Section 94 of this Act shall serve as basis for the clearing of checks and the
settlement of interbank balances, subject to such rules and regulations as the Monetary Board
may issue with respect to such operations: Provided, That any bank which incurs on
overdrawing in its deposit account with the Bangko Sentral shall fully cover said overdraft,
including interest thereon at a rate equivalent to one-tenth of one percent (1/10 of 1%) per day
or the prevailing ninety-one-day treasury bill rate plus three percentage points, whichever is
higher, not later than the next clearing day: Provided, further, That settlement of clearing
balances shall not be effected for any account which continues to be overdrawn for five (5)
consecutive banking days until such time as the overdrawing is fully covered or otherwise
converted into an emergency loan or advance pursuant to the provisions of Section 84 of this
Act: Provided, finally, That the appropriate clearing office shall be officially notified of banks with
overdrawn balances. Banks with existing overdrafts with the Bangko Sentral as of the effectivity
of this Act shall, within such period as may be prescribed by the Monetary Board, either convert
the overdraft into an emergency loan or advance with a plan of payment, or settle such
overdrafts, and that, upon failure to so comply herewith, the Bangko Sentral shall take such
action against the bank as may be warranted under this Act.
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Section 103. Exemption from Attachment and Other Purposes. - Deposits maintained
by banks with the Bangko Sentral as part of their reserve requirements shall be exempt from
attachment, garnishments, or any other order or process of any court, government agency or
any other administrative body issued to satisfy the claim of a party other than the Government,
or its political subdivisions or instrumentalities.
Bangko Sentral ng Pilipinas as Government Banker, Agent and Financial Adviser
CHAPTER V — FUNCTIONS AS BANKER AND FINANCIAL ADVISOR OF THE

GOVERNMENT
ARTICLE I
FUNCTIONS AS BANKER OF THE GOVERNMENT
Section 110. Designation of Bangko Sentral as Banker of the Government. - The
Bangko Sentral shall act as a banker of the Government, its political subdivisions and
instrumentalities.
Section 111. Representation with the International Monetary Fund. - The Bangko
Sentral shall represent the Government in all dealings, negotiations and transactions with the
International Monetary Fund and shall carry such accounts as may result from Philippine
membership in, or operations with, said Fund.
Section 112. Representation with Other Financial Institutions. - The Bangko Sentral
may be authorized by the Government to represent it in dealings, negotiations or transactions
with the International Bank for Reconstruction and Development and with other foreign or
international financial institutions or agencies. The President may, however, designate any of
his other financial advisors to jointly represent the Government in such dealings, negotiations or
transactions.
Section 113. Official Deposits. - The Bangko Sentral shall be the official depository of
the Government, its political subdivisions and instrumentalities as well as of government-owned
or controlled corporations and, as a general policy, their cash balances should be deposited
with the Bangko Sentral, with only minimum working balances to be held by government-owned
banks and such other banks incorporated in the Philippines as the Monetary Board may
designate, subject to such rules and regulations as the Board may prescribe: Provided, That
such banks may hold deposits of the political subdivisions and instrumentalities of the
Government beyond their minimum working balances whenever such subdivisions or
instrumentalities have outstanding loans with said banks.
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The Bangko Sentral may pay interest on deposits of the Government or of its political
subdivisions and instrumentalities, as well as on deposits of banks with the Bangko Sentral.
Section 114. Fiscal Operations. - The Bangko Sentral shall open a general cash
account for the Treasurer of the Philippines, in which the liquid funds of the Government shall
be deposited.
Transfers of funds from this account to other accounts shall be made only upon order of
the Treasurer of the Philippines.
Section 115. Other Banks as Agents of the Bangko Sentral. - In the performance of its
functions as fiscal agent, the Bangko Sentral may engage the services of other government-
owned and controlled banks and of other domestic banks for operations in localities at home or
abroad in which the Bangko Sentral does not have offices or agencies adequately equipped to
perform said operations: Provided, however, That for fiscal operations in foreign countries, the
Bangko Sentral may engage the services of foreign banking and financial institutions.
Section 116. Remuneration for Services. - The Bangko Sentral may charge equitable
rates, commissions or fees for services which it renders to the Government, its political
subdivisions and instrumentalities.
1. What are the functions of BSP and summarize it’s importance in the Philippine Financial
System
Bangko Sentral ng Pilipinas Monetary Policies
Price Stability
The BSP's main responsibility is to formulate and implement policy in the areas of money,
banking and credit with the primary objective of preserving price stability. Price stability refers to
a condition of low and stable inflation. By keeping price stable, the BSP helps ensure strong and
sustainable economic growth and better living standards.
Monetary Policy
The primary objective of the BSP's monetary policy is to promote a low and stable inflation
conducive to a balanced and sustainable economic growth.
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Monetary operations refer to the buying/selling of government securities, lending/borrowing against
underlying assets as collateral, acceptance of fixed-term deposits, foreign exchange swaps, and
the use of other monetary instruments of the Bangko Sentral.
It consists of a rate at which the central bank (CB) lends to banks (typically an overnight lending rate)
and a rate at which it takes deposits from them (deposit rate). In a standard corridor,
the lending rate will be above the CB target/policy rate (thereby forming an upper bound for short-term
market rates), and the deposit rate will be below the CB policy rate (thereby forming the lower bound).
ARTICLE II
THE MONETARY BOARD
Section 6. Composition of the Monetary Board. - The powers and functions of the
Bangko Sentral shall be exercised by the Bangko Sentral Monetary Board, hereafter referred to
as the Monetary Board, composed of seven (7) members appointed by the President of the
Philippines for a term of six (6) years.
The seven (7) members are:
(a) the Governor of the Bangko Sentral, who shall be the Chairman of the
Monetary Board. The Governor of the Bangko Sentral shall be head of a
department and his appointment shall be subject to confirmation by the
Commission on Appointments. Whenever the Governor is unable to attend a
meeting of the Board, he shall designate a Deputy Governor to act as his
alternate: Provided, That in such event, the Monetary Board shall designate one
of its members as acting Chairman;
(b) a member of the Cabinet to be designated by the President of the Philippines.

Whenever the designated Cabinet Member is unable to attend a meeting of the
Board, he shall designate an Undersecretary in his Department to attend as his
alternate; and
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(c) five (5) members who shall come from the private sector, all of whom shall
serve full-time: Provided, however, That of the members first appointed under the
provisions of this subsection, three (3) shall have a term of six (6) years, and the
other two (2), three (3) years.
No member of the Monetary Board may be reappointed more than once.
Section 7. Vacancies. - Any vacancy in the Monetary Board created by the death,
resignation, or removal of any member shall be filled by the appointment of a new member to
complete the unexpired period of the term of the member concerned.
Section 8. Qualifications. - The members of the Monetary Board must be natural-born

citizens of the Philippines, at least thirty-five (35) years of age, with the exception of the
Governor who should at least be forty (40) years of age, of good moral character, of
unquestionable integrity, of known probity and patriotism, and with recognized competence in
social and economic disciplines.
Section 9. Disqualifications. - In addition to the disqualifications imposed by Republic

Act No. 6713, a member of the Monetary Board is disqualified from being a director, officer,
employee, consultant, lawyer, agent or stockholder of any bank, quasi-bank or any other
institution which is subject to supervision or examination by the Bangko Sentral, in which case
such member shall resign from, and divest himself of any and all interests in such institution
before assumption of office as member of the Monetary Board.
The members of the Monetary Board coming from the private sector shall not hold any
other public office or public employment during their tenure.
No person shall be a member of the Monetary Board if he has been connected directly
with any multilateral banking or financial institution or has a substantial interest in any private
bank in the Philippines, within one (1) year prior to his appointment; likewise, no member of the
Monetary Board shall be employed in any such institution within two (2) years after the
expiration of his term except when he serves as an official representative of the Philippine
Government to such institution.
Section 10. Removal. - The President may remove any member of the Monetary Board
for any of the following reasons:
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(a) If the member is subsequently disqualified under the provisions of Section 8
of this Act; or
(b) If he is physically or mentally incapacitated that he cannot properly discharge

his duties and responsibilities and such incapacity has lasted for more than six
(6) months; or
(c) If the member is guilty of acts or operations which are of fraudulent or illegal
character or which are manifestly opposed to the aims and interests of the
Bangko Sentral; or
(d) If the member no longer possesses the qualifications specified in Section 8 of

this Act.
Section 11. Meetings. - The Monetary Board shall meet at least once a week. The
Board may be called to a meeting by the Governor of the Bangko Sentral or by two (2) other
members of the Board.
The presence of four (4) members shall constitute a quorum: Provided, That in all cases
the Governor or his duly designated alternate shall be among the four (4).
Unless otherwise provided in this Act, all decisions of the Monetary Board shall require
the concurrence of at least four (4) members.
The Bangko Sentral shall maintain and preserve a complete record of the proceedings
and deliberations of the Monetary Board, including the tapes and transcripts of the stenographic
notes, either in their original form or in microfilm.
Section 12. Attendance of the Deputy Governors. - The Deputy Governors may attend
the meetings of the Monetary Board with the right to be heard.
Section 13. Salary. - The salary of the Governor and the members of the Monetary
Board from the private sector shall be fixed by the President of the Philippines at a sum
commensurate to the importance and responsibility attached to the position.
Section 14. Withdrawal of Persons Having a Personal Interest. - In addition to the

requirements of Republic Act No. 6713, any member of the Monetary Board with personal or
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pecuniary interest in any matter in the agenda of the Monetary Board shall disclose his interest
to the Board and shall retire from the meeting when the matter is taken up. The decision taken
on the matter shall be made public. The minutes shall reflect the disclosure made and the
retirement of the member concerned from the meeting.
Section 15. Exercise of Authority. - In the exercise of its authority, the Monetary Board
shall:
(a) issue rules and regulations it considers necessary for the effective discharge
of the responsibilities and exercise of the powers vested upon the Monetary
Board and the Bangko Sentral. The rules and regulations issued shall be
reported to the President and the Congress within fifteen (15) days from the date
of their issuance;
(b) direct the management, operations, and administration of the Bangko Sentral,
reorganize its personnel, and issue such rules and regulations as it may deem
necessary or convenient for this purpose. The legal units of the Bangko Sentral
shall be under the exclusive supervision and control of the Monetary Board;
(c) establish a human resource management system which shall govern the
selection, hiring, appointment, transfer, promotion, or dismissal of all personnel.
Such system shall aim to establish professionalism and excellence at all levels of
the Bangko Sentral in accordance with sound principles of management.
A compensation structure, based on job evaluation studies and wage surveys and
subject to the Board's approval, shall be instituted as an integral component of the Bangko
Sentral's human resource development program: Provided, That the Monetary Board shall
make its own system conform as closely as possible with the principles provided for under
Republic Act No. 6758: Provided, however, That compensation and wage structure of
employees whose positions fall under salary grade 19 and below shall be in accordance with
the rates prescribed under Republic Act No. 6758.
On the recommendation of the Governor, appoint, fix the remunerations and other
emoluments, and remove personnel of the Bangko Sentral, subject to pertinent civil service
laws: Provided, That the Monetary Board shall have exclusive and final authority to promote,
transfer, assign, or reassign personnel of the Bangko Sentral and these personnel actions are
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deemed made in the interest of the service and not disciplinary: Provided, further, That the
Monetary Board may delegate such authority to the Governor under such guidelines as it may
determine.
(d) adopt an annual budget for and authorize such expenditures by the Bangko
Sentral as are in the interest of the effective administration and operations of the
Bangko Sentral in accordance with applicable laws and regulations; and
(e) indemnify its members and other officials of the Bangko Sentral, including
personnel of the departments performing supervision and examination functions
against all costs and expenses reasonably incurred by such persons in
connection with any civil or criminal action, suit or proceedings to which he may
be, or is, made a party by reason of the performance of his functions or duties,
unless he is finally adjudged in such action or proceeding to be liable for
negligence or misconduct.
In the event of a settlement or compromise, indemnification shall be provided only in

connection with such matters covered by the settlement as to which the Bangko Sentral is
advised by external counsel that the person to be indemnified did not commit any negligence or
misconduct.
The costs and expenses incurred in defending the aforementioned action, suit or
proceeding may be paid by the Bangko Sentral in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of the member, officer, or
employee to repay the amount advanced should it ultimately be determined by the Monetary
Board that he is not entitled to be indemnified as provided in this subsection.
Section 16. Responsibility. - Members of the Monetary Board, officials, examiners, and
employees of the Bangko Sentral who willfully violate this Act or who are guilty of negligence,
abuses or acts of malfeasance or misfeasance or fail to exercise extraordinary diligence in the
performance of his duties shall be held liable for any loss or injury suffered by the Bangko
Sentral or other banking institutions as a result of such violation, negligence, abuse,
malfeasance, misfeasance or failure to exercise extraordinary diligence.
Similar responsibility shall apply to members, officers, and employees of the Bangko
Sentral for: (1) the disclosure of any information of a confidential nature, or any information on
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the discussions or resolutions of the Monetary Board, or about the confidential operations of the
Bangko Sentral, unless the disclosure is in connection with the performance of official functions
with the Bangko Sentral, or is with prior authorization of the Monetary Board or the Governor; or
(2) the use of such information for personal gain or to the detriment of the Government, the
Bangko Sentral or third parties: Provided, however, That any data or information required to be
submitted to the President and/or the Congress, or to be published under the provisions of this
Act shall not be considered confidential.
Assignment
1. How many members compose the monetary board?

2. Who is the Chairman of Monetary Board?
3. Is the Cabinet Secretary an ex-officio member of the Monetary Board?
4. How many members must constitute a quorum?
5. What are the records to be maintained and preserved during the board meeting?
The Theory of Monetary Policy
Monetary theory is based on the idea that a change in money supply is the main driver of
economic activity. It argues that central banks, which control the levers of monetary policy, can
exert much power over economic growth rates by tinkering with the amount of currency and
other liquid instruments circulating in a country's economy.
Demand and Supply of Money

