3.

1 The Role of Manual on Operation and Regulations of Banks (MORB) and

AMLC in the Philippine Banking System

The Banking Industry in the Philippines just like banks in other country is being regulated
by a Central Bank and in our case it is being regulated by the Bangko Sentra ng Pilipinas. In this
session, you will learn how our Central Bank exercises its power in controlling the Banking
activities in our Country and how attached agency to the BSP exercises its authority in securing
the financial  integrity of our Banking Community. 

The Manual on Operation and Regulations of Banks

The MORB is the document serves as the basis of the Bangko Sentral ng Pilipinas in
exercising its authority and powers in regulation of all banks within the Philippines. For Banks,
this document serves as the Bible of the Banking Industry.

The document also contains information on how banks should practice banking activities
in the country such as acceptance of cash deposits from clients, loan assistance to borrowers,
applicable fees and charges to its services and how it should adhere to the reporting standards
set by the Government.

In the MORB, the powers of the BSP to exercise is clearly stated such as the power to
Examine, Supervisory Enforcement Policy and Prompt Corrective Actions Framework. In
adherence to the MORB our Banking System maintained its integrity even in the eyes of the
International Community.

C:\Users\pc\Desktop\2018_MORB.pdf

Money Laundering

Money laundering is the illegal process of making large amounts of money generated by a
criminal activity, such as drug trafficking or terrorist funding, appear to have come from a
legitimate source. The money from the criminal activity is considered dirty, and the process
"launders" it to make it look clean.

(Supplementary material: https://www.investopedia.com/terms/m/moneylaundering.asp)

The Anti-Money Laundering Council

The Banking Industry should maintained the highest standard of professionalism in doing
its activities to maintain integrity. But in doing so, just like other industries, the banking sector
also faces challenges in safeguarding a clean and honest trading and exchanging of monies.

One of the biggest problems of any banking industry in the world is Money Laundering.
Before we proceed on how our banking industry combats money laundering, I want you to
understand it first so please watch this video.

(Video: https://youtu.be/257wV-AbKaE)

Our country is committed to a clean and honest trading. Therefore it created the Anti-
Money Laundering (AMLC).

The Role of the AMLC are as follows:

  To protect and preserve the integrity of the Philippine financial system, including the
confidentiality of bank accounts.
 To ensure that the Philippines shall not be used as a money laundering site for the
proceeds of any unlawful activity.
 To extend cooperation, consistent with Philippines’ foreign policy, in transnational
investigations and prosecutions of persons involved in money laundering activities
wherever committed.

Supplementary material - http://www.amlc.gov.ph/

3.2 The Role and Functions of Government Banks, Islamic and Universal Banks

The Banking Industry is composed of different banking classification. These banks have
same functions just like the other existing banks. But with only added function based on its
classification.

Government Banks

These are Financial Institutions owned and controlled by the state which focuses in
accepting deposits, cash withdrawals, lending activities such as mortgage banking and corporate
banking. The only difference that Government Banks have vs other banks is that it is the
authorized depository bank of the Republic of the Philippines and with objective to help some
specific sectors to alleviate poverty and provide capitalization to selected sectors.

 Landbank of the Philippines - https://www.landbank.com/

 Development Bank of the Philippines - https://www.dbp.ph/

Islamic Banks

Islamic banking, also referred to as Islamic finance or shariah-compliant finance, refers to

finance or banking activities that adhere to shariah (Islamic law).

 Al Amanah Islamic Bank - https://www.amanahbank.gov.ph/

Universal Banks

A universal bank is a bank that combines the three main services of banking under one
roof. The three services are wholesale banking, retail banking, and investment banking.
Universal Banks offers the same services like any other banks. Universal banks may offer credit,
loans, deposits, asset management, investment advisory, payment processing, securities
transactions, underwriting, and financial analysis.

