MODULE 3

Lesson 1: Overview of the Banking Industry

LESSON 3: BANK MANAGEMENT

"Good Banking is produced not only by good laws, but by

good bankers."

= Hartley Withers =
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INTRODUCTION

Finance 101 (Banking & Financial Institutions) is an elective subject in the Bachelor of
Science in Business Administration Curriculum. It is therefore necessary that the students must
be provided with a simple presentation and adequate knowledge and clear understanding on
the overview of banking and the role of banks in the economy.

Likewise, it also deals with the general practices in the organization, management,
operations and functions of banks & other financial institutions as well as the business of
banking, the typical banks’ products and services, the distribution channels through which these
products are delivered to customers.

“Progress is impossible without change, and those who cannot

change their minds cannot change anything.” – George Bernard
Shaw

ENJOY YOUR MODULE...

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ABOUT THE MODULE

This module includes ONLY one (1) lesson, the bank management; together with it’s sub-
topics, namely: a) The stockholders, b) The Board of Directors, c) Bank Officers and Employees,
d) Bank Office and Branches and e) Acquisition of Motor Vehicles, Banking Days and Hours.

This module also contains tasks like pre-test and post-test that you need to accomplish.
Likewise, activities like self-test should also be accomplished to measure your knowledge you
gained in the module. BUT BEFORE YOU GO WITH THE MODULE here are some of the things to
remember:

ICONS TO REMEMBER:

Means WHAT TO DO (PRETEST & POST-TEST). You need to answer it before

reading the lessons. This will measure your understanding/knowledge on
the topic before you take the lesson.

LESSON. You will encounter this icon whcih leads you to the lesson
proper/topic for this module.

OBJECTIVES. This icon means the Learning objectives of the course. You
will encounter this icon every module.

SELF TEST. You will encounter this icon every end of the module. Answer it
and this will measure the knowledge that you gained in the module.
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ABOUT THE AUTHORS

CORAZON B. URBIS, MPA

Program Chair, BSBA FM

Prof. Corazon Urbis is a Bachelor of Science in Business Administration

Major in Banking and Finance graduate. She had finished her academic
requirements in Doctor in Business Administration and a graduate of
Master in Public Administration at University of Northern Philippines.

Prof. Urbis was the Disciplinal Chair of BSBA-FM Program at College of

Business Administration and Accountancy from June 2008 to present. She
was also a College Secretary from November 14, 2011 to May 7, 2013.
Prof. Urbis was a Coordinator in Business, Economics and Cooperative at
College of Business Administration and Accountancy from July 2007 to
August 23, 2011. She was once a Disciplinal Chair of Cooperative
Management Program from year 2001 to July 2004. And lastly Prof. Urbis
was a Coordinator of the General Operations of CBAA Cooperative
Laboratory from year 200 to July 2004.

Prof. Urbis is an active member of the Accrediting Agency of Chartered

Colleges and Universities in the Philippines (AACCUP), Confederation of
Faculty Association in State Colleges and Universities in the Philippines
(CDASCUP); a member of Entrepreneurship Educators Association of the
Philippines Inc., Philippine Council of Deans and Educators in Business
(PCDEB); Regional Association of Business Educators Region 1 (RABE1);
Council of Management Educators and Practitioners in the Philippines
(COMEPP); Council Management Educators (COME); UNP Faculty Union
from August 2016 to present, UNP-FULAP from October 2019-present and
UNP Federated Alumni Association.

Currently, Prof. Urbis is the Program Chair of BSBA Financial Management

and the Treasurer of UNP Faculty Union.
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KATHERINE ALON - RABBON, MBA

Faculty Member, CBAA

Prof. Katherine A. Rabbon is a Bachelor of Science in Business

Administration major in Financial Management graduate. She is a holder
of Master in Business Administration in 2018 and had finished 30 units in
Doctor in Business Administration as of 2020.

Prof. Rabbon is an active member of the Junior Confederation of Finance

Association Philippines (JCFAP), Asian Qualitative Research Association,
Entrepreneurship Educator’s Association of the Philippines, Inc.; State
Universities and Colleges Teachers Educators, Asia Pacific Network for
International Educational Education and Values Education (APNIEVE) and
other professional organizations both national and international. She is
also a member of the UNP Faculty Union and UNP-FULAP from 2018 to
present. She was also the adviser of Junior Bankers Association - the
Accredited Organization of Financial Management from 2018 to present.