Demand of Money
The demand for money refers to the total amount of wealth held by the household and
companies. The demand for money is affected by several factors such as income levels,
interest rates, price levels (inflation), and uncertainty.
The impact of these factors on the demand for money is explained in terms of the three primary
reasons to hold money. The three reasons are:
Transactions: This is the money needed for fulfilling transactions. As the total number and size
of transactions increases in an economy, the transaction demand for money also increases.
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Precautionary: This is the money needed for uncertain future needs, for example, unexpected
medical expenses. The precautionary demand for money increases as the size of economy
increases.
Speculative: People also hold money for speculative purposes so that they can take advantage
of investment opportunities in the future. If the current returns on financial products are high,
people will rather invest than hold money with a speculative motive. We can say that the
demand for money for speculative motive increases with the increase in perceived risk in other
financial instruments.
There is an inverse relationship between the short-term interest rates and the demand for
money that households and firms want to hold. If the interest rates are low, the demand for
money is high and if the interest rates are high, the demand for money is low. This is because
as interest rates increase, the opportunity cost of holding money increases, and people will be
better off by investing in other financial instruments than holding money.
Supply of Money
The supply of money in an economy is controlled by its central bank, for example, Fed in the
US. The Fed may change the money supply by using open market operations or by changing
reserve requirements.
Demand and Supply Curve
The demand and supply curve for money can be represented as follows:
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As you can see, the money supply curve is completely inelastic. The money demand curve is
downward sloping, i.e., the demand for holding money increases with decrease in interest rates.
The short-term interest rate (i) is determined by the equilibrium of the supply and demand for
money. If the interest rates are above the equilibrium, there is excess supply of money. This
means the households and firms are holding more money and they will purchase securities to
lower their money balances. This will lead to an increase in security prices and a drop in interest
rates. Similarly, if interest rates are lower than the equilibrium rate, there is excess demand for
money and people desire to hold money than they actually have. To do so, firms and
households will sell securities, which will decrease the security prices and increase the interest
rates.
The central bank can change the money supply, which will influence the interest rates. An
increase in money supply will create excess supply, which will put a downward pressure on
interest rates.
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The International Constraint on Monetary Policy
ARTICLE IV
OPERATIONS OF THE BANGKO SENTRAL
Section 22. Research and Statistics. - The Bangko Sentral shall prepare data and
conduct economic research for the guidance of the Monetary Board in the formulation and
implementation of its policies. Such data shall include, among others, forecasts of the balance
of payments of the Philippines, statistics on the monthly movement of the monetary aggregates
and of prices and other statistical series and economic studies useful for the formulation and
analysis of monetary, banking, credit and exchange policies.
Section 23. Authority to Obtain Data and Information. - The Bangko Sentral shall have
the authority to request from government offices and instrumentalities, or government-owned or
controlled corporations, any data which it may require for the proper discharge of its functions
and responsibilities. The Bangko Sentral through the Governor or in his absence, a duly
authorized representative shall have the power to issue a subpoena for the production of the
books and records for the aforesaid purpose. Those who refuse the subpoena without justifiable
cause, or who refuse to supply the bank with data requested or required, shall be subject to
punishment for contempt in accordance with the provisions of the Rules of Court.
Data on individual firms, other than banks, gathered by the Department of Economic
Research and other departments or units of the Bangko Sentral shall not be made available to
any person or entity outside of the Bangko Sentral whether public or private except under order
of the court or under such conditions as may be prescribed by the Monetary Board: Provided,
however, That the collective data on firms may be released to interested persons or entities:
Provided, finally, That in the case of data on banks, the provisions of Section 27 of this Act shall
apply.
Section 24. Training of Technical Personnel. - The Bangko Sentral shall promote and
sponsor the training of technical personnel in the field of money and banking. Toward this end,
the Bangko Sentral is hereby authorized to defray the costs of study, at home or abroad, of
qualified employees of the Bangko Sentral, of promising university graduates or of any other
qualified persons who shall be determined by proper competitive examinations. The Monetary
Board shall prescribe rules and regulations to govern the training program of the Bangko
Sentral.
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Section 25. Supervision and Examination. - The Bangko Sentral shall have supervision
over, and conduct periodic or special examinations of, banking institutions and quasi-banks,
including their subsidiaries and affiliates engaged in allied activities.
For purposes of this section, a subsidiary means a corporation more than fifty percent
(50%) of the voting stock of which is owned by a bank or quasi-bank and an affiliate means a
corporation the voting stock of which, to the extent of fifty percent (50%) or less, is owned by a
bank or quasi-bank or which is related or linked to such institution or intermediary through
common stockholders or such other factors as may be determined by the Monetary Board.
The department heads and the examiners of the supervising and/or examining
departments are hereby authorized to administer oaths to any director, officer, or employee of
any institution under their respective supervision or subject to their examination and to compel
the presentation of all books, documents, papers or records necessary in their judgment to
ascertain the facts relative to the true condition of any institution as well as the books and
records of persons and entities relative to or in connection with the operations, activities or
transactions of the institution under examination, subject to the provision of existing laws
protecting or safeguarding the secrecy or confidentiality of bank deposits as well as investments
of private persons, natural or juridical, in debt instruments issued by the Government.
No restraining order or injunction shall be issued by the court enjoining the Bangko
Sentral from examining any institution subject to supervision or examination by the Bangko
Sentral, unless there is convincing proof that the action of the Bangko Sentral is plainly arbitrary
and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in
which the action is pending a bond executed in favor of the Bangko Sentral, in an amount to be
fixed by the court. The provisions of Rule 58 of the New Rules of Court insofar as they are
applicable and not inconsistent with the provisions of this section shall govern the issuance and
dissolution of the restraining order or injunction contemplated in this section.
Section 26. Bank Deposits and Investments. - Any director, officer or stockholder who,
together with his related interest, contracts a loan or any form of financial accommodation from:
(1) his bank; or (2) from a bank (a) which is a subsidiary of a bank holding company of which
both his bank and the lending bank are subsidiaries or (b) in which a controlling proportion of
the shares is owned by the same interest that owns a controlling proportion of the shares of his
bank, in excess of five percent (5%) of the capital and surplus of the bank, or in the maximum
amount permitted by law, whichever is lower, shall be required by the lending bank to waive the
secrecy of his deposits of whatever nature in all banks in the Philippines. Any information
obtained from an examination of his deposits shall be held strictly confidential and may be used
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by the examiners only in connection with their supervisory and examination responsibility or by
the Bangko Sentral in an appropriate legal action it has initiated involving the deposit account.
Section 27. Prohibitions. - In addition to the prohibitions found in Republic Act Nos.
3019 and 6713, personnel of the Bangko Sentral are hereby prohibited from:
(a) being an officer, director, lawyer or agent, employee, consultant or
stockholder, directly or indirectly, of any institution subject to supervision or
examination by the Bangko Sentral, except non-stock savings and loan
associations and provident funds organized exclusively for employees of the
Bangko Sentral, and except as otherwise provided in this Act;
(b) directly or indirectly requesting or receiving any gift, present or pecuniary or
material benefit for himself or another, from any institution subject to supervision
or examination by the Bangko Sentral;
(c) revealing in any manner, except under orders of the court, the Congress or
any government office or agency authorized by law, or under such conditions as
may be prescribed by the Monetary Board, information relating to the condition or
business of any institution. This prohibition shall not be held to apply to the giving
of information to the Monetary Board or the Governor of the Bangko Sentral, or to
any person authorized by either of them, in writing, to receive such information;
and
(d) borrowing from any institution subject to supervision or examination by the
Bangko Sentral shall be prohibited unless said borrowings are adequately
secured, fully disclosed to the Monetary Board, and shall be subject to such
further rules and regulations as the Monetary Board may prescribe: Provided,
however, That personnel of the supervising and examining departments are
prohibited from borrowing from a bank under their supervision or examination.
Section 28. Examination and Fees. - The supervising and examining department head,
personally or by deputy, shall examine the books of every banking institution once in every
twelve (12) months, and at such other times as the Monetary Board by an affirmative vote of five
(5) members, may deem expedient and to make a report on the same to the Monetary Board:
Provided, That there shall be an interval of at least twelve (12) months between annual
examinations.
The bank concerned shall afford to the head of the appropriate supervising and
examining departments and to his authorized deputies full opportunity to examine its books,
cash and available assets and general condition at any time during banking hours when
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requested to do so by the Bangko Sentral: Provided, however, That none of the reports and
other papers relative to such examinations shall be open to inspection by the public except
insofar as such publicity is incidental to the proceedings hereinafter authorized or is necessary
for the prosecution of violations in connection with the business of such institutions.
Banking and quasi-banking institutions which are subject to examination by the Bangko
Sentral shall pay to the Bangko Sentral, within the first thirty (30) days of each year, an annual
fee in an amount equal to a percentage as may be prescribed by the Monetary Board of its
average total assets during the preceding year as shown on its end-of-month balance sheets,
after deducting cash on hand and amounts due from banks, including the Bangko Sentral and
banks abroad.
Section 29. Appointment of Conservator. - Whenever, on the basis of a report submitted
by the appropriate supervising or examining department, the Monetary Board finds that a bank
or a quasi-bank is in a state of continuing inability or unwillingness to maintain a condition of
liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary
Board may appoint a conservator with such powers as the Monetary Board shall deem
necessary to take charge of the assets, liabilities, and the management thereof, reorganize the
management, collect all monies and debts due said institution, and exercise all powers
necessary to restore its viability. The conservator shall report and be responsible to the
Monetary Board and shall have the power to overrule or revoke the actions of the previous
management and board of directors of the bank or quasi-bank.
The conservator should be competent and knowledgeable in bank operations and
management. The conservatorship shall not exceed one (1) year.
The conservator shall receive remuneration to be fixed by the Monetary Board in an
amount not to exceed two-thirds (2/3) of the salary of the president of the institution in one (1)
year, payable in twelve (12) equal monthly payments: Provided, That, if at any time within one-
year period, the conservatorship is terminated on the ground that the institution can operate on
its own, the conservator shall receive the balance of the remuneration which he would have
received up to the end of the year; but if the conservatorship is terminated on other grounds, the
