WEEK 3 MODULE

BANKS AND ITS

ROLES AND
FUCTIONS
 Learning
Outcomes:
• Identify the different classifications
of banks

• Describe the role of banks

• Identify and describe the different

products and services offered by
banks

Presentation title 2
 BANKS
- are financial institutions/financial intermediaries that
accept deposits from the public and create credit.
They play a crucial role in the economy by facilitating
the flow of funds from savers to borrowers.

Presentation title 3
 CLASSIFICATIONS OF BANKS

1. UNIVERSAL BANKS

These banks offer a wide range of financial services, including deposits, loans, investment banking, and
asset management. They have both commercial and investment banking functions. Universal banks
are the largest and most diversified among all types of banks in the Philippines.
• Exercise all the legal powers of an investment house, including underwriting
• Invest in non-allied enterprises
• Own up to 100% of the equity of a Thrift Bank, Rural Bank, or Allied enterprise
• Own up to 100% of the voting stock of -one- other Universal or Commercial Bank (if publicly-
listed)

Presentation title 4
Updated as of 12 February 2024 5
 2. COMMERCIAL BANKS

• These banks primarily focus on traditional banking services, such as accepting deposits, providing
loans, and facilitating domestic and international transactions for individuals, businesses, and
government entities. They do not engage in investment banking activities.
• Buy and sell foreign exchange and bullion
• Receive in custody funds, documents and valuable objects
• Act as a broker or agent to buy and sell securities for customers
• Act as an advisor or administrator of investment management accounts
• Rent out safety deposit boxes
• Engage in quasi-banking functions

Presentation title 6
Updated as of 12 February 2024 7
 3. THRIFT BANKS
• Thrift banks, commonly referred to as savings and mortgage banks, are a vital component of the financial landscape in the Philippines. These
regulated financial institutions specialize in accepting savings deposits from individuals and small businesses, while also offering mortgage loans to
facilitate homeownership. Thrift banks are also sometimes referred to as Savings and Loan Associations (S&Ls).
Thrift banks composed of:
(a) savings and mortgage banks
(b) stock savings and loan associations, and
(c) private development banks;
• Grant all secured and unsecured loans
• Invest in bonds, commercial paper, and other fixed income securities
• Issue domestic letters of credit
• Extend credit facilities to private and government employees
• Rediscount paper with the Land Bank of the Philippines (LBP), Development Bank of the Philippines (DBP), and other government-owned or-
controlled corporations
• Accept foreign currency deposits
• Purchase, hold and convey real estate

Presentation title 8
Updated as of 12 February 2024 9
 4. RURAL BANKS
Cater to the financial needs of rural and agricultural communities. They provide basic banking services, such as savings and credit
facilities, to rural residents and small-scale farmers.
Rural banks may perform the following:
• extend loans and advances to farmers, fishermen, farm families, cooperatives, merchants, private and public employees;
• accept savings and time deposits;
• act as correspondent for other financial institutions;
• rediscount paper with Land Bank of the Phils, Devt Bank of the Phils or any other bank; act as collection agent; offer other
banking services provided in Sec 53 of RA 8791. With prior approval of the Monetary Board, an RB may perform:
• accept current or checking account provided rural bank has a net asset of at least PHP5 million;
• accept negotiable order of withdrawal accounts; act as trustee over estates/properties of farmers and merchants;
• act as official depository of local government unit in the local government unit where bank is locates;
• sell domestic drafts;
• and invest in allied undertakings.

Presentation title 10
Presentation title 11
Presentation title 12
Presentation title 13
Presentation title 14
Presentation title 15
Presentation title 16
Presentation title 17
Presentation title 18
Presentation title 19
Presentation title 20
Presentation title 21
 5. COOPERATIVE BANKS

• These banks are owned and operated by cooperatives, which are formed by groups of individuals
with common interests, such as farmers, workers, or residents of a particular community.
Cooperative banks provide banking services to their members and may also offer services to non-
members.
• A Coop Bank shall primarily provide financial, banking and credit services cooperatives and their
members, and to general public. It may also perform any or all of the banking services offered by
other types of banks subject to prior approval of the BSP.

Presentation title 22
Presentation title 23
 Rural Banks and Cooperative Banks have the same powers and may:

• Extend loans to farmers, fishermen, cooperatives, and certain other persons and merchants.

• Take savings and time deposits.

• Take current / checking accounts, if the bank has net assets of PHP5 million or more.

• Offer NOW (negotiable order of withdrawal) accounts.

• Act as a trustee over the estates of farmers and merchants.

• Take municipal , city or provincial deposits from the municipality, city or province where the bank is located.

Rural banks and cooperative banks are differentiated from each other by ownership. While rural banks are
privately-owned and managed, cooperative banks are organized/owned by cooperatives or federation of
cooperatives.

Presentation title 24
 6. ISLAMIC BANKS

• These banks operate under Shariah principles, which prohibit interest (Riba) and promote risk-sharing and ethical investments. They
offer Islamic financial products and services compliant with Islamic law. Example: Al-Amanah Islamic Bank
An Islamic bank, insofar as not inconsistent or incompatible with RA 6848, may perform:
• open savings accounts for safekeeping with no participation in profit or loss unless authorized by the holder;
• accept investment account placements and invest the same for a term with the bank's funds in Islamically permissible transactions on participation basis;
• accept foreign currency deposits;
• buy and sell foreign exchange; handle remittances and fund transfers; accept drafts and issue letters of credit, negotiate notes and bills of exchange and
other evidence of indebtedness;
• act as collection agent;
• provide financing;
• handle storage operations for goods or commodity financing;
• issue shares for the account of institutions and companies assisted by the bank;
• undertake various investments in all transactions allowed by Islamic Shari’a;
• and other services allowed by Monetary Board.

Presentation title 25
Presentation title 26
Presentation title 27
Presentation title 28
 BANK PRODUCTS AND SERVICES
1. Different Types of Bank Accounts in the Philippines

a. Savings Account. Because of its low initial deposit and low maintaining balance, savings account (SA) is
usually the preferred choice for Filipinos when they open an account with the bank. With an initial deposit
of P200.00 you can already open a savings account with no maintaining balance required. This type of
bank account is appropriate for children, teenagers, and young professionals who do not have huge
amount of savings and stable income. The less attractive feature of savings account, however, is that
savings account pays low interest, usually 1% and if you avail of ATM facilities with another bank, there is
another deduction from your account as service charge.

• It is primarily designed for storing money over the long term while earning interest on the deposited funds.
It is ideal for individuals who want to save money for future goals or emergencies.

Presentation title 29
 BANK PRODUCTS AND SERVICES
Savings Account vs. Payroll Account

• Savings accounts and payroll accounts have some similarities such as ATM withdrawals and debit card
facilities. A significant distinction between the two is that a payroll account has no maintaining balance.

ATM vs. Passbook Savings Account. When you open a savings account, the bank staff will ask you to choose
between an ATM account and a passbook account. If your intention is for spending and easy access of your
fund using an ATM or debit card, go with an ATM savings account. ATM accounts have lower maintaining
balance and initial deposit requirements compared with passbook accounts.

If you do not touch your money more often, passbook savings account is a better choice. Bank accounts with
passbooks are ideal for Pinoys who prefer traditional banking where transactions and account balances are
printed in booklet type. This makes passbook accounts safer than ATM accounts, as there is no risk of ATM
skimