AYALA, FRENCH, D.

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1. What is Banking? What are its significances in our day-to-day life?

o Banking includes a wide variety of financial institutions that store the

money of individuals, businesses and other entities. Banks provide
financial services that help people save, manage and invest their
money.
o Banking is the business of protecting money for others. Banks lend
this money, generating interest that creates profits for the bank and
its customers.
o Banks are closely linked to many of our everyday activities, such as
managing and saving money, processing paychecks, providing bill
payment services, financing major purchases and more

2. What is Bank?  What is Banking System in the Philippines?

A bank is a financial institution that is licensed to accept checking and

savings deposits and make loans. Banks also provide related services such
as individual retirement accounts (IRAs), certificates of deposit (CDs),
currency exchange, and safe deposit boxes.

There are several types of banks including retail banks, commercial or

corporate banks, and investment banks.

o Banks in the Philippines are classified into universal, commercial,

thrift banks, rural, cooperative, and Islamic banks. Universal banks
are authorized to provide a variety of services including investment,
commercial, and development banking, as well as mutual funds and
housing loans. Commercial banks, on the other hand, are privately-
owned institutions that accept deposits and offer checking services.
In the Philippines, these kinds of banks are the largest group of
 financial institutions and the most popular among customers with
different financial needs because of their wide array of financial
services. Among the largest universal and commercial banks in the
country in terms of assets were BDO Unibank Inc., Metropolitan
Bank, and Trust Company, and the Land Bank of the Philippines.

On the other hand, thrift banks are comprised of savings and

mortgage banks as well as loan associations that focus on
accumulating and investing depositors’ savings. This type of bank also
provides short-term to long-term financing. Meanwhile, rural banks
and cooperative banks are authorized to provide basic financial
services to rural residents and financial assistance to farmers. Finally,
Islamic banks cater to Muslim Filipinos and operate under Islamic
laws.

3. How bank is created and what the benefits of Banking?

Banks have existed since at least the 14th century. They provide a safe place for
consumers and business owners to stow their cash and a source of loans for
personal purchases and business ventures. In turn, the banks use the cash that is
deposited to make loans and collect interest on them.
o Banking began when empires needed a way to pay for foreign goods
and services with something that could be exchanged easily. Coins of
varying sizes and metals eventually replaced fragile, impermanent
paper bills.
o Banking has been around since the first currencies were minted and
wealthy people wanted a safe place to store their money. Ancient
empires also needed a functional financial system to facilitate trade,
distribute wealth, and collect taxes. Banks were to play a major role
in that, just as they do today.
Benefits of Banking

 Security
Banks protect your cash from theft and natural disasters like fires or
floods. Your insurance may not cover money lost in your home, car
or on your person. But banks don’t typically carry the same risk.

 Insurance
Banking security is more than just vaults and guards. Most of your
assets are federally insured up to $250,000 by the federal
government if the institution fails. The FDIC (Federal Deposit
Insurance Corporation) insures assets in banks and
the NCUA (National Credit Union Administration) insures assets in
credit unions. Federal laws also require institutions to maintain
minimum levels to help them remain solvent.

 Convenience
Banks allow you to access your money when you need it. They can
also provide “one-stop shopping” for financial needs from
investments to home and auto loans, along with other financial
services. Convenience, along with interest rates and low fees, are
major selling points for banks.

 Services to Grow Your Wealth

Banks offer many services that can help you grow wealth. These
include high-yield checking or savings accounts, individual retirement
accounts (IRAs), self-directed 401(k) plans and certificates of deposit
(CDs).

4. What is Philippine Financial Systems and its Elements?

 The Philippine banking industry has always played a substantial role in

sustaining the pace of growth of the country’s economy. The entire banking
sector is supervised by the Central bank of the Philippines, Bangko Sentral
ng Pilipinas, while the overall industry is segmented and variegated as
under:
 45 Commercial and Universal banks together hold around 90% of the total
market share of banking industry in the Philippines. In 2017, there were 40
commercial and universal banks. These banks claim a lion’s share of the
total deposits available to whole banking industry. Their area of services
ranges from wholesale, retail and corporate banking to treasury, trade,
underwriting and investment advisory. Some top commercial and universal
banks (on the basis of available assets) in the Philippines are: Metropolitan
Bank and Trust, Land Bank of the Philippines, Banco de Oro Unibank,
Philippine National Bank and Bank of the Philippine Islands.

 There are 406 Rural and Co-operative banks in the Philippines. These banks
are responsible for development of rural areas and their economies by
providing basic financial services to rural populace. The major difference
between rural and co-operative banks is the nature of their ownership.
Rural banks are owned by the private individuals while co-operative banks
are under the ownership of co-operative societies. Notably, the number of
rural and co-operative banks is down from 479 in 2017. It would be interest
to attempt to establish a plausible relationship between the decline in this
number with the GDP growth in rural areas.

 Thrift banks in the Philippines number 43, down from 57 in 2017. These
banks are further categorized into Private development banks, Savings and
mortgage banks, Loan associations, stock savings and microfinance saving
banks. Their major activities include collection of deposits from small savers
and investing them into profitable portfolios. These banks are also engaged
in providing trade services to small and medium-sized enterprises and
individual entrepreneurs.

 Emerging business segments in banking industry include:

A form of partnership or association between a financial institution and an
insurance company; where banks offer insurance products through their
platform to their customers. In recent years, the Bangko Sentral ng Pilipinas
has received numerous applications both from local and foreign banks
 seeking approval for provision of Bancassurance services through their
platforms.

 Mobile banking or Branchless banking: a relatively new form of service

where banks or financial institutions allow their customers to conduct
financial transactions through their mobile devices. Mobile banking can be
carried out in collaboration with telecom industry and is far away from the
traditional brick-and-mortar banking structure.

 Retail Wealth Management: Wealth management services and Retail

investment advisory is provided to young or new investors showing interest
in mutual fund units and other such financial products.

 Microfinance: This is one of the fastest growing businesses not only in the
Philippines but is also attracting the whole world’s admiration. As per the
latest report of the Central bank, there are more than 200 microfinance
institutions working in the country, that has lent around $250 million to 1
million borrowers.

 The Covid-19 pandemic has brought to question the sustainability of

current micro-finance practices — prudence in credit has given way to
predatory lending that has found its way unbeknownst to those who had
no option, were uninformed, and were led to the debt trap spiral
perpetuated by a system that were stacked against them.

REFERENCES:

https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Banks

https://finance.yahoo.com/news/why-bank-choice-important-day

https://www.statista.com/topics/5618/banking-industry-in-the-philippines/
#dossierKeyfigures