conservator shall not be entitled to such remaining balance. The Monetary Board may appoint a
conservator connected with the Bangko Sentral, in which case he shall not be entitled to receive
any remuneration or emolument from the Bangko Sentral during the conservatorship. The
expenses attendant to the conservatorship shall be borne by the bank or quasi-bank concerned.
The Monetary Board shall terminate the conservatorship when it is satisfied that the
institution can continue to operate on its own and the conservatorship is no longer necessary.
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The conservatorship shall likewise be terminated should the Monetary Board, on the basis of
the report of the conservator or of its own findings, determine that the continuance in business
of the institution would involve probable loss to its depositors or creditors, in which case the
provisions of Section 30 shall apply.
Section 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of
the head of the supervising or examining department, the Monetary Board finds that a bank or
quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of
business: Provided, That this shall not include inability to pay caused by
extraordinary demands induced by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the Bangko Sentral, to
meet its liabilities; or
(c) cannot continue in business without involving probable losses to its depositors
or creditors; or
(d) has willfully violated a cease and desist order under Section 37 that has
become final, involving acts or transactions which amount to fraud or a
dissipation of the assets of the institution; in which cases, the Monetary Board
may summarily and without need for prior hearing forbid the institution from doing
business in the Philippines and designate the Philippine Deposit Insurance
Corporation as receiver of the banking institution.
For a quasi-bank, any person of recognized competence in banking or finance may be
designed as receiver.
The receiver shall immediately gather and take charge of all the assets and liabilities of
the institution, administer the same for the benefit of its creditors, and exercise the general
powers of a receiver under the Revised Rules of Court but shall not, with the exception of
administrative expenditures, pay or commit any act that will involve the transfer or disposition of
any asset of the institution: Provided, That the receiver may deposit or place the funds of the
institution in non-speculative investments. The receiver shall determine as soon as possible, but
not later than ninety (90) days from take over, whether the institution may be rehabilitated or
otherwise placed in such a condition so that it may be permitted to resume business with safety
to its depositors and creditors and the general public: Provided, That any determination for the
resumption of business of the institution shall be subject to prior approval of the Monetary
Board.
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If the receiver determines that the institution cannot be rehabilitated or permitted to
resume business in accordance with the next preceding paragraph, the Monetary Board shall
notify in writing the board of directors of its findings and direct the receiver to proceed with the
liquidation of the institution. The receiver shall:
(1) file ex parte with the proper regional trial court, and without requirement of
prior notice or any other action, a petition for assistance in the liquidation of the
institution pursuant to a liquidation plan adopted by the Philippine Deposit
Insurance Corporation for general application to all closed banks. In case of
quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon
acquiring jurisdiction, the court shall, upon motion by the receiver after due
notice, adjudicate disputed claims against the institution, assist the enforcement
of individual liabilities of the stockholders, directors and officers, and decide on
other issues as may be material to implement the liquidation plan adopted. The
receiver shall pay the cost of the proceedings from the assets of the institution.
(2) convert the assets of the institutions to money, dispose of the same to
creditors and other parties, for the purpose of paying the debts of such institution
in accordance with the rules on concurrence and preference of credit under the
Civil Code of the Philippines and he may, in the name of the institution, and with
the assistance of counsel as he may retain, institute such actions as may be
necessary to collect and recover accounts and assets of, or defend any action
against, the institution. The assets of an institution under receivership or
liquidation shall be deemed in custodia legis in the hands of the receiver and
shall, from the moment the institution was placed under such receivership or
liquidation, be exempt from any order of garnishment, levy, attachment, or
execution.
The actions of the Monetary Board taken under this section or under Section 29 of this
Act shall be final and executory, and may not be restrained or set aside by the court except on
petition for certiorari on the ground that the action taken was in excess of jurisdiction or with
such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for
certiorari may only be filed by the stockholders of record representing the majority of the capital
stock within ten (10) days from receipt by the board of directors of the institution of the order
directing receivership, liquidation or conservatorship.
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The designation of a conservator under Section 29 of this Act or the appointment of a
receiver under this section shall be vested exclusively with the Monetary Board. Furthermore,
the designation of a conservator is not a precondition to the designation of a receiver.
Section 31. Distribution of Assets. - In case of liquidation of a bank or quasi-bank, after
Civil Code.
Section 32. Disposition of Revenues and Earnings. - All revenues and earnings realized
by the receiver in winding up the affairs and administering the assets of any bank or quasi-bank
within the purview of this Act shall be used to pay the costs, fees and expenses mentioned in
the preceding section, salaries of such personnel whose employment is rendered necessary in
the discharge of the liquidation together with other additional expenses caused thereby. The
balance of revenues and earnings, after the payment of all said expenses, shall form part of the
assets available for payment to creditors.
Section 33. Disposition of Banking Franchise. - The Bangko Sentral may, if public
interest so requires, award to an institution, upon such terms and conditions as the Monetary
Board may approve, the banking franchise of a bank under liquidation to operate in the area
where said bank or its branches were previously operating: Provided, That whatever proceeds
may be realized from such award shall be subject to the appropriate exclusive disposition of the
Monetary Board.
Section 34. Refusal to Make Reports or Permit Examination. - Any officer, owner, agent,
manager, director or officer-in-charge of any institution subject to the supervision or examination
by the Bangko Sentral within the purview of this Act who, being required in writing by the
Monetary Board or by the head of the supervising and examining department willfully refuses to
file the required report or permit any lawful examination into the affairs of such institution shall
be punished by a fine of not less than Fifty thousand pesos (P50,000) nor more than One
hundred thousand pesos (P100,000) or by imprisonment of not less than one (1) year nor more
than five (5) years, or both, in the discretion of the court.
Section 35. False Statement. - The willful making of a false or misleading statement on
a material fact to the Monetary Board or to the examiners of the Bangko Sentral shall be
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Section 36. Proceedings Upon Violation of This Act and Other Banking Laws, Rules,
Regulations, Orders or Instructions. - Whenever a bank or quasi-bank, or whenever any person
or entity willfully violates this Act or other pertinent banking laws being enforced or implemented
by the Bangko Sentral or any order, instruction, rule or regulation issued by the Monetary Board,
the person or persons responsible for such violation shall unless otherwise provided in this Act
be punished by a fine of not less than Fifty thousand pesos (P50,000) nor more than Two
hundred thousand pesos (P200,000) or by imprisonment of not less than two (2) years nor more
than ten (10) years, or both, at the discretion of the court.
Whenever a bank or quasi-bank persists in carrying on its business in an unlawful or
unsafe manner, the Board may, without prejudice to the penalties provided in the preceding
paragraph of this section and the administrative sanctions provided in Section 37 of this Act,
take action under Section 30 of this Act.
Section 37. Administrative Sanctions on Banks and Quasi-banks. - Without prejudice to
the criminal sanctions against the culpable persons provided in Sections 34, 35, and 36 of this
Act, the Monetary Board may, at its discretion, impose upon any bank or quasi-bank, their
directors and/or officers, for any willful violation of its charter or by-laws, willful delay in the
submission of reports or publications thereof as required by law, rules and regulations; any
refusal to permit examination into the affairs of the institution; any willful making of a false or
misleading statement to the Board or the appropriate supervising and examining department or
its examiners; any willful failure or refusal to comply with, or violation of, any banking law or any
order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling
by the Governor; or any commission of irregularities, and/or conducting business in an unsafe or
unsound manner as may be determined by the Monetary Board, the following administrative
sanctions, whenever applicable:
(a) fines in amounts as may be determined by the Monetary Board to be
appropriate, but in no case to exceed Thirty thousand pesos (P30,000) a day for
each violation, taking into consideration the attendant circumstances, such as the
nature and gravity of the violation or irregularity and the size of the bank or quasi-
bank;
(b) suspension of rediscounting privileges or access to Bangko Sentral credit
facilities;
(c) suspension of lending or foreign exchange operations or authority to accept
new deposits or make new investments;
(d) suspension of interbank clearing privileges; and/or
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(e) revocation of quasi-banking license.
Resignation or termination from office shall not exempt such director or officer from
administrative or criminal sanctions.
The Monetary Board may, whenever warranted by circumstances, preventively suspend
any director or officer of a bank or quasi-bank pending an investigation: Provided, That should
the case be not finally decided by the Bangko Sentral within a period of one hundred twenty
(120) days after the date of suspension, said director or officer shall be reinstated in his position:
Provided, further, That when the delay in the disposition of the case is due to the fault,
negligence or petition of the director or officer, the period of delay shall not be counted in
computing the period of suspension herein provided.
The above administrative sanctions need not be applied in the order of their severity.
Whether or not there is an administrative proceeding, if the institution and/or the
directors and/or officers concerned continue with or otherwise persist in the commission of the
indicated practice or violation, the Monetary Board may issue an order requiring the institution
and/or the directors and/or officers concerned to cease and desist from the indicated practice or
violation, and may further order that immediate action be taken to correct the conditions
resulting from such practice or violation. The cease and desist order shall be immediately
effective upon service on the respondents.
The respondents shall be afforded an opportunity to defend their action in a hearing
before the Monetary Board or any committee chaired by any Monetary Board member created
for the purpose, upon request made by the respondents within five (5) days from their receipt of
the order. If no such hearing is requested within said period, the order shall be final. If a hearing
is conducted, all issues shall be determined on the basis of records, after which the Monetary
Board may either reconsider or make final its order.
The Governor is hereby authorized, at his discretion, to impose upon banking
institutions, for any failure to comply with the requirements of law, Monetary Board regulations
and policies, and/or instructions issued by the Monetary Board or by the Governor, fines not in
excess of Ten thousand pesos (P10,000) a day for each violation, the imposition of which shall
be final and executory until reversed, modified or lifted by the Monetary Board on appeal.
Section 38. Operating Departments of the Bangko Sentral. - The Monetary Board shall,
in accordance with its authority under this Act, determine and provide for such operating
departments and other offices, including a public information office, of the Bangko Sentral as it
deems convenient for the proper and efficient conduct of the operations and the
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accomplishment of the objectives of the Bangko Sentral. The functions and duties of such
operating departments and other offices shall be determined by the Monetary Board.
The exchange rate is important for several reasons:

