UNIVERSITY OF MAKATI

J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY

COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

OTHERS FINANCIAL
INTERMEDIARIES
SUBJECT: FINMA 5 PRESENTED BY: GROUP 9
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

GROUP 9 PRESENTORS

SOPHIA DONNA ALIZA JEWEL

TOLENTINO TORREDES TORRES TRINIDAD
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

LEARNING OBJECTIVES
Define what a Financial Intermediary is and explain its function.
Discuss the advantages and disadvantages of using financial
intermediaries.
Discuss the types of Financial Intermediaries: Banks, Mutual savings
banks, Savings banks, Building societies, Credit unions/Cooperatives,
Financial advisers or brokers, Insurance companies, and Pension funds.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

FINANCIAL INTERMEDIARIES

A financial intermediary is an entity that acts as the middleman between

two parties in a financial transaction, such as a commercial bank,
investment bank, mutual fund, or pension fund.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

FUNCTION OF FINANCIAL INTERMEDIARIES

ASSET STORAGE
Commercial banks provide safety and security by ensuring the storage of
cash- either paper money or coins and other precious materials such as gold
or silver.
LOANS
Financial intermediaries are primarily engaged in advancing short- and long-
term loan transactions.
INVESTMENTS
Some financial intermediaries, such as mutual funds and investment banks,
employ in-house investment specialists who help clients grow their
investments.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

ADVANTAGES OF USING FINANCIAL INTERMEDIARIES

Spreading risk
Financial intermediaries provide a
platform where individuals with
surplus cash can spread their risk
by lending to several people
rather than to only one individual.
Convenience
Exchange becomes suitable for
the investor as well as the
borrower.
Safe Investment
From the investor’s point of view,
financial intermediaries are considered
to be trustworthy and reliable.
Greater Liquidity
Financial intermediaries like banks
allow investors or depositors to
withdraw their amount at any point in
time, as per their requirement.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

DISADVANTAGES OF USING FINANCIAL INTERMEDIARIES

Lower Investment Returns Fees and Commissions
The ultimate aim of the financial Financial intermediaries impose
intermediaries is to earn a profit charges, expenses, and commissions on
and therefore, they usually provide the financial assistance they provide to
a low rate of interest on the their customers.
investment made by the
depositors. High Interest on Loans
These financial intermediaries charge a
Mismatched Goals high rate of interest on the loan
The goals of the investors and the provided to the borrowers to earn a
financial intermediaries may not profit.
complement each.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

WHAT IS BANKS?
Banks is a financial institution that accepts
deposits from the public and creates a demand
deposit while simultaneously making loans.
The bank can directly perform lending
activities or indirectly through capital markets.

Banks lend money by making advances to

customers on current accounts, by making
installment loans, and by investing in
marketable debt securities and other forms of
money lending.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

HOW ARE BANKS REGULATED?

The Republic of the Philippines' central bank
is called Bangko Sentral ng Pilipinas, or BSP.
In accordance with the New Central Bank
Act of 1993 and the 1987 Philippine
Constitution, it was founded on July 3, 1993.
The Central Bank of the Philippines, which
was founded on January 3, 1949, was
replaced as the nation's central bank by the
BSP. As it fulfills its legislated duties, the
BSP is free from the National Government's
financial and administrative control.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

Types of Banks: US AND PH SETTING: SIMILARITIES AND ITS EXAMPLES

RETAIL BANKS CORPORATE BANKS INVESTMENT BANKS CENTRAL BANKS

Commercial or Investment banks a financial institution
offer their services to the
corporate banks tailor focus on providing given privileged
general public and usually
their services to corporate clients control over the
have branch offices as well as
business clients, from with complex production and
main offices for the
small business owners services and financial distribution of money
convenience of their
to large, corporate transactions activity. and credit for a
customers.
entities. nation or a group of
nations.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

Common Banking Products and Services

1. Checking Accounts
2. Savings Accounts
3. Certificates of Deposit
4. Money Market Accounts
5. Loans
6. Debit Cards
7. Credit Cards
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

MUTUAL SAVINGS BANKS (MSB)

HISTORY OF MSB

A mutual savings bank is a type of

thriftinstitution originally designed to
serve low-income individuals.
Historically, these individuals
invested in long-term, fixed-rate
assets, such as mortgages.
Initiated in 1816, the first mutual
savings banks (MSBs) were the
Philadelphia Saving Society and
Boston's Provident Institution for
Saving.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

MUTUAL SAVINGS BANKS (MSB)

Financial stability Sometimes too

Solid customer service conservative
Depositor safety No member control
Long-term oriented outlook Risk of being acquired
Profits stay within community or going public
Accessibility
ADVANTAGES DISADVANTAGES
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

SAVINGS BANKS HISTORY OF SAVINGS BANK

is a financial institution that gathers savings, Savings banks frequently originated

paying interest or dividends to savers. It
channels the savings of individuals who wish to
consume less than their incomes to borrowers
who wish to spend more.
as part of philanthropic efforts to
encourage saving among people of
modest means. The earliest municipal
savings banks developed out of the
municipal pawnshops of Italy.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

ADVANTAGES & DISADVANTAGES OF SAVINGS BANKS

Safety Low Interest Rates

Accessibility Limited Returns
Interest Earnings Liquidity Constraints
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

BUILDING SOCIETIES

Building societies are a specific type of financial institution that provides various banking
and financial services to its members. These institutions are known as "mutuals" as they are
owned by their members. Unlike banks, building societies operate more like credit unions
and cooperatives. They primarily focus on savings and mortgage financing services.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

WHICH BUILDING SOCIETY IS THE

BIGGEST IN THE WORLD?
Throughout the world and in the UK,
Nationwide UK is the biggest building
society. At the conclusion of the fiscal
year 2022, its assets in society were
£269.07 billion.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

CREDIT UNIONS/ COOPERATIVES

Article 3 of RA 9520 or the Philippine
Cooperative Code of 2008

A cooperative is a registered association of people

Cooperatives are people-centred
enterprises owned, controlled and
run by and for their members to
realize their common economic,
social, and cultural needs and
aspirations.
with a common interest who come together
voluntarily to achieve their social, economic, and
cultural needs. They make equitable contributions
to the capital, patronize their products and
services, and share risks and benefits in
accordance with cooperative principles.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

List of various types of Cooperatives:

FINANCE-RELATED CULTIVATION SERVICE

Credit Cooperative
Marketing Cooperative
Financial Service Cooperative
Cooperative Bank
Insurance Cooperative
Advocacy Cooperative
Multipurpose Cooperative
Education Cooperative
Consumer Cooperative Transport Cooperative
Agrarian Reform Cooperative Health Service Cooperative
Dairy Cooperative Water Service Cooperative
Fishermen Cooperative Housing Cooperative
Working Cooperative
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

COOPERATIVE

LANDBANK offers multiple lending programs specially designed for Cooperatives, tailored to
their unique needs and demographics. As a result, many cooperatives have benefited from
these programs by taking advantage of the opportunities provided to them.

Ex: Agri Lending Programs, I-RESCUE Lending Program, SPEED P.U.V.

 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

CATEGORIES OF COOPERATIVES

MEMBERSHIP
Types of cooperatives include primary,
secondary, and tertiary cooperatives, with
members consisting of natural persons, other
cooperatives, and secondary cooperatives,
respectively.
Ex: UMEMPC (UMakCoop), Philippine Cooperative Center
TERRITORY
Categorization of cooperatives is based on
their area of operation, which may or may not
align with the political subdivisions of the
country.
Ex: municipal, city, provincial, regional, national
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

CREDIT UNION

Credit unions are financial cooperatives that offer traditional banking

services to their members. They are owned and operated by their members
and are usually not required to pay corporate income tax on their profits.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

FINANCIAL ADVISORS AND/ OR BROKERS

BROKERS FINANCIAL ADVISORS

an individual or firm that acts as a manage customers' money and

PRIMARY
middleman between an investor and a provide financial advice as part of
FUNCTION
securities exchange. their work.

SERVICE buying and selling securities develop a long-term financial plan

COMPENSATION Commission Paid for the advice and service

PURPOSE Offer financial guidance Complex and personal financial plans

STANDARD Subject to “sustainability” standards Subject to “fiduciary” standards

 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

TYPES OF BROKER

INSURANCE BROKER REAL ESTATE JEWELRY ART/ GALLERY

BROKER BROKER BROKER
Ex: BDO Insurance Brokers INC.
CHINABANK Insurance Brokers INC. Ex: MEGAWORLD
LBP Insurance Leverage INC. Brokers Network
Colliers Philippines
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

ADVANTAGE AND DISADVANTAGES OF FINANCIAL

ADVISORS AND/ OR BROKERS
BROKERS FINANCIAL ADVISORS
ADVANTAGES DISADVANTAGES ADVANTAGES DISADVANTAGES
Offer lower fees than May have a conflict of Provide comprehensive Fees can be higher than
a financial advisor. interest. financial planning services. brokers.

Provide fast May not provide Helps create long term May have minimum
comprehensive financial
execution of trades. planning services. financial plan. investment requirements.
Not suitable for self-
Offer access to a wide May not have fiduciary Offer a wide range of
managed investment
range of securities. responsibility. financial products.
preferences.
Can provide guidance to
other related planning.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

INSURANCE COMPANY
Insurance
Insurance is a contractual arrangement provided through a policy,
offering financial protection or compensation to the policyholder in the
event of losses.

Insurance Companies
These are financial intermediaries which offer direct insurance or
reinsurance services, providing protection from possible hazards in the
future.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

INSURANCE POLICY COMPONENTS

1. PREMIUM- is the cost of the insurance policy, usually paid on a monthly basis.
Auto insurance premiums: history of property and auto claims, age and location,
creditworthiness, and many other factors that may vary by state.
Home insurance premiums: value of your home, personal belongings, location, claims
history, and coverage amounts.
Health insurance premiums: age, sex, location, health status, and coverage levels.
Life insurance premiums: age, sex, tobacco use, health, and amount of coverage.

2. POLICY LIMIT - is the maximum amount that an insurance company will cover for a
particular loss under your policy.

3. DEDUCTIBLE - is a set amount of money that you need to pay from your own pocket before
your insurer starts covering a claim.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

FUNCTIONS OF INSURANCE COMPANIES

1. Provides Reliability: Insurance serves the primary purpose of removing the
uncertainties surrounding an unplanned and sudden financial loss through regular
premium payments.
2. Protection: Insurance provides a protection against such loss that a company or an
individual may suffer.
3. Pooling of Risk: All of the policyholders share the risk together when purchasing
insurance.
4. Legal Requirements: In many instances, legal mandates require individuals and
organizations to acquire specific forms of insurance.
5. Capital Formation: Insurance companies build capital through the aggregation of
individual premiums.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

MAIN TYPES OF INSURANCE COMPANIES

1. Accident and Health Insurance Companies: offers a policy or contract
to insure a person in the event of an accident. It typically covers medical
expenses, such as hospitalization, surgeries, and doctor visits, resulting
from an accident.

2. Life Insurance Companies: primarily provides policies that pay a lump

sum to beneficiaries when the insured person passes away.

3.Property & Casualty Insurance Companies: offer a wide range of policies

that protect against damage to property and liability for property owners.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

MUTUAL VS STOCK INSURANCE COMPANY

MUTUAL INSURANCE COMPANY STOCK INSURANCE COMAPANY

This firm is owned by its stockholders or

A corporation that is solely owned by
Ownership and shareholders with the goal of making a profit for
policyholders, who are "contractual
Management them. Policyholders do not directly share in the
creditors".
company's profits or losses.

They distribute extra profits to policyholders

When they generate surplus income, stock insurers
Earnings in the form of dividends or reductions in
distribute it to shareholders as dividends.
future premiums.

Adopt a long-term perspective with Stock insurers prioritize short-term gains by

Financial Risk conservative investments, aiming to maintain investing in high-yield assets, which can lead to
sufficient capital for policyholder needs. profits for shareholders but also involve higher risks.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

Advantages of Investing in Disadvantages of Investing in

Insurance Company Insurance Company

Steady Income Risk of Significant Losses

Long-Term Growth Regulatory and Legal Risks
Resilience to Economic Downturns Income Vulnerability
Inflation Protection
Potential for Mergers and
Acquisitions
Regulatory Safeguards
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

PENSION FUNDS
Pension funds serve as financial intermediaries,which offer social insurance by providing
retirement income for employees when they retire at the end of their careers.

How Pension Funds Work

1. Contribution Phase 2. Investment Phase 3. Distribution Phase 4. Management and Oversight

Contributions are made Pension fund managers handle the Retirees receive regular Professional investment
by employers, employees, investments, diversifying the assets payments from the pension managers are responsible for
or both into the pension into stocks, bonds, real estate, and fund, either in the form of managing the fund's assets and
fund other financial instruments an annuity or a lump sum. monitoring performance.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

TYPES OF PENSION FUNDS PENSION FUNDS IN THE PHILIPPINES

1. Defined Benefit Plans:

Social Security System (SSS) is
These plans establish retirement benefits based on a
a government-run social
formula considering factors like an employee's salary,
insurance program designed to
years of service, and age at retirement. Typically, the
administer social security
employer is responsible for funding the plan and
protection to workers in the
managing its assets.
private sector.

2. Defined Contribution Plans: Government Service Insurance

Retirement benefits are based on the contributions System (GSIS) is a government-
made by both the employee and employer. owned and controlled
corporation that serves as the
Example: Personal Equity and Retirement Account pension fund for public
(PERA) established by Republic Act No. 9505 in the employees.
Philippines.
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

Advantages of Penion Funds Disadvantages of Pension Funds

Retirement Security Limited Control

Professional Management Investment Risk
Diversification Funding Risk
Tax Benefits Inflexibility
Employer Contributions Regulatory Burden
 UNIVERSITY OF MAKATI
J.P. RIZAL EXTENSION BARANGAY WEST REMBO, MAKATI CITY
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE

THANK YOU!

SUBJECT: FINMA 5 PRESENTED BY: GROUP 9