 BDO Unibank Inc. (BDO)

 Metropolitan Bank and Trust Company (Metrobank)
 Bank of the Philippine Islands (BPI)
 Security Bank Corporation (SecB)
 China Banking Corporation (ChiB)
 Union Bank of the Philippines (UB)
 Philippine National Bank (PNB)
 Eastwest Banking Coproration (EWBC)
 Philippine Trust Bank (PTC)
 Rizal Commercial and Banking Corporation (RCBC)
 Asia United Bank (AUB)

3.3 The Role and Functions of Commercial, Savings, Thrift and Rural Banks

In the previous topic you have learned some of the classifications of banks. Now, in this session
this will be the continuation of understanding about the classification of banks.

Commercial Banks

These are banks that offer services such as acceptance of deposits, cash disbursements,
and offering term deposit or time deposit. Commercial Banks make money by providing and
earning interest from loans such as mortgages, auto loans, business loans, and personal loans.

 Philippine Bank of Communications (PBCom)

 Robinsons Bank Corporation (RBank)
 Bank of Commerce (BankCom)
 Maybank of the Philippines (Maybank)
 Philippine Veterans Bank (Veterans)
 Chinatrust (Philippines) Commercial Bank Corporation (Chinatrust)

Savings Banks

A savings bank is a financial institution whose primary purpose is accepting savings

deposits and paying interest on those deposits. A savings bank is organized for the purpose of
accumulating the savings of depositors and investing them , together with its capital papers.

Thrift Banks
 They are primarily engaged in MOBILIZING the savings of the people. they encourage the
habit of thrift and savings ,and provide loans at reasonable interest rates.

THE FOLLOWING BANKS FALLS UNDER THE CATEGORY OF THRIFT BANKS:

1. Savings and Mortgage banks

2. Private development banks
3. stock savings and loan associations

Rural Banks

The rural banking system was introduced in the early 1950s to serve the credit needs of
the poor consumers and small producers mostly farmers and fisherman. They were organized
primarily to attain the goal of the national government to improve the social economic conditions
in the rural areas. The government has channeled many of its various financial assistance
programs to countryside development.

Module 3: PowerPoint Presentation

FIN-004-Government-Banking.pptx

GOVERNMENT BANKING INSTITUTIONS – GOVERNMENT BANKS IN THE PHILIPPINES

TERMS TO REMEMBER:

• Agrarian reform - agrarian reform can refer either, narrowly, to government-initiated or

government-backed redistribution of agricultural land or, broadly, to an overall redirection
of the agrarian system of the country, which often includes land reform measures.

• Agrarian Reform Fund - An Agrarian Reform Fund, hereinafter referred to as the "Fund" is
hereby established to finance and/or guaranty the payment of farm lots acquired under
Proclamation No. 27.

• Amortization - is an accounting term that refers to the process of allocating the cost of an
intangible asset over a period of time. It also refers to the repayment of loan principal
over time.

• Stakeholders - a person or a group of people who own a share in a business

• Bond - Bonds are used by companies, municipalities, states, and sovereign governments
to finance projects and operations.
 • CARP (Comprehensive Agrarian Reform Program) - is an agrarian reform law of the
Philippines whose legal basis is the Republic Act No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law (CARL).

• Infrastructure – the term for the basic physical systems of a business or nation—
transportation, communication, sewage, water, and electric systems are all examples of
infrastructure. These systems tend to be high-cost investments and are vital to a
country's economic development and prosperity.

• Social Services – Benefits and facilities such as education, food subsidies, health care, and
subsidized housing provided by a government to improve the life and living conditions of
the children, disabled, the elderly, and the poor in the national community.

• Charter – a document, issued by a sovereign or state, outlining the conditions under

which corporation, colony, city, or other corporate body disorganized, and defining its
rights and privileges.

• NLIB – National Loan and Investment Bank

• AIB – Armed Forces and Industrial Bank

• RFC – Rehabilitation Finance Corporation

• AAIIBP - Al-Amanah Islamic Investment of the Philippines

• Murabaha Financing - form of financing where the bank purchases goods for the
customer. Tenor is usually short-term.

• Al-IJARAH - A form of financing where the bank acquires a property called the Ijarah
asset, to be leased to client at a pre-determined lease payments and lease period.

LAND BANK OF THE PHILIPPINES

HISTORY

Milestones in Corporate Existence

1. Republic Act 3844 (Agricultural Land Reform Code) – 8 August 1963

• To finance the acquisition and distribution of agricultural estates for division and
resale to small landholders as well as the purchase of the landholding by the
agricultural lessee;

• Members of the Board of Trustees

• Chairman - LBP President & CEO

• One member elected by the holder of preferred shares

 • 4 Members: including the Head of Land Authority (now Dept. of
Agrarian Reform)

• Increased authorized capitalization to 3 billion Increased the members of the Board

of Directors to seven (7)

• Chairman - Secretary of Finance

• Vice-Chairman - LBP President

• Members (Ex-Officio)

• Secretary of Agrarian Reform

• Secretary of Labor -

• Three Members - elected annually

Reorganization – 1977

• LBP formed three major sectors - Agrarian, Banking and Operations to strengthen
operations and ensure long-term viability

• LBP to provide assistance to landowners through:

• investment information and counseling assistance.

• conversion and/or exchange of LBP Agrarian Reform bonds to/from

government stocks with government assets.

• marketing of LBP Agrarian Reform bonds.

VISION AND MISSION

Vision

By 2023, LANDBANK shall be the leading universal bank that promotes inclusive growth,
especially in the unbanked and underserved areas, through the delivery of innovative financial
products and services powered by digital banking platforms.

Mission

To Our Clients and Publics

We provide accessible and best technology solutions to deliver timely and responsive
financial and support services to meet the needs of our clients, especially Small Farmers and
Fishers (SFFs), Micro, Small and Medium Enterprises (MSMEs), Countryside Financial Institutions
(CFIs), Local Government Units (LGUs) and government agencies, while promoting sustainable
development anchored on good governance.

To Our Employees
 We are the employer of choice. We develop and nurture talents who exemplify the
highest standards of ethics, social responsibility and service excellence. We support diversity and
cultivate a healthy work environment with equal opportunity for professional growth and
advancement.

MAJOR ROLES

• An implementing agency of CARP involved in land evaluation, compensation to

owners of private agricultural lands, and collection of amortizations from CARP
farmer-beneficiaries.

• Provision of credit assistance to small farmers and fisher folk and ARBs.

• An official depository of government funds.

• A government bank with a social mandate to spur countryside development.

PURPOSE

The Land Bank of the Philippines is a government financial institution that strikes a
balance in fulfilling its social mandate of promoting countryside development while remaining
financially viable.

OBJECTIVES

The objectives of the Bank are derived from the socio-economic scan and the implications
thereof, the Land Bank Act and mandate as set by the shareholder. These encompass all the
requirements of the Land Bank Act and serve as a basis for the Bank’s units to develop activity
plans in pursuance of the objectives. The Bank must promote, facilitate and support.

DEVELOPMENT BANK OF THE PHILIPPINES

HISTORY AND CORPORATE PROFILE

 DBP is Government Financial Institution

 founded on 1947
 Headquarters: Makati City

TIMELINE

 1935 – National Load and Investment Board (NLIB) was created.

 1939 – NLIB was abolished and Armed Forces and Industrial Bank (AIB) was created.
  1947 – Rehabilitation Finance Corporation (RFC) under R.A. No. 85 was established.
 1958 – RFC was reorganized into Development Bank of the Philippines (DBP).
 with the initial P500 millions, DBP expanded their facilities and operations to
accelerate the national development efforts.
 1986 – Former Pres. Corazon Aquino issued E.O No. 81 which provided for the revised
charter.
 1998 – Former President Fidel V. Ramos signed R.A. 8523 amending DBP’s 1986 Charter.
 As of Today – DBP sharpens its development focus as the country’s Infrastructure Bank.
The bank spurs national growth by funding projects that raise the economy’s
competitiveness.
 137 Branches and 15 regional marketing centers across the country.
 Second largest state-owned bank and one of the largest government-owned and
controlled corporations.
 ranked in 8th place as a largest bank in the Philippines as of December 2018.

VISION AND MISSION

Vision

By 2022, a one-trillion Bank capable of supporting and spearheading development in half of the
Philippine countryside.

Vision 2040

By 2040, DBP will be a world-class infrastructure and development financial institution, and
proven catalyst for a progressive and prosperous Philippines.

Mission

 To support infrastructure development, responsible entrepreneurship, efficient social

services, and the protection of the environment.
 To work for raising the level of competitiveness of the economy for sustainable growth.
 To promote and maintain the highest standards of good governance.

MAJOR ROLES AND PURPOSE

To provide financial assistance to various business and economic sectors. To maintain the
sustainable growth of the Philippine economy and to speed up the services of the country.

SERVICE OFFERED

1. Deposit products & cash services

2. Trade products and services
3. Treasury product and services
 AMANAH ISLAMIC BANK

HISTORY

• Al Amanah Islamic Bank traces it’s roots to the philippine Amanah Bank,
established by President Ferdinand Marcos in 1973 by virtue of Presidential Decree
No. 264. With an initial capital of 100 million pesos, it was one of the world’s first
Islamic bank. It’s charter originally mandated it to provide financial services to the
provinces of Basil, Cotabato, Lanao Del Norte, Lanao Del Sur, Palawan, Sulu, Tawi-
Tawi, Zamboanga del Norte, and Zamboanga del Sur, where there are large, if not
dominant, Muslim populations.

• In 1974, the bank’s charter was amended by Presidential Decree No. 542, allowing
it open branches in Maguindanao and Sultan Kudarat.

• In 1989, the bank was re-chartered and re-capitalized pursuant to Republic Act No.
6848, and was subsequently renamed the Al-Amanah Islamic Investment Bank of
the Philippines, with the capital of one billion pesos. Between 1990 and 2007, the
bank was under the supervision of the Bureau of the Treasury.

• The bank was sold to another government-owned bank, the Development Bank
of the Philippines in 2008. However in 2012, DBP announced that it intended to
divest itself on the bank, since it does not have the expertise to handle an Islamic
Financial Institution.

THE BANK TODAY

• Al-Amanah Islamic Investment Bank of the Philippines (AAIIBP) is a universal bank

authorized to perform and provide Islamic banking, financing and investment services
pursuant to R.A. 6848, otherwise known as the Charter of the Al-Amanah Islamic Bank of
the Philippines of 1990. In 2008, AAIIBP became a subsidiary of Development Bank of the
Philippines, owning 99.9% of its capital stock, which introduced its current logo and tag
name. “Amanah Islamic Bank”.

VISION AND MISSION

Vision

To be the leading and choice Islamic financial institution providing alternative banking services
in response to the emerging global Islamic markets and to promote and accelerate the socio-
economic developments of the Islamic communities in Philippines by 2022.

Mission

To become a full Islamic and afford Filipinos of the blessings and benefits of Islamic
banking financing and investment.
  To be competitive and significant in banking industry.
 To become a key-player in the global Islamic banking and investment market.
 Participate to all phases of development spec in the ARMM and Mindanao.
 To serve as arm of the government in addressing poverty alleviation especially in
Muslim Filipino communities across the country by delivering them the goodwill and
simplistic Islamic banking and financing that are responsive, sensitive, suitable to their
way of life.
 To equip Muslim Filipinos with Islamic banking and Financial education that can help them
improve their economic condition and made them a significant economic force of the
nation.

MAJOR ROLES

AAIIBP is committed to protect and respect your privacy to ensure that you continue to trust the
Bank with your personal information; to adopt and observe appropriate standards; its
implementing rules and regulations (IRR) issuances and other relevant laws of the Philippines.

PURPOSE

Murabahah - For working capital; for Acquisition of fixed assets/machineries and equipment for
business use.

Ijarah - For acquisition of all types of machinery and equipment used for business.

OBJECTIVES

 To promote and accelerate the socio-economic development of the Autonomous Region.