She is an advocate, a resource speaker and a learning service provider of

Financial Literacy and inclined in educating both professionals, students,
out-of-school-youth and indigents through Extension Services and invited
speakership.

Prof. Rabbon is a multi-sport enthusiast. She is inclined to running,

mountain biking, badminton, hiking, waterfalls chasing and travelling. One
of her achievements under her hobbies were when she conquered the
traverse trails of Mt. Apo at Davao City last November 2017 and Mt. Fuji at
Japan last July 2019.

Prof. Rabbon is fortunately married to Mr. Keith Homer R. Rabbon a

Senior Accounts Analyst in Metro Vigan Water District and they are
blessed with a beautiful daughter named Kimberly
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GENERAL GUIDELINES

It is important that you must read all documents (e.g. syllabus, assignments) to be
familiar with course expectations. On-line attendance is expected, however, late logging into the
Learning Management System of students is considered. You are expected to observe internet
etiquette at all times they access the net. The promotion of a safe online community is expected
both from the students and faculty. Online academic integrity should be observed at all times
through honest and transparent assessment. Mechanics of assessment tasks such as graded
question and answer, formative test and essay will be provided during the lecture. Any form of
assessment will be given during and after the online discussion. You are not required to post
photographs and other personal information on the course site. Student(s) with special needs
and concerns with technology/software application will be given consideration. Moreover, the
student may be assisted by his/her parents/relatives who have the capacity to do such. Likewise,
you should take the examinations given within the period it will be given via on-line or face to
face. If you fail to take the examination, he/she should notify the faculty concern the reason(s)
for failure to take the examination.

All assignments are expected to be done individually. you are given 7 working days to
submit their outputs after the announcement of the assigned tasks/activities. Assignments may
be submitted through the Facebook messenger, yahoo and google accounts using their last
name/first name/ middle name/assignment code as the filename. Assignment code will be
provided by their own instructor/professor.

The instructor/professor shall have the following responsibilities:

Orient you regarding the use of software applications to enable you to clearly
understand what to do. The monitoring of your attendance and participation will also be done in
order to track objectively their individual performance. Prepare the power point presentations,
modules/manuals, activities before the delivery should be done before hand so as to deliver the
lessons very well. Report untoward incident in the cyberspace to higher authorities will be for
disciplinary actions. Grade and record all student performance objectively via on-line or any
other modes in order for the students to track their individual performance, lacking and the like.
Ensure students receive accurate, sufficient and up to date class performance via on-line or
other modes. Likewise, the teacher must develop or adopt appropriate materials, assessments,
exercises, and any other helpful resources that will assist in developing a supportive learning
community.
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LESSON 3: BANK MANAGEMENT

INTRODUCTION

A bank is formed as a corporate entity. It is managed by the Board of Directors

and the set of officers of the bank. The Board of Directors is the policy formulating body
and the set of officers are the policy implementing body. Therefore, the stockholders
who are the part-owners of the business delegate their power of management to a
Board of Directors. Here, because of their right to vote they elect the members of the
BOD who will in turn elect from among themselves the Chairman of the Board, the
President, the Vice-Presidents, the Secretary, Treasurer, Comptroller and the Senior and
Junior officers of the bank.

OBJECTIVES: At the end of the lesson, the students must be able to:

 Classify the difference of committees created by the board, bank officers and
employees.
 Describe the banking days, hours and operations of a bank.
 Categorize the functions of stock holders.

A. THE STOCKHOLDERS. The stockholders elect the Board of Directors by virtue of their
right to vote.

Duties & Responsibilities of the Stockholders:

1. Amending the by-laws & AOI;

2. Increasing & decreasing the authorized capital stock of the bank;
3. Approving the minutes of previous annual or special meeting of stockholders;
4. Examining & approving/disapproving the operations of the bank;
5. Approving the tentative budget for the ensuing year as presented by the
president of the bank;
6. Electing the Board o Directors; and
7. Delegating to the Board of Directors the authority to distribute
earnings/dividends.

B. THE BOARD OF DIRECTORS. The Board of Directors shall be composed of a number

agreed upon as contained in the by-laws between 5-15 members. It shall be headed by a
Chairman = whose duty is to preside over the meetings of the board. The Board of
Directors are responsible to the stockholders for the management of the bank.