 It serves as the basic link between the local and the overseas market for various goods,
services and financial assets. Using the exchange rate, we are able to compare prices of
goods, services, and assets quoted in different currencies.
 Exchange rate movements can affect actual inflation as well as expectations about
future price movements. Changes in the exchange rate tend to directly affect domestic prices
of imported goods and services. A stronger peso lowers the peso prices of
imported goods as well as import‐intensive services such as transport, thereby lowering
the rate of inflation. For instance, an increase in the value of the peso from US$1:P50
to US$1:P40 will lower the price of a $1 per liter gasoline from P50.00 (P50 X $1) to
P40.00 (P40X $1). 
Exchange rate movements can affect the country’s external sector through its impact on
foreign trade. An appreciation of the peso, for instance, could lower the price
competitiveness of our exports versus the products of those competitor countries
whose currencies have not changed in value.
 The exchange rate affects the cost of servicing (principal and interest payments) on the
country’s foreign debt. A peso appreciation reduces the amount of pesos needed to
buy foreign exchange to pay interest and maturing obligations.
How is the exchange rate determined?

Under the system of freely floating exchange rates, the value of the dollar in terms of the
peso is determined in the interbank foreign exchange market (by the forces of supply and
demand just like any commodity or sevice being sold in the market). Under a fixed exchange
rate system, a par value rate is set between the peso and the dollar by the central bank.
The par value may be adjusted from time to time.
Exchange Rate March 2020
How does the exchange rate change?

Under a floating exchange rate system, if more dollars are demanded than are offered, the
price of the dollar in terms of the peso will tend to increase; that is, it will cost more pesos
to acquire one dollar. If, on the other hand, more dollars are offered than are demanded,
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the value of the dollar in terms of the peso will tend to decrease; that is, it will cost less
pesos to acquire one dollar. In contrast, under a fixed rate system, a change in the exchange
rate is effected through an official announcement by the central bank.
What is the country’s foreign exchange policy? At present, the country's exchange rate
policy supports a freely floating exchange rate system whereby the Bangko Sentral ng
Pilipinas (BSP) leaves the determination of the
exchange rate to market forces. Under a market‐determined exchange rate framework, the
BSP does not set the foreign exchange rate but instead allows the value of the peso to be
determined by the supply of and demand for foreign exchange.
Thus, the BSP’s participation in the foreign exchange market is limited to tempering sharp
fluctuations in the exchange rate. On such occasions of excessive movements, the BSP
enters the market mainly to maintain order and stability. When warranted, the BSP also stands
ready to provide some liquidity and ensure that legitimate demands for foreign
currency are satisfied.
How is foreign exchange traded in the market?