 To establish and participate in agricultural, commercial, and industrial ventures based on
the Islamic concept of Banking.

FUNCTIONS

All the assets, liabilities and capital amount of the Philippines; Amanah Bank are hereby
transferred to the Al-Amanah Islamic Investment Bank.

ISLAMIC BANKING

 known as non-interest banking, is a system based on the Principles of Islamic or Sharia

Law and guided by Islamic economics.
 Financial transactions within Islamic banking are culturally distinct form of ethical
investing.
 Investing involving alcohol, gambling, pork and other forbidden items is prohibited.

PRINCIPLES OF ISLAMIC BANKING

 Sharing of Profit and Loss

  Prohibition of the collection and payment of interest by lenders and investors

HOW ISLAMIC BANKS MAKE A PROFIT

• Islamic banks use equity participation to make profit. Equity participation means if a bank
loans money to a business, the business will pay back the loan without interest, but
instead gives the bank a share in its profits.

REFERENCES:

 https://www.landbank.com/
 https://www.devbnkphl.com/
 http://www.amanahbank.gov.ph/
 https://www.investopedia.com/terms/i/islamicbanking .asp

FIN-004-Islamic-Banking.pptx

ISLAMIC BANKING

What is 'Islamic Banking‘?

• https://www.youtube.com/watch?v=OvnF2f2MZug
• https://www.youtube.com/watch?v=5Qmf0uFvuw0
• Islamic banking, also known as non-interest banking, is a banking system that is based on
the principles of Islamic, or Shari'ah, law and guided by Islamic economics. Two
fundamental principles of Islamic banking are the sharing of profit and loss and the
prohibition of the collection and payment of interest by lenders and investors.
Islamic law prohibits collecting interest or "riba."

Breaking Down 'Islamic Banking'

• Islamic banking is grounded in Shari'ah, or Islamic principles and all bank undertakings
follow those Islamic morals. Islamic rules on transactions are called Fiqh al-Muamalat. 
• Typically, financial transactions within Islamic banking are a culturally distinct form of
ethical investing. For example, investments involving alcohol, gambling, pork, and other
forbidden items is prohibited.

Principles of Islamic Banking

• The principles of Islamic Banking follow Sharia law, which is based on the Quran and the
Hadith, the recorded sayings, and actions of the Prophet Muhammad (PBUH). When more
information or guidance is necessary, Islamic bankers turn to learned scholars or use
independent reasoning based on scholarship and customs. The bankers also ensure their
ideas do not deviate from the fundamental principles of the Quran.

History of Islamic Banking

• The origin of Islamic banking dates back to the beginning of Islam in the seventh century.
The Prophet Muhammad's (PBUH) first wife, Khadija, was a merchant. He acted as an
agent for her business, using many of the same principles used in contemporary Islamic
 banking. In the Middle Ages, trade and business activity in the Muslim world relied on
Islamic banking principles. These banking principles spread throughout Spain, the
Mediterranean, and the Baltic States, arguably providing some of the basis for western
banking principles. From the 1960s to the 1970s, Islamic banking resurfaced in the
modern world.

How Do Islamic Banks Earn Money Without Using Interest?

• To earn money without the use of charging interest Islamic banks use equity
participation systems.

• Equity participation means if a bank loans money to a business, the business will pay back
the loan without interest, but instead gives the bank a share in its profits. If the business
defaults or does not earn a profit, then the bank does not benefit either.

• For example, in 1963, Egyptians formed an Islamic bank in Mit Ghmar. When the bank
loaned money to businesses, it did so on a profit-sharing model. To reduce its risk the
bank only approved about 40% of its business loan applications, but the default ratio was
zero.

What is 'Equity Participation‘?

• Equity participation refers to the ownership of shares in a company or property.

• Equity participation may involve the purchase of shares through options or by allowing
partial ownership in exchange for financing.

• The greater the equity participation rate, the higher the percentage of shares owned by
stakeholders. Allowing stakeholders to own shares ties the stakeholders' success with that
of the company or real estate investment. In this case, a more profitable company will
provide stakeholders with greater gains.