 In small banks = the chairman of the board and the President may be only one
person = to achieve harmony, efficiency and economy.
 In larger banks = the officers are held by 2 separate persons.
Qualifications:
1. he should own at least one share of stock;
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2. 2/3 of the members of the BOD should be citizens of the Philippines;

and
3. he should also meet all other qualifications specified in the by-laws

Duties & Responsibilities of the Board:

1. Elect one of its members as Chairman of the Board;

2. Elect the President and Chief Executive Officer of the Bank;
3. Elect the Heads of the different committees created by the Board;
4. Elect an Executive Secretary to maintain all corporate records of the bank;
5. Appoint senior or junior officers, to whom are delegated the responsibility of
supervising operating and financial functions of the bank;
6. Approve the compensation of various officers & employees of the bank;
7. Formulate policies of the bank;
8. Determine & adopt measures that safeguards the interests of depositors;
9. They are responsible to the regulatory and supervisory agencies = these
agencies will keep surveillance over the management of the bank’s affairs to
allow the maximum of safety to depositors & to give the widest and best kind of
service to the public.

Special Committees Created by the Board: To which it delegates some of its functions:

1. The Executive Committee. This committee deals with administrative matters it

often meets to prepare the groundwork for board meetings. It acts as an
advisory body to the board; and it prepares policies which are eventually
approved by the board.

2. The Loan & Discount Committee. It deliberates all matters pertaining to:
(a) loans and discounts; (b) lines of credit; and (c) other related to loaning
functions, such as review and approve/disapprove loan applications; and
determine the rate of interest to be paid on time & savings deposit as well as on
loans.

3. The Investment Committee. It is concerned with the investment portfolio = the

collection of different investment commitment of the bank. It makes judgment
on what securities the bank should purchase, in what amounts, how to diversify
investments. (by industry, maturity, geographical location) and related matters.

4. The Trust Committee. It concerns with the fiduciary function = (administering

money or property in trust) of the bank. It will thresh out how the trust funds
shall be invested, how to charge clients, and how to administer trust agreements
and others.

5. The Examination Committee. To improvise methods to conduct such internal

examination and supervision (the internal examination and audit of the bank’s
accounts is essential feature of good management)
Liabilities of the BOD: The BOD shall be liable from their incompetence and negligence
in the discharge of their duties. Here, they may therefore, have to face serious and
expensive suits brought against them for reasons of: (a) misconduct in doing their
duties; and (b) they may be removed from their office by the stockholders.
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C. BANK OFFICERS & EMPLOYEES. Officers are responsible for the efficient and
harmonious administration of their duties. Officers are liable for any losses incurred by
the bank thru’ their negligence, misconduct or inefficiency. Hence officers shall be: (a)
men of moral integrity; (b) intellectually and physically capable; and (c) with wide and
diverse experience in the field of banking.

1. Chairman of the Board.

a. preside on all meetings of the BOD, Executive Committee & the

Stockholders;
b. maintain relationship between the stockholders & the BOD; and
between BOD & various committees.

2. President. The President shall be the chief executive officer of the

bank. He is responsible for the active management of the bank.

a. presides at all meetings of the BOD & various committees if the

Chairman of the Board is absent;
b. supervises the business & financial affairs of the bank;
c. jointly signs with the cashier all checks or all financial documents in
behalf of the bank;
d. sit as member of the BOD (if he is not at the same time the
Chairman) during board meetings;
e. he is the court of last resort when the Board is in session = he shall
be the final decision maker;
f. he represents the bank in cases of litigation = he shall represent the
bank in disputes and as such he has the right to retain a counsel to
file suits in the name of the bank and to depend the bank; and
g. implements the policies formulated by the BOD.

 In cases where the positions of the Chairman and President are

held by 2 separate persons, the President = is duty bound to
preside over the meetings of the board.

3. Vice-President. He assists the President; and he takes over the duties

and responsibilities of the President when the latter is absent or
incapacitated. The BOD assigns several VP’s in accordance with the
needs of the bank.

a) Executive VP = is sometimes called 1st VP or Senior VP = assists

the President and acts in his behalf.

b) Administrative VP = is the coordinating officer of the bank & the

liaison between the President & all other officers of the bank.
He sees to it that the various departments & divisions of the
bank are properly coordinated in their activities.