In the Philippines, banks trade foreign exchange using an electronic trading platform called the
Philippine Dealing and Exchange Corp. (PDEx) through any of the following ways:
Reuters or Bloomberg dealing, over‐the‐counter, or via brokers. The PDEx captures all spot
transactions (which involve the purchase or sale of a foreign currency for immediate
delivery, i.e., within one day for US dollars and within two days for other convertible
currencies), done through any of these transaction vehicles.
When banks trade, either for their clients or for their own accounts, they follow a set of
guidelines laid by the BSP (Manual of Regulations on Foreign Exchange Transactions, as
amended; Circular 471 dated 24 January 2005; and other applicable BSP regulations) to
ensure orderly trades in the foreign exchange markets.
How does one judge whether the exchange rate is at an appropriate level or not?
One way of judging the appropriate level of the exchange rate is by looking at the trend in the
real effective exchange rate (REER) of the peso versus a basket of currencies. This
measure takes into account not only the nominal exchange rate movements but also the
relative inflation rates among trading and competing countries. As such, the REER is a more
comprehensive measure of external price competitiveness.
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FINAL EXAMINATION
1. The State shall maintain a that shall function and operate

as an independent and accountable body corporate in the discharge of its mandated
responsibilities concerning money, banking and credit. In line with this policy, and considering
its unique functions and responsibilities, the central monetary authority established under this
Act, while being a government-owned corporation, shall enjoy fiscal and administrative
autonomy.
a. Central Bank
b. Banko Sentral ng Pilipinas
c. Monetary Policy
d. Central Monetary Authority
2. The primary objective of the Bangko Sentral is to maintain conducive to a

balanced and sustainable growth of the economy...
c. Monetary Price
d. Price Stabilty
3. It refers to the purchasing power of the peso and it’s convertibility to other currencies.
a. Price Stability
b. Exchange Rate
c. Monetary Stability
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d. Legal Tender
4. It is one that can be easily identified / distinguished or recognize in the absence of

corporate name. In short this is what is known as
a. BSP Logo
b. Legal Tender
c. Corporate Seal
d. Trade Name
5. a member of the Cabinet to be designated by the . Whenever the

designated Cabinet Member is unable to attend a meeting of the Board, he shall designate
an Undersecretary in his Department to attend as his alternate;
a. Monetary Board
b. BSP Governor
c. Congress
d. President of the Philippines
6. The Bangko Sentral shall maintain and preserve a complete record of the proceedings
and deliberations of the Monetary Board, including the tapes and transcripts of the
stenographic notes, either in their original form or in .
a. Hard Copy
b. Micro Film
c. Universal Serial Bus
d. Disc
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7. Section 11 of R.A. 7653 Meeting. is a number of members present in
meeting to make the transaction valid.
a. Attendance
b. Votes
c. Quorum
d. Presence Meeting
8. The signature of the Governor may be in whenever appropriate in a contract

and documents.
a. Original Form
b. Facsimile
c. Photocopy
d. Reproduction
9. Section 20. Outside Interests of the Governor and the Full-time Members of the
Board. The Governor of the Bangko Sentral and the full-time members of the Board shall limit
their professional activities to those pertaining directly to their positions with the Bangko
Sentral. Accordingly, they may not accept any other employment, whether public or private,
remunerated or ad honorem, with the exception of positions in ....
a. Monetray Board
b. Eleemosynary
c. Government
d. Private Sector
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10 . The Governor of the Bangko Sentral, with the approval of the Monetary Board, shall
appoint not more than three who shall perform duties as may be assigned to
them by the Governor and the Board.
a. 3 Deputy Governor
b. 4 Deputy Governor
c. 5 Members of the Monetary Board
d. 3 Members from the Private Sectors
11. Section 25. Supervision and Examination. The Bangko Sentral shall have supervision over,
and conduct periodic or special examinations of, banking institutions and quasi-banks, including
their subsidiaries and affiliates engaged in allied activities.For purposes of this section, a
subsidiary means a corporation more than
a. 50% of Voting Stock
b. 75% of Voting Stock
c. 80% of Voting Stock
d. 100% of Voting Stock
12. Section 26. Bank Deposits and Investments. Compute for the loan limit of Capital plus
Surplus of a Directors, Officers and Stockholders in his bank, to wit:
Capital : P467M
Surplus: P 39M
Total :P506M
a. P25,300,000
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b. P50,600,000
c. P379,500,000
d. P253,000,000
13. What are the laws that prohibits Bangko Sentral ng Pilipinas Personnel in relation to Section
27 of RA 7653.
a. RA 3019 and 6713
b. RA 3098 and 3465
c. RA 3424 and 5602
d. RA 2397 and 4315
14. Whenever, on the basis of a report submitted by the appropriate supervising or examining
department, the Monetary Board finds that a bank or a quasi-bank is in a state of continuing
inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the
interest of depositors and creditors, the Monetary Board may appoint a
a. Deputy Governor
b. Conservator
c. Ex Officio
d. Arbitrator
15. Section 31. Distribution of Assets. In case of liquidation of a bank or quasi-bank, after
.
a. Code of Ethics of Government Employee
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b. RA 7653
c. Civil Code of the Philippines
d. RA 2397
16. Section 33. Disposition of Banking Franchise. - The Bangko Sentral may, if public interest
so requires, award to an institution, upon such terms and conditions as the Monetary Board may
approve, the banking franchise of a bank under liquidation to operate in the area where said
bank or its branches were previously operating: Provided, That whatever proceeds may be
realized from such award shall be subject to the appropriate exclusive disposition of the
.
a. Monetary Board
b. Bangko Sentral
d. Financial Institution
17. Section 35. False Statement. The willful making of a false or misleading statement on a
material fact to the Monetary Board or to the of the Bangko Sentral shall be
a. Officials
b. Examiners
c. Deputy Governor
d. Governor
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18. The petition for may only be filed by the stockholders of record representing
the majority of the capital stock within ten (10) days from receipt by the board of directors of the
institution of the order directing receivership, liquidation or conservatorship.
a. Certiorari
b. Bank Settlement
c. The Court
d. Penalties
19. Who is the agency appointed as receiver by the Monetary Board in Banking Institution?
a. BSP
b. Central Clearing House
c. PDIC
d. LBP
20. Who is the person appointed as receiver by the Monetary Board in Quasi-Banking
Institution?
a. Jose Mari Chan
b. Jojo Ong
c. Any person of recognize competence in Banking and Finance
d. Any members of the receivership
21. For how long the receivership last?
a. 90 days
b. 30 days
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c. 30 banking days
d. None of the above
22. means closing or winding the affairs of the banks business.
a. Consolidation
b. Liquidation
c. Liquidity
d. Window Dressing
23. It is the right or license granted to banking instituion to operate in particular teritory.
a. Business Permit
b. Franchise
c. Municipal Permits
d. Regulation Papers
24. An adjustment made to a portfolio or financial statement of a financial institution to create

false appearance that it creates of a successful portfolio management.
a. Security against bank loans
b. Margin requirements against letters of credit
c. Window Dressing
d. Auditing
25. Which is not included in the computation of annual profit and losses because there is no
actual or exchange of transaction.
a. Revaluation Profits and Losses

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b. Bank Reserve Penalties
c. Letters of Credit issued by Financial Institution
d. Individual Loans as Guarantee
26. Section 28. Examination and Fees. - The supervising and examining department head,
personally or by deputy, shall examine the books of every once in every twelve
(12) months...
a. Banking Institution
b. Quasi Banking Institution
c. Non-Bank Financial Institution
d. Investment Company
27. how long shall the conservatorship last?
a. 6 months
b. 1 Year
c. 2 Years
d. 4 Years
28. The assets of an institution under receivership or liquidation shall be deemed in