Key Takeaways

• Islamic banking, also known as non-interest banking, is a system based on the principles
of Islamic or Sharia law and guided by Islamic economics.

• Islamic banks make a profit through equity participation which requires a borrower to give
the bank a share in their profits rather than paying interest.

• Some commercial banks have windows or sections that provide Islamic banking services
to customers.

References

• https://www.investopedia.com/terms/i/islamicbanking.asp

• https://www.youtube.com/watch?v=OvnF2f2MZug

• https://www.youtube.com/watch?v=5Qmf0uFvuw0
FIN-004-Commercial-Thrift-and-Rural-Banks.pptx

COMMERCIAL BANKS, THRIFT BANKS AND RURAL BANKS

COMMERCIAL BANKS

• grant mainly as short-term loans

• are the biggest lenders in commercial and industrial loans
• now permitted to exercise the power to accept demand deposits under certain terms and
condition.

DEPOSIT OPERATION

• A COMMERCIAL BANK IS AUTHORIZED TO ACCEPT OR CREATE DEMAND DEPOSIT

SUBJECT TO WITHDRAWAL.
• DEMAND DEPOSIT, ALSO KNOWN AS CURRENT ACCOUNT OR CHECKING ACCOUNTS, DO
NOT EARN INTEREST.
• ALSO AUTHORIZED TO ACCEPT SAVINGS DEPOSITS WHICH EARN INTEREST
• ALSO OFFER OF “NOW” ACCOUNTS( NEGOTIABLE ORDER OF WITHDRAWAL)

BORROWING OPERATIONS

Commercial bank may borrow from the Central Bank and other government and private
financial institutions. Borrowing may take form of:

1. Rediscounting
2. Direct Advance

Rediscounting - mode of borrowing whereby the bank assigns in favor of the Central Bank the
eligible borrowers’ paper in accordance with established guidelines, terms, and conditions.

Direct advance or loan – grant direct advances to a commercial bank in times of emergency or
when it can no longer be allowed to rediscount eligible borrowers’ paper.

LENDING OPERATIONS

LOANS GRANTED BY A COMMERCIAL BANK MAY BE CLASSIFIED AS FOLLOWS:

1. AS A COLLATERAL
a) SECURED LOANS - THESE LOAN ARE SECURED BY A REAL MORTGAGE
b) UNSECURED LOANS - THESE LOANS ARE GRANTED AGAINST PERSONAL
SECURITY.
2. AS TO PURPOSE
a) AGRICULTURAL - THESE LOANS ARE GRANTED TO FINANCE AGRICULTURAL
PRODUCTION AND RELATED ACTIVITIES.
b) COMMERCIAL - These loans are granted to finance the purchase of goods ,
commodities or merchandise for resale.
c) REAL ESTATE - THESE LOANS ARE GRANTED TO FINANCE AND/OR REFINANCE
THE CONSTRUCTION, ACQUISITION EXPANSION AND/OR IMPROVEMENTS OF
URBAN AND RURAL PROPERTIES.
 d) OTHERS - THESE LOANS ARE GRANTED FOR PURPOSES OTHER THAN
AGRICULTURAL, COMMERCIAL, INDUSTRIAL AND REAL ESTATE.
3. AS TO ACCOUNTING TREATMENT
a) DEMAND LOANS - THESE LOANS ARE TO BE GRANTED WITHOUT FIXED
MATURITY DATES BUT WHICH BECOME DUE AND PAYABLE UPON CALL OR DEMAND
AT THE OPTION OF THE LENDING BANK.
b) BILLS DISCOUNTED - THESE LOANS ARE THOSE THE INTEREST OF WHICH IS
COLLECTED IN ADVANCE.
c) TIME LOANS - THESE LOANS ARE PAYABLE ON A FIXED DATE OR WITHIN A
SPECIFIED PERIOD OF TIME, USUALLY MORE THAN ONE YEAR.

