RINNA O.

SAHITARIOS AUGUST 22, 2023

FM312 CAPITAL MARKET ASSIGNMENT NO. 2

WHAT IS COMMERCIAL BANK?

A commercial bank is a particular kind of financial institution that offers loans, takes deposits, and
offers a variety of other financial services to individuals, businesses, and organizations. They are frequently
larger and provide services including business loans, credit cards, mortgages, checking, and savings accounts.

WHAT IS THRIFT BANK?

A thrift bank, also known as a savings bank, is a type of financial institution that focuses on accepting savings
deposits and providing mortgage loans. Thrift banks often have a community-oriented approach and aim to
promote savings and homeownership.

WHAT IS A RURAL BANK?

A rural bank is a type of financial institution that operates in rural areas, typically serving the financial needs of
agricultural and rural communities. They provide banking services such as savings and deposit accounts, loans
for small-scale farmers, and microfinance services to help promote financial inclusion in remote areas. Rural
banks play a crucial role in the economic development of rural areas by supporting local businesses and
farmers.

WHAT IS BSP?

-BSP stands for Bangko Sentral ng Pilipinas, which translates to the Central Bank of the Philippines in English.
It is the central monetary authority and the governing body of the country's banking system.

WHAT IS THE ROLE OF IN THE WELL-BEING OF THE PHILIPPINES?

The role of BSP in the well-being of the Philippines is vital, and it primarily focuses on three important areas:

1. Monetary Stability:

BSP has the responsibility of maintaining price stability and promoting a balanced and sustainable economic
growth. It formulates and implements monetary policies to control inflation rates, interest rates, and manage the
overall money supply in the economy. These policies aim to stabilize the purchasing power of the Philippine
peso and foster a conducive environment for economic development.
2. Financial Supervision and Regulation:

BSP acts as the primary supervisor and regulator of financial institutions operating in the Philippines, including
banks, non-bank financial institutions, and other specialized entities. It ensures the stability and soundness of
the financial system by enforcing prudential regulations, conducting regular examinations, and implementing
risk management standards. The BSP's role is crucial in preventing financial crises, protecting consumer
interests, and maintaining the integrity of the country's financial sector.

3. Currency Issuance and Management:

As the issuer of the Philippine currency, BSP is responsible for the production, distribution, and regulation of
banknotes and coins. It ensures that the supply of currency is sufficient to meet the needs of the economy and
maintains the quality and integrity of currency in circulation. BSP also oversees foreign exchange regulations to
facilitate trade and maintain a stable foreign exchange market.

Overall, BSP plays a critical role in ensuring the stability, efficiency, and integrity of the Philippine financial
system. Its actions are geared towards promoting sustainable economic growth, safeguarding the value of the
currency, and maintaining a conducive environment for businesses and consumers.

HOW IS THE BSP STRUCTURE RELATIVE TO THE FINANCIAL SYSTEM?

The BSP (Bangko Sentral ng Pilipinas) structure is an essential component of the financial system in the
Philippines. As the central bank of the country, it is responsible for formulating and implementing monetary
policies, regulating and supervising financial institutions, and maintaining price stability.

The BSP's relationship with the financial system is characterized by its regulatory and supervisory role. It
ensures that banks and other financial institutions comply with prudential regulations and standards. This
includes monitoring their capital adequacy, liquidity, risk management practices, and consumer protection
measures. By doing so, the BSP safeguards the stability and integrity of the financial system.

Furthermore, the BSP exercises oversight over the payment and settlement systems in the country. It promotes
the efficiency, safety, and reliability of these systems to facilitate transactions, both domestically and
internationally. This role is crucial in supporting economic growth and financial inclusion by promoting smooth
and secure transactions.

The BSP also plays a significant role in maintaining price stability, which is essential for sustainable economic
growth. It formulates and implements monetary policies, such as setting interest rates and managing the money
ORGANIZATIONAL STRUCTURE

An organizational chart is a visual representation of a company's structure that shows the hierarchy and
relationships between different positions and departments.

WHAT IS MONETARY POLICY?

Monetary policy refers to the actions taken by a country's central bank to control the money supply, interest
rates, and the availability of credit in the economy. It involves using various tools to influence economic
growth, inflation, and employment levels.

WHAT IS THE IMPORTANCE OF MONETARY POLICY IN THE ECONOMY?

The importance of monetary policy in the economy is that it helps maintain price stability, promotes economic
growth, and stabilizes the financial system. By controlling the money supply and interest rates, central banks
can influence borrowing and investment behavior, which in turn impacts economic activity.

RELATION BETWEEN MONETARY POLICY AND FINANCIAL POLICY?

There is a close relationship between monetary policy and the financial system. Monetary policy decisions
affect the overall liquidity in the financial system and the cost of borrowing for financial institutions and
individuals. Changes in interest rates and credit availability can have significant effects on the functioning of
the financial system, including banks and non-bank financial institutions.

DIFFERENT TOOLS FOR MONETARY POLICY

Some of the tools used in monetary policy include open market operations (buying and selling of government
securities), reserve requirements (the amount of funds banks must hold in reserve), and the discount rate (the
interest rate at which banks can borrow from the central bank). These tools directly or indirectly influence the
money supply and interest rates in the economy.

HOW THIS TOOL INFLUENCE THE MONEY SUPPLY AND INTEREST RATES?

The use of these tools can affect the money supply by either increasing or decreasing it. For example, by buying
government securities in open market operations, the central bank injects money into the economy, increasing
the money supply. Conversely, by increasing reserve requirements, the central bank reduces the amount of
money available for lending, thereby decreasing the money supply. Changes in interest rates also impact the
cost of borrowing, influencing individuals' and businesses' borrowing and spending decisions.
ROLE OF BSP IN THE ECONOMIC DEVELOPMENT OF THE COUNTRY?

The Bangko Sentral ng Pilipinas (BSP) plays a crucial role in the economic development of the Philippines. It is
responsible for formulating and implementing monetary policy, issuing currency, regulating banks and financial
institutions, and promoting financial stability. Through its actions and policies, the BSP aims to maintain price
stability, ensure a sound and stable financial system, and support sustainable economic growth.

ROLE OF BSP AS A MANAGER OF BANKS AND OF NON-BANKS?

As a manager of banks and non-banks, the BSP supervises and regulates financial institutions to ensure their
financial viability, solvency, and compliance with relevant laws and regulations. It sets prudential regulations,
conducts inspections and examinations, and takes appropriate actions to address any concerns or risks to the
stability of the banking and non-banking sectors. The BSP's regulatory role helps maintain public confidence in
the financial system and protects the interests of depositors and investors.