in the hands of the receiver and shall, from the moment the institution was
placed under such receivership or liquidation, be exempt from any order of garnishment, levy,
attachment, or execution.
a. Certiorari
b. Custodia Legis
c. Affiximatis
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d. Duces Tecum
29. Foreign Loan Liability: Assume that a foreign loan was contacted as follows:
As per records: Year 2020
$1000 x P50 P50,000
In Year 2030 the exchange rate is P66/$
Compute for the losses:
a. P16,000
b. P116,000
c. $16
d. $3,300
30. The unit of monetary value in the Philippines is:
a. Peso
b. Centavo
c. Coins
d. Notes
31. If we divide the peso in 100 equal parts then it becomes a:
a. Peso
b. Centavo
c. Coins
d. Notes
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32. Bangko Sentral shall begin on January first and end on December thirty-first of each year.
a. Fiscal Year
b. Calendar Year
c. Gregorian Calendar
d. Year of the Snake
33. The Bangko Sentral shall have the sole power and authority to issue
a. Notes
b. Coins
c. Currencies
d. Peso
34. Notes and coins issued by the Bangko Sentral shall be liabilities of the Bangko Sentral and
may be issued only against, and in amounts not exceeding, the assets of the Bangko Sentral.
a. Issue Power
b. Legal Tender Power
c. Liabilities for Notes and Coins
d. Counterfeit
35. The power of notes and coins that make it acceptable for the payment of debt both private
and public.
a. Counterfeit
b. Medium of Exchange
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c. Legal Tender
d. Loans
36. Who shall prescribe the printing of notes and minting of coins?
b. Governor of BSP
d. Monetary Board
37. Suppose Bank of the Philippine Islands wanted to change it’s P500,000 bills all in P1000
peso denomination into P50, what do you call this exchange?
a. Denomination
b. Denominator
c. Exchanging
d. Intercovertibility
38. Section 6. Composition of the Monetary Board- The powers and functions of the Bangko
Sentral shall be exercised by the Bangko Sentral Monetary Board, hereafter referred to as the
Monetary Board, composed of members appointed
a. five
b. six
c. seven
d. eight
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39. It is the a sum commensurate to the importance and responsibility attached to the position
a. salary
b. compensation
c. commission
d. perks and benefits
40. Section 15. Exercise of Authority. In the exercise of its authority, the Monetary Board shall:
(1) issue rules and regulations it considers necessary for the effective discharge of the
responsibilities and exercise of the powers vested upon the Monetary Board and the Bangko
Sentral. The rules and regulations issued shall be reported to the President and the Congress
within sixteen (16) days from the date of their issuance
(2) direct the management, operations, and administration of the Bangko Sentral, reorganize its
personnel, and issue such rules and regulations as it may deem necessary or convenient for
this purpose. The legal units of the Bangko Sentral shall be under the exclusive supervision and
control of the Monetary Board;
(3) establish a human resource management system which shall govern the selection, hiring,
appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to
establish professionalism and excellence at all levels of the Bangko Sentral in accordance with
sound principles of management.
which of the following statements are true?
a. 1 only
b. 1 and 2
c. 2 and 3
d. 1, 2 and 3
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41. The shall be the chief executive officer of the Bangko Sentral
a. President
b. Officer in Charged
c. Highest Investor
d. Governor
42. He executes and administers the policies and measures approved by the Monetary Board
a. President
b. Officer in Charged
c. Highest Investor
d. Governor
43. Section 19. Authority of the Governor in Emergencies. _ In case of emergencies where time
is insufficient to call a meeting of the Monetary Board, the Governor of the Bangko Sentral, with
the concurrence of other members of the Monetary Board, may decide any matter
or take any action within the authority of the Board.
a. one
b. two
c. three
d. four
44. Section 28. Examination and Fees. _ The supervising and examining department head,
personally or by deputy, shall examine the books of every banking institution once in every
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months
a. three
b. four
c. six
d. twelve
45. The balance of , after the payment of all said expenses, shall form part
of the assets available for payment to creditors.
a. assets and liabiities
b. revenues and earnings
c. liabilities and equities
d. income and losses
46. Section 39. Reports and Publications. The Bangko Sentral shall publish a general balance
sheet showing the volume and composition of its assets and liabilities as of the last working day
of the month within sixty (60) days after the end of each month except for the month of
December, which shall be submitted within ninety (90) days after the end thereof. True or
False?
a. True
b. False
c. There is a missing statement to make it correct
d. both b and c
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47. of the net profits shall be carried to surplus and the remaining
shall revert back to the National Treasury, except as otherwise provided in
the transitory provisions of this Act.
a. 20%, 80%
b. 50%, 50%
c. 30%, 70%
d. 40%, 60%
48. Any remaining profit or loss shall be carried in a special frozen account which shall be
named and the net balance of which shall appear either among the
liabilities or among the assets of the Bangko Sentral, depending on whether the revaluation
have produced net profits or net losses.
a. Revaluation of International Reserve
b. International Revenue
c. Retaained Earnings
d. Revenue reserves
49. The representative of the must be a certified public

accountant with at least ten (10) years experience as such. No relative of any member of
the Monetary Board or the Chairman of the Commission within the sixth degree of consanguinity
or affinity shall be appointed such representative
a. Chairman on Audit
b. Chairman of the Commission
c. Chairman or Relative Revenues
d. Bangko Sentral
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50. The unit of monetary value in the Philippines
a. Dollar
b. Peso
c. Euro
d. Yen
51. Section 74. Exchange Rates. The shall determine the exchange rate
policy of the country.
b. Executive Director
c. Governor
d. Monetary Board
52. Section 81. Guiding Principles. The which the Bangko Sentral is
authorized to extend to banking institutions under the provisions of the present article of this Act
shall be used to influence the volume of credit consistent with the objective of price stability.
(1) discounts and loans
(2) loans and advances
(3) rediscounts
(4) disounts and rediscounts
a. 1 only
b. 2 and 3
c. 4 only
110
d. 2 and 4
53. The Bangko Sentral may grant advances against the following kinds of collaterals for fixed
periods which, with the exception of advances against the collateral named in clause (4) of the
present subsection, shall not exceed three hundred sixty days (360) days:
(1) gold coins or bullion;
(2) securities representing obligations of the Bangko Sentral or of other domestic credit
institutions of recognized solvency;
(3) the credit instruments to which reference is made in subsection (a) of this section;
(4) the credit instruments to which reference is made in subsection (b) of this section
a. 1 and 2
b. 3 and 4
c. 1, 2, 3, and 4
d. none of the above
54. . The Bangko Sentral may grant advances against the following kinds of collaterals for fixed
periods which, with the exception of advances against the collateral named in clause (4) of the
present subsection, shall not exceed one hundred eighty (180) days:
(1) utilized portions of advances in current account covered by regular overdraft agreements
related to operations included under subsections (a) and (b) of this section, and certified as to
amount and liquidity by the institution soliciting the advance;
(2) negotiable treasury bills, certificates of indebtedness, notes and other negotiable obligations
of the Government maturing within three (3) years from the date of the advance; and
(3) negotiable bonds issued by the Government of the Philippines, by Philippine provincial, city
or municipal governments, or by any Philippine Government instrumentality, and having
maturities of not more than ten (10) years from the date of the advance.
111
a. 1 and 2
b. 3 and 4
c. 1, 2, 3, and 4
55. Section 84. Emergency Loans and Advances. In periods of national and/or local emergency
or of imminent financial panic which directly threaten monetary and banking stability, the
Monetary Board may, by a vote of at least of its members, authorize the Bangko
Sentral to grant extraordinary loans or advances to banking institutions secured by assets
a. three
b. four
c. five
d. six
56. The amount of any emergency loan or advance shall not exceed the sum of
of total deposits and deposit substitutes of the banking institution and shall be
disbursed in or more tranches.
a. 30%, 4
b. 40%, 1
c. 50%, 2
d. 60%, 3
112
57. Section 86. Endorsement. The documents rediscounted, discounted, bought or accepted as
collateral by the Bangko Sentral in the course of the credit operations authorized in this article
shall bear the of the institution from which they are received.
a. terms and conditions
b. endorsement
c. rediscounting policy
d. seal
58. Section 90. Principles of Open Market Operations. The open market purchases and sales
of securities by the Bangko Sentral shall be made exclusively in accordance with its primary
objective of achieving .
c. Monetary Price
d. Price Stabilty
59. Section 91. Purchases and Sales of Government Securities. In order to achieve the
(1) evidences of indebtedness issued directly by the Government of the Philippines or by its
political subdivisions; and
(2) evidences of indebtedness issued by government instrumentalities and fully guaranteed by