TRUST OPERATION

A COMMERCIAL BANK MAY ENGAGE IN TRUST OPERATION OR TRUST BUSINESS REFERS TO

THE ADMINISTRATION, HOLDING, AND MANAGEMENT BY A TRUSTEE OF FUNDS AND/OR
PROPERTY FOR THE BENEFIT AND ADVANTAGE OF THE TRUSTOR OR THE BENEFICIARIES.

EXPANDED COMMERCIAL BANKS

These are commonly known as UNIVERSAL BANKS which emerged with the introduction of
financial reform in 1980.

• combination of COMMERCIAL BANKING with the powers of an INVESTMENT HOUSE.

• the investment house operations may be discharged by an expanded commercial banks

either:

• (a) in-house, that is , by establishing SEPERATE DEPARTMENT therefore the bank.

• (b) through the establisment of a SEPERATE SUDSIDIARY.

ORGANIZATION AND CAPITALIZATION

An EXPANDED COMMERCIAL BANK is organized like an ordinary bank, except the minimum
PAID- IN CAPITAL OF THE FORMER before is starts operations is ₱500 million.

EQUITY OF INVESTMENTS

An expanded commercial banks may invest in the equity of other financial institutions under the
following regulations:

1. it can own up 100% of the voting stockof a financial institution performing QUASI-
BANKING functions (money market operations)
2. it can invest the following non-financial allied under takings:
a) warehouse companies
b) storage companies
c) safe deposit box companies
d) companies engaged in the MANAGEMENT of mutual funds but not in the mutual
funds THEMSELVES.
 e) management corporations engaged in activities similar to the management of
mutual funds
f) companies engaged provisions of computer services
g) insurance agencies
h) companies engaged HOME BUILDING and/or HOME DEVELOPMENT
i) companies providing drying and/or milling facilities for agricultural crops, such as
rice and corn.
j) companies engaged in insurance brokerage.
3. the bank's investment, or of its wholly or majority owned subsidiary, in any single-non-
allied undertaking SHALL NOT EXCEED 35% of th total SUBSCRIBED CAPITAL STOCK nor
SHALL IT EXCEED 35% of the voting stock of that enterprise.
4. The bank of equity investment in, and outstanding loans to,any single enterprise whether
allied or non-allied, shall not,at any time exceed 15% of the net worth of the investing
bank.

UNDERWRITING AND DEALERSHIP IN SECURITIES

UNDERWRITING - is the act or process of guaranteeing the distribution of sale and securities
of any kind issued by another corporation.

TYPES OF UNDERWRITING:

1. the guaranteed basis where the underwriting bank guarantees the disposition of the
securities it has received from the issuing corporation.
2. best-efforts basis where the underwriting bank simply tries its best to dispose of the
securities without any guarantee.

DEALERSHIP - Brokerage in that the later refers to the act performed by a person or institution
where by it arranges the meeting of a seller and buyer of the securities.

THRIFT BANKS

are primarily engaged in MOBILIZING the savings of the people. they encourage the habit of
thrift and savings ,and provide loans at reasonable interest rates.

THE FOLLOWING BANKS FALLS UNDER THE CATEGORY OF THRIFT BANKS:

1. Savings and Mortgage banks

2. Private development banks
3. stock savings and loan associations

SAVINGS BANKS

A savings bank is organized for the purpose of accumulating the savings of depositors and
investing them , together with its capital papers.

• It may also invest in such other investments and loans which the MONETARY BOARD OF
THE CENTRAL BANK may determine as necessary in the furtherance of national economic
objectives
PRIVATE DEVELOPMENT BANKS

A private development bank is organized under the provisions of REPUBLIC ACT NO. 4093, as
amended (otherwise known as the private development Banks'Act)

• the principal objective of a private bank is to CATER TO THE CAPITAL NEEDS and
DEMAND for adequate investment credit or medium-and long-term loans for the
promotion and growth of agriculture and industry at REASONABLE COST.