4. Executive Secretary. He is the Chief Recording Officer of the bank.

a. maintains all corporate records;

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b. custodian of corporate seal, representing the legal authority of

the bank;
c. take & keep the minutes of meetings of the stockholders, BOD &
credit committee;
d. maintains a complete & current list of stockholders & addresses;
e. prepare the agenda of the BOD’s & stockholders’ meeting.

5. Manager. The manager shall take charge of the management of the

affairs of the bank.

6. Cashier. He shall be the custodian of the funds and securities of the

bank; he shall keep and control all accountable forms such as: blank
checks, savings account, passbook, etc. and he shall prepare and sign
checks for duly approved loans and disbursements.

7. Accountant. The accountant is responsible in recording all transactions

and the preparation of reports.

8. Comptroller. He takes care of all the accounting and statistical work of

the bank.

9. Auditor. He verifies the accounts resulting from banking operations;

and conducts periodic bank examination.
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BANK OFFICE & BRANCHES:

1. Bank Office. The bank office is a prerequisite to the issue of a

certificate of authority to operate by the MB of the BSP.

2. Branches. With prior approval of the MB, it may establish branches, or

extension offices on a nationwide basis.

E. ACQUISITION OF MOTOR VEHICLES. An investment in furniture, fixtures,

equipment and motor vehicles of a bank shall be limited to 15% of the private
paid-up capital and surplus of the bank.

F. BANKING DAYS & HOURS:

1. Banking Days. Banks observe a five (5) days banking week from
Mondays thru’ Fridays with the option to open on Saturdays. They also
have the option to open during local or national holidays provided
there is prior notice to BSP.

2. Banking Hours. The minimum number of hours a bank shall be open

during banking days shall be six (6) hours which could be set between
8:00 a.m to 8:00 p.m.

G. BANK OPERATIONS: The operational activities of management in the

implementation of policies of the board involve:

Three (3) Distinct Functions:

1. The Executive Function. Here the banker must be a man with:

a. creative managerial ability = because he must of necessity be

faced with policy making;

b. charming personality = because he must be establishing

harmonious relations with customers to get business;

c. shrewd and patient = practical, hard-headed, acute in

perception and sound judgment; and

d. above average intelligence

2. The Teller Function. The teller must be patient, understanding,

accurate and careful because: (a) he accepts deposits; (b) he changes
checks for cash; (c) he changes big bills with smaller denomination; (d)
he releases checks or cash loans; and (e) he receives payments for
loans.

3. The Bookkeeping Function. The bookkeeping function is responsible in

keeping faithful records of the events and accounts passing through his
hands; and the banker must have to record the figures and facts which
requires bookkeeping knowledge.
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Personal & Educational Qualities of a Banker:

1. Personal Qualities:
1. character above suspicion;
2. integrity of the highest order; and
3. he should be: patient; understanding; cordial & respectful.

2. Educational Qualities:
1. he should be well-versed in banking principles and practices;
2. have a good command of the medium of communication; and
3. have a working knowledge of: law; economics; accounting;
management; public relations; and business psychology.

End of Module 3

CONGRATULATIONS FOR FINISHING THE THIRD MODULE

NOW YOU CAN PROCEED TO THE FOURTH MODULE

REFERENCES

Barcena, Emmanuel E., (2014) Check Payment System, Business of Banking Handbook 4,
Bankers Association of the Philippines.

Escucha, Alexander C., Business of Banking, Handbook I: Overview of the Banking

Industry. The Bankers Association of the Philippines, 2014.

Laman, Rose Marie B and Emiliana P. Evia, “Commercial Bank Organization, Operation
& Management”, 2nd ed. Manila, Philippines: GIC Enterprises & Co., Inc. 2012.
Miranda, Gregorio S., Commercial Banking, 3rd ed. Laguna, Philippines: L&G
Business House, 2005.
Serrano, Salvador R. (2014) Distribution Channels Part 1: Branch Banking, Business of
Banking Handbook 3, Bankers Association of the Philippines.

Tumbaga, Allan M., Business of Banking, Handbook II: Bank Products and Services. The
Bankers Association of the Philippines, 2014.
***
/cbu
05/05/19