the Government.
a. 1 only
b. 2 only
113
c. 1 and 2
60. Section 93. Review of the Bangko Sentral's Portfolio. At least month the
Monetary Board shall review the portfolio of the Bangko Sentral in relation to its future credit
policy.
a. once every
b. twice every
c. once every other
d. twice every other
61. The Monetary Board may exempt from reserve requirements deposits and deposit
substitutes with remaining maturities of or more, as well as interbank borrowings.
a. two weeks
b. two months
c. two years
d. two decades
62. It is defined as an alternative form of obtaining funds from the public, other than deposits,
through the issuance, endorsement, or acceptance of debt instruments for the borrower's own
account, for the purpose of relending or purchasing of receivables and other obligations
a. deposit substitutes
b. emergency fund
c. alternative deposits
d. substitute
114
63. Section 101. Reserve Deficiencies. Whenever the reserve position of any bank or quasi-
bank, computed in the manner specified in the preceding section of this Act, is below the
required minimum, the bank or quasi-bank shall pay the Bangko
Sentral per day on the amount of the deficiency or the prevailing
ninety-one-day treasury bill rate plus three percentage points, whichever is higher: Provided,
however, That banks and quasi-banks shall ordinarily be permitted to offset any reserve
deficiency occurring on one or more days of the week with any excess reserves which they may
hold on other days of the same week and shall be required to pay the penalty only on the
average daily deficiency during the week. In cases of abuse, the Monetary Board may deny any
bank or quasi-bank the privilege of offsetting reserve deficiencies in the aforesaid manner.
a. one tenth of one percent (1/10 of 1%)
b. one tenth of two percent (1/10 of 2%)
c. one tenth of three percent (1/10 of 3%)
d. one tenth of four percent (1/10 of 4%)
64. The Bangko Sentral is prohibited from:
(1) acquiring shares of any kinds or becoming a stockholder of any corporation because it is
contrary to its purpose
(2) accepting shares as collateral for loan because it will be competing with other banking
institutions
(3) owning and exchanging dollar to peso for it will affect the circulation of money thereof
(4) onwing or managing of any enterprises because by doing so, it will be engaged in another
business outside the purpose for which it was created
which of the following is Bangko Sentral prohibited from?
a. 1, 2 and 4
b. 2, 3 and 4
115
c. 1, 2 and 3
d. 1, 3 and 4
65. What are the two methods of placing government securities?
a. direct sale to financial and non financial institutions
b. direct sale to to financial institutions and to to the public
c. direct sale to non financial institutions and to the custodians
d. direct sale to financial institutions and to privaate institutions
67. A fiscal agent is entrusted in doing the following EXCEPT:
(1) the management and administration of the national debt
(2) the buying and selling of government securities
(3) the floating, conversion and redemption government loans
(4) rediscounting, discounting and loan advancement
(5) the issuance and redemption of government bonds
a. 1 only
b. 2 and 3
c. 4 and 5
d. 4 only
68. Transfer of funds from a general cash aaccount to other accounts shall be made only upon
order of the
a. President of the Philippines
116
b. Treasurer of Baangko Sentral ng Pilipinas
c. Auditor of Bangko Sentral ng Pilipinas
d. Treasurer of the Philippines
69. Bangko Sentral as a banker must do the following obligations EXCEPT:
a. It manages naationaal and foreign debt
b. it provides foreign exchange
c. it gives statement of accounts to the general public
d. it conducts the account of the government and its instrumentation
70. Which of the following is included in the International Monetary Fund Special Facilities?
(1) Extennded Fund Facility
(2) Buffer Stock Financing Facility
(3) Compensatory and Continency Financing Facility
(4) Supplemental Reserve Facility
a. 1,2 and 3
b. 2, 3 and 4
c. 1, 3 and 4
d. 1, 2 and 4
71. It is the relationship in quantity/amount or size between two or more things; proportion
a. balance
b. ratio
117
c. partition
d. minimum requirement
72. What is a bank portfolio?
(1) loanable assets of banking institutions
(2) used to control or regulate the expansion of bank credit
(3) held directly by investors and/or managed by financal professionals
a. 1 and 2
b. 2 and 3
c. 1, 2 and 3
73. It is the right of the employer not to accept employees
a. lookout
b. strike
c. union
d. perks and benefits
74. It is a line or limit granted by the banks to the depositors wherein he is allowed to make
overdrawing.
a. credit limit
b. credit score
c. overdraft line
118
d. credit line
75. Deposits liabilities subject to reserve requirements are:
a. demand deposits and savings deposits
b. savings deposit and time deposit
c. time deposits and demand deposits
d. demand deposits, savings deposits, and time deposits
119

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INSTRUCTIONAL MATERIALS FOR FIMA 30043 MONETARY POLICY AND CENTRAL

COMPILED BY: ARIS G. NORBERTE

COURSE TITLE : MONETARY POLICY AND CENTRAL BANKING

CREDIT UNITS : 3 UNITS

COURSE PREREQUISITE : FIMA 30023 – Banking and Financial Institutions

COURSE DESCRIPTION : This course is designed to provide an understanding

 Discuss the basic concepts and principles of credit

History of the Philippine Determine issue Perspective from

6-7 Domestic and

8 Bangko Sentral ng Comprehend and

12 Comprehend and The New Central Bank

13-14 The New Central Bank

The Monetary Board, Describe the roles of Perspective from

Express different News articles

15 The New Central Bank

16-17 The International Constraint on The New Central Bank

Class Standing 70%

Midterm / Final Examinations 30%

Midterm Grade + Final Term Grade = FINAL GRADE

Central Banking for Every Juan and Maria

BSP Publications 2003

The Bangko Sentral & the Philippine Economy

BSP Publications, 2005

Nature and Definition of Central Banking in the Philippines 1-2

Evolution and History of Central Banking in the Philippines 3-4

Assessment and Activities 5

Primary Objectives, Significant Characteristics and

Services performed by the Bangko Sentral ng Pilipinas 5-9

Comparison of RA No. 265 and RA No. 7653 10-14

The new organizational structure of the

Assessment and Activities 38

Domestic and International Monetary Stabilization

Monetary Tools of BSP 43-49

Assessment and Activities 49

Bangko Sentral ng Pilipinas Management of

MIDTERM EXAMNINATION 52-63

Loans to Banks and Other Financial Institutions 63-69

Assessment and Activities 70

The Custodian of Cash Reserves of Banking Institutions

Bangko Sentral ng Pilipinas Monetary Policies 74-75

The Monetary Board 75-80

Assessment and Actvities 80

The Theory of Monetary Policy 80-82

The International Constraint on Monetary Policy 82-93

FINAL EXAMINATION 93-119

Evolution of Central Banking in the Philippines

A bill establishing a central bank was drafted by Secretary of Finance Manuel

A joint Philippine-American Finance Commission was created to study the

PD No. 72 emphasized the maintenance of domestic and international monetary

Executive Order No. 16 amended the Monetary Board membership to promote

The Evolution of the Central Bank Mandate

Assessment and Activities

Primary Objectives of the Bangko Sentral ng Pilipinas

Characteristics of Bangko Sentral ng Pilipinas

1. Profit motive is only secondary;

Services performed by the Bangko Sentral ng Pilipinas

Payments and Settlements

Payments and Settlements

Coins and Notes

International Reserves Management

Republic Act 265 Republic Act 7653

Section 2. Creation of the Bangko Sentral. -

Section 3. Responsibility and Primary Objective.