GROUP 2

LEADER:MANGINLAUD,ARAH L.
MEMBERS:
SALUNDAR , ANNA MAE
MARTINEZ, REIGNA MAE
MERAÑA, ELONAH
ENAJE, MARY SHANE
FELICIA, RAVEN
BAGASALA,ARABELLA

BANKING INSTITUTION
OBJECTIVES:

● Central Banking:Development and Growth

● Nature of Central Banking
● Central Banking Defined
● Origin of Central Bank
● Operations of New Central Bank
● The BSP and the Economy
● The BSP
● Brief History of BSP
● Objectives and Responsibilities of BSP

MANGILAUD
Central Banking:Development and Growth

Their actions need to be well-balanced and transparent to maintain public trust and avoid
undesirable consequences, such as inflation or financial instability.

NATURE OF CENTRAL BANKING

Central banks are distinct entities from commercial banks and other financial institutions.
Their purposes, functions, and relationships with the government and the public are distinct.
Central banks primarily focus on macroeconomic stability and the regulation of the financial
system, while commercial banks primarily provide banking and financial services to
individuals and businesses for profit.

Revolves around maintaining monetary stability, financial stability, and economic growth
while performing a range of critical functions within the broader financial and economic
landscape of a nation. These functions are designed to support the overall well-being of the
economy and its participants.

CENTRAL BANK DEFIGNED

Central Bank is defigned as the central monetary authority, under the Philippines Law.

There are two main functions of central bank:

1.It acts as lender of last resort
2.Controller of money supply

-The banking system constitutes a very large stores of capital formation. Bank mobilize the
savings of the people, and lend this to businessmen for investments
-A central bank of any country is interested to promote the expansion of an efficient banking
industry in view of its very important role in economic development. Bank and other financial
institutions provide funds for agricultural and industrial projects and business corporation

SALUNDAR
Origin of Central Banks
Central banks have developed in two ways. One is through a slow process of evolution. The
other way is the creation of central banks by governments. The development of early central
banking has been a gradual process.

The first central banks evolved in Europe due to the great need to safeguard the interests of
the bankers, and to improve monetary conditions.

Banks were privately owned and were generally known as banks of issue or as national
banks. In later years, they gradually performed the functions of central banking.

Here are some brief notes on the oldest central banks:

Bank of England.
In return, the government granted the Bank of England the privilege of note issue. In later
years, the Bank of England enjoyed a partial monopoly of note issue and only its notes were
declared by the government to be legal tender. It was only in 1946 that the Bank of England
wax nationalized by the British Parliament.

The Riksbank of Sweden.

During the early years of the Riksbank, it enjoyed the sole right of note issue. It was only in
1830 that Riksbank regained its monopoly power of note issue.

The Bank of France.

It was created in 1800 mainly from private capital and the rest from government funds.
Napoleon Bonaparte, the French leader at the time, played a key role in creating this bank. It
was the government's banker and it had the sole right of note issue. The government
participated in the operations of the bank through the appointment of the governor and two
sub-governors.

Bank of the Netherlands (1814):This bank started with private money in 1814.
National Bank of Austria (1817): Austria's central bank, founded in 1817.
Bank of Norway (1817): Norway's central bank, also founded in 1817, began with private
funds.
In subsequent years, Denmark, Belgium, Spain, Russia, Germany, and Japan, established
their own central banks. These central banks played crucial roles in managing their
respective nations' economies.

At the end of 1800, almost all countries in Europe and other parts have organized their own
central banks.

The Central Bank and the Economy

There is no question that a central bank is a very important and powerful institution in any
economy. The central bank of any country has a crucial role to play, especially in a poor
country where resources are not properly distributed and efficiently used.

Through its powers and policies, a central bank can direct flow of money and credit into the
various sectors of the economy, it can also improve the social and economic conditions of
the poor by making credit facilities accessible to them. With liberal bank loans, the poor can
put up their small business or income- producing projects. Since they constitute the
foundation of our society and the economy, the improvement of their standard of living
results to a more stable society and balanced economic growth.

BANGKO SENTRAL NG PILIPINAS

The Bangko Sentral ng Pilipinas is the central monetary authority. This is the Monetary
Board of the Bangko Sentral ng Pilipinas. Through the various monetary tools of our Bangko
Sentral, such as open-market operations, legal reserve requirements and moral suasion,
monetary and economic conditions can be stabilized, and that economic growth can be
further advanced.