RURAL BANK

The rural banking system was introduced in the early 1950s to serve the credit needs of the
poor consumers and small producers, MOSTLY FARMERS AND FISHERMAN.

• it was organized primarily to attain the goal of the national government --- to improve the
social economic conditions in the rural areas.

• through the rural banks, the government has channeled many of its various financial
assistance programs to countryside development.

FUNCTIONS OF A RURAL BANK:

1. Grant investments in accordance with existing rules and regulations

2. Accept savings and time deposits
3. Sell domestic drafts
4. Act as correspondent for other financial institutions
5. receive in custody funds, documents, and other valuable objects, and rent safety deposit
boxes for the safeguarding of the objects.
6. Act as Financial Agent, buy and sell, by order of and for the account of its customers,
shares, evidences of indebtedness and all types of securities.
7. Make collections and payments

TYPES OF LOANS:

1. AGRICULTURAL LOANS

a) farm expenses,like cost of labor, connection with preparation, planting, andcultivation of

the farm and the harvesting, transportation, storage and marketing products.

b) purchase of seeds, fertilizers,work animals, implements, and equipment necessary for the
operation of the farms.

c) purchase of animals,poultry, or fish for breeding purposes

d) Minor repairs, construction, or improvements in the farm or fishpond which are necessary
and proper to maintainor increase productivity.

e) Payment of current taxes and irrigation fees.

2. COMMERCIAL LOANS - these are grated for the purpose of conducting or carrying on,
developing, or improving commercial operations.
3. INDUSTRIAL LOANS:

a) expenses for labor in connection with the manufacture of goods which are in demand and
readily salable, or have quick turnover, considere necessity and essentials.

b) purchase of raw materials for manufacture and processing of the goods.

c) marketing of the goods which have been manufactured or processed.

4. TERM LOANS

a) Purchase of farm land, improved or unimproved

b) improvement of agricultural, commercial, industrial or residential real estate

c) acquisition of agricultural or industrial machinery, tools and other equipment needed in

the farm.

d) purchase of equipment and materials for livestock and poultry raising,fish culture and
coastal fishing.

e) production and harvesting of agricultural crops which have production cycles of more
than one year.

5. LOAN TO COOPERATIVES:

a) AGRICULTURAL LOANS for meeting the credit needs of members of farmers

cooperatives.

b) COMMERCIAL NEEDS for the purchase of commodities for resale to members of the
cooperatives.

c) INDUSTRIAL LOANS to meet the credit needs of the members of the cooperatives.

TERMS OF LOANS:

1. AGRICULTURAL LOANS shall be granted for a period not exceeding 360 days, which
may renewed for not more than two times.

2. COMMERCIAL LOANS shall be granted for a maximum period of 180 days, which may
be renewed for a period not exceeding 90 days.

3. INDUSTRIAL LOANS may be granted for a period of not more than 360 days,
renewable for another period exceeding 180 days.

4. TERM LOANS

• A medium-term loan is one with maturities of more than one ear but not exceeding
five years.
• A long-term loan is one with maturity period of more than five years.
a) long- term loans for the purchase of farm land, improved and unimproved
(20 years)
 b) Long-term loans for the improvement of agricultural, commercial, industrial,
or residential real estate(10 years)
c) Medium- Term Loans for agricultural, industrial machinery, tools, and other
equipment needed in farm.( 5 years)
d) Medium-term loans for the purchase of acquisition of work animals for use in
the farm owned/operated by the borrower( 3 years)
e) Medium-term Loans for agricultural crops with production cycle exceeding
one year(18 months)

DEPOSIT OPERATION:

1. Demand Deposit- also known as current or checking account.

2. Savings Deposit - evidence as a passbook in the name of depositor. it earns interest
3. Time Deposit- evidenced by a certificate issued by the rural bank in the name of the
depositor. it earns interest on the basis maturity period.
4. NOW account-special type of savings deposit which is evidenced by certificate issued
only to natural persons. it earns interest.

REFERENCES

FINANCIAL INSTITUTIONS by Feliciano R. Fajardo

https://www.investopedia.com