OSIAS COLLEGE INC.

F. TANEDO ST. SAN NICOLAS TARLAC CITY

WRITTEN
REPORT
IN
 BASIC
MICROECON
OMICS
SUBMITTED BY:
FERIA, MARK ANGELO
DE LEON, NESTOR
SANTULLO, REYNALYN
CERENEO, ELEANOR

SUBMITTED TO:
Mrs. MELINDA ABEJUELA
TYPES OF BANKS AND FUNCTIONS OF MONEY
What is Bank?

The term Bank is derived from the French word BANCO which means a bench or money exchange
table. A bank is a financial institution licensed to receive deposits and make loans. Banks may also
provide financial services such as wealth management, currency exchange, and safe deposit boxes. 

THE BANKING SYSTEM IN THE

PHILIPPINES
REYES (2003) classified banks
according to function, size and scope
of services being offered. Based on these criteria, banks are grouped into universal banks, commercial
banks, thrift banks, rural banks, cooperative banks, Islamic banks and microfinance banks.

TYPES OF BANKS IN THE PHILIPPINES

 UNIVERSAL BANKS - are banks vested with the authority to exercise, in a addition to the powers
of an investment house and the power to investing the equities of allied and non- allied
enterprises as may be determined by the BSP. The minimum capitalization for universal banks is
P4.95 billion.
 COMMERCIAL BANKS- are banking entities which, in addition to the general powers incident to
corporations are authorized to carry on the business of commercial banking namely.

a. Accepting drafts and issuing letters of credit

b. Discounting and negotiating promissory notes, drafts, bills, or exchange and other evidences of
debts;

c. Accepting or creating demand deposits;

d. Receiving other types of deposits and deposits substitutes;

e. Buying and selling foreign exchange and gold or silver bullion;

f. Acquiring marketable bonds and other debt securities; and

g. Extending credit subject t the rules the BSP may promulgate.

 THRIFT BANKS- are banks established primarily to mobilize small savings and provide loans at
generally longer and easier terms. They cater to small and medium enterprises and have a
minimum capitalization of P52 million (outside Metro Manila) and P325 million (within Metro
Manila).

TYPES OF THRIFT BANKS

1. SAVINGS BANKS - are banks organized for the purpose of accumulating savings, deposits, and
investing them for specified purposes.
2. PRIVATE DEVELOPMENT BANKS- are banks that are organized primarily to cater to the capital
needs and demand for investment credit or medium to long – term loans for the promotion of
growth of industry and agriculture at reasonable costs.
3. STOCK SAVINGS AND LOAN ASSOCIATION- are institutions engaged in the accumulation of
savings mainly of stockholders in specified undertakings. They are primarily concerned with
servicing the needs of the household by providing personal finance and long – term financing for
home building and development.
4. RURAL BANKS- are banks which are largely privately – owned that provide credit facilities to
farmers and merchants, or their cooperatives and in general, to the people of rural
communities. The minimum capitalization for this type of bank is P2.6 million (5th/6th class
municipalities) and P26million (within Metro Manila).
5. COOPERATIVE BANKS- are duly registered associations of person who voluntarily joined
together with a common bond of interest to achieve a lawful, common, social, or economic end,
and to make equitable contributions to the capital required and accept a fair share of the risks
and benefits of the undertaking in accordance with universally accepted cooperative principles.
6. ISLAMIC BANKS- are banks established to promote and accelerate the socio- economic
development particularly of the Autonomous Region of Mindanao by performing banking,
financing and investment operations and to establish and participate in agricultural, commercial
and industrial ventures based on the Islamic concept of banking. All business dealing and
activities of Islamic banks are subject to the basic principles and rulings of Islamic Sharia within
the purview of the aforementioned declared policy.
7. MICROFINANCE BANKS- are banks that are provide a broad range of financial services such as
deposits, loans, payment services, money transfers and insurance products to the poor and low-
income households for micro enterprises and small businesses. These banking services are
aimed at enabling the poor and low- income households to raise their income levels and
improve their living standards (Reyes 2003).

FUNCTIOS OF MONEY

1. MEDIUM OF EXCHANGE- When money is used to intermediate the exchange of goods and
services, it is performing a function as a medium of exchange.

2. UNIT OF ACCOUNT- It is a standard numerical unit of measurement of market value of

goods, services, and other transactions. It is a standard of relative worth and deferred
payment, and as such is a necessary prerequisite for the formulation of commercial
agreements that involve debt. To function as a unit of account, money must be divisible into
smaller units without loss of value, fungible (one unit or piece must be perceived as
equivalent to any other), and a specific weight or size to be verifiably countable.
3. STORE OF VALUE- To act as a store of value, money must be reliably saved, stored, and
retrieved. It must be predictably usable as a medium of exchange when it is retrieved.
Additionally, the value of money must remain stable over time.

CONCEPT AND FUNCTIONS OF MONEY

Money is defined in many different ways. In economics, Tetangco (2003) defined money as
traditionally as anything that is generally accepted as payment for goods and services or as
repayment for depts. Money is defined as “nothing other than a transferable
acknowledgement of debt, a promise to pay, arbitrarily created and usually with an
indeterminate maturity and exchange value. As a financial asset, money presents a claim
against income or wealth of a business firm, household or unit of government, represented
usually by a certificate, receipt or other legal documents .However, not all financial assists
can be classified as money. For example, stocks and debt scariness do not necessarily
constitute the broad definition of money since these assets do not perform the other
functions of money such as serving as a unit of account moreover, stocks and similar assets
do not have the liquidity feature of money because these assets are not easy to exchange
for cash or for other goods and services..