The Bangko Sentral supervises the operations of the banking institutions and regulates the
activities of the non-bank financial institutions. Such powers of the Bangko Sentral are
important in order to be able to control within desirable limits the supply of money circulating
in the economy.

MARTINEZ
A Brief History of the BSP

- It was Miguel Cuaderno, the first Governor of the Central Bank.

- He developed the concept of the central bank in 1933. For thirteen years he conducted
extensive research on the structures and operations of various central banks in many
countries.

- In the year 1946, the formal preparation for the organization of the central bank started
under the instruction of President Manuel Roxas.

- Miguel Cuaderno who had the greatest participation in the creation of a central bank, chose
the charter of the Central Bank of Guatemala as the model for our central bank.
- A Central bank council was formed in August 1947 to review the report of the Commission
and to prepare the necessary legislation for its implementation.

- The year 1948, President Roxas submitted to Congress a bill “establishing the Central
Bank of the Philippines, defining its powers on the administration of the monetary and
banking system, amending the pertinent provisions of the Administrative Code concerning
the currency and the Bureau of Banking and for other purposes.”

- Republic Act (RA) No. 265, also known as The Central Bank Act. The charter of the Central
Bank was signed into law on June 15, 1948, by President Elpidio Quirino

- The Philippine Central Bank was inaugurated and formally opened on January 3, 1949, and
Miguel Cuaderno was its first Governor.

- In 1900, two years after the arrival of the Americans in our country, Act No. 52, passed by
the First Philippine Commission, placed all banks under the Bureau of Treasury. The Insular
treasurer was authorized to supervise and examine banks and banking activities. February
1929, the Bureau of Banking took over the supervision of banks.

- With the opening of the Central Bank of the Philippines in 1949, bank supervision and
examination were placed under said premier financial institutions.

OBJECTIVES AND RESPONSIBILITIES OF CBP

Primary Task of the old Central Bank of the Philippines is to administer the monetary,
banking, and credit system in the country.

In 1949, when the Central Bank opened, there were only 11 head offices and 75 branches of
commercial banks in operation. During the 1950s, 7 commercial banks were established and
44 branches were created. At the end of 1959, there were 137 commercial banking offices in
operation. The 1960s have been known as the “decade of bank proliferation’. An additional
24 commercial banks with 483 branches were established.

It was during the early 1970s that non-bank financial institutions, especially investment
houses and finance companies, cropped up.

It was also during this period that the Euro-currency banking began in the Philippines.

ENAJE, MARY SHANE

ORIGINAL OBJECTIVES

The three general objectives of the old Central Bank, as contained in the original Central
Bank Act, indicated its duties and responsibilities, particularly in relation to the promotion of
economic development, and the maintenance of internal and external monetary stability.
These broad policy objectives were:
1. maintenance of monetary stability in the Philippines;
2. preservation of the international value of the peso and its convertibility into other freely
convertible currencies; and
3. promotion of a raising level of production, employment, and real income in the Philippines.

AMENDED OBJECTIVES

The IMF-CBP Banking Survey Commission established in 1971 to ensure the banking
system's growth and responsiveness to economic needs. Recommendations were
implemented, leading to financial reforms. In 1972, PD No. 72 amended RA 265,
emphasizing the Central Bank's primary objective of maintaining monetary stability.
The amended objectives of the Central Bank are:
1. to maintain internal and external monetary stability in the Philippines, and to preserve the
international value of the peso and the convertibility of the peso into other freely convertible
currencies; and
2. to foster monetary, credit, and exchange conditions conducive to a balanced and
sustainable growth of the economy.

CENTRAL BANK AUTHORITY EXPANDED

The Central Bank of the Philippines has been a significant player in the financial system
since its inception. However, the system has evolved due to legislative measures and new
forms of financial intermediation. In 1972, the Central Bank expanded its authority, regulating
non-bank financial institutions like investment houses and pawn shops. This reform was
further enhanced by PD No. 1771 in 1981.
The significant features of this Decree are:
1. Increase in the capitalization of the Central Bank from P10 million to P10 billion;
2. Granting the Monetary Board the power to authorized special examination of affiliates and
subsidiaries of banks and affiliates of non-bank financial intermediaries with quasi-banking
functions;
3. Authorizing department heads and examiners of examining departments to administer
oaths to any official or employee of any institution subject to their examination, and to
compel the presentation of books, documents, papers, or records; and
4. Empowering the Monetary Board to allow examination of deposits during bank
examination to determine bank fraud and serious irregularity.

MERAÑA,ELONAH
Objectives and Functions of the Bangko Sentral ng Pilipinas

According to the New Central Bank Act of 1993, the BSP’s main objective is to maintain
price stability conductive to a balanced and sustainable economic growth. It also aims to
promote and preserve monetary stability and the convertibility of the national currency. The
creation of the BSP also founded the BSP Monetary Board, which is the policy making body
of the bank. It is administered by a Governor, together with five members coming from the
private sector and one member for the cabinet. The Monetary Board is responsible for
delegating tasks to accomplish the following functions of the Bangko Sentral:
1. Liquidity Management- The Bangko Sentral implements monetary policies in
accordance to its primary objective of price stability, including policies on money supply.
2. Currency issue- The power to issue national currency, including all notes and coins,
belongs to the BSP. Once authorized by the BSP, these notes and coins are considered legal
tender for all public and private debts.
3. Lender of last resort- Banking institutions can request for loans, discounts, and
advances from the BSP liquidity purposes.
4. Financial Supervision- Supervision of banking institutions and regulation of
non-banking institutions fall under the authority of the BSP.
5. Management of foreign currency reserves- In order to preserve international stability
and convertibility of the Philippine Peso, the BSP maintains enough international reserves to
meet any possible net demands for foreign currencies.
6. Determination of exchange rate policy- Exchange rate policies are determined by the
BSP. Presently, the BSP follows a market-oriented foreign exchange rate policy, reducing the
BSP’s role into ensuring a stable market.
7. Other activities- The BSP also plays other roles such as that of a banker, a financial
advisor, and official depository of the Government.

HISTORICAL DEVELOPMENT OF BANKING

Modern banking structure and practices did not come as a result of deliberate planning.
Rather, present day banking institutions evolved from simple enterprises to more
complicated giants. Just like the modern day species of animals that became the subject of
Chares Darwin’s studies, the first banks were much different from modern banks. But unlike
Darwin’s subjects which evolved in millions of years, the evolution of modern banking covers
only a span of a little more than two hundred years.

THE CRUCIAL FIRST STEPS

Before the first banks came into being, there were goldsmiths and silversmiths in Europe
during the middle ages who kept their inventories in safekeeping devices they own. The
extra spaces in the Safes were rented by owners of valuable items like gold coins also for
safekeeping a depositor receipt was issued by the smith to the customer, whenever
valuables were accepted for deposit. The receipt served as proof of ownership of the
valuables deposited in the safe and was surrendered when valuables were withdrawn.

Withdrawals were made whenever the depositor needed his gold coins as payment for
purchases, he made. Oftentimes, the payment received by the seller was also deposited
with a smith usually the same one contracted of banks had already been made.

BAGASALA
Second Gear:

The bank introduced a faster way of exchanging by replacing the depository receipt with a
bearer receipt. Endorsing the depository receipt was limited and caused inconvenience,
which is eliminated with the bearer receipt. It can be transferred an unlimited number of
times without the need for a signed endorsement. The bearer receipt, or bank note, can be
used as payment for anything, eliminating barriers to withdrawing gold coins from the bank.

Crescendo:
Initially, the total amount of the gold coins and other valuables deposited in the vaults of the
bank corresponds to the total amount of receipts or notes issued to the depositors. However,
the banker's desire for profit led him to issue more notes than the actual value of the
deposited valuables, ultimately reaching a tipping point. This resulted in difficulties in
accommodating withdrawals and had a severe impact on the depositors.

THE NEED FOR A CENTRALIZED BANKING AUTHORITY

What is Central bank:

- Central banks are responsible for managing a country's economy by controlling and
managing its money supply and interest rates through monetary policy. Additionally, they
regulate banks and provide financial services to ensure stability in the financial sector. As
such, central banks play a crucial role in shaping a country's economic landscape.

Some reason how they can maintain stability:

- Through interest rate.
- Foreign currency.

REASONS WHY DO WE NEED CENTRALIZED BANKING:

- Every enterprise including banks is concerned with Growth and stability.

- To avoid the profit being Jeopardize bank's financial stability.
- To avoid prioritizing foreign clients over locally qualifies borrowers.
- Helps in developing the Economy.
- They implement its monetary policy and regulate its money supply. They are often tasked
with ensuring low inflation and stable GDP growth.
- At a macro level, central banks have the power to impact interest rates and engage in open
market operations to manage the cost of borrowing and lending across an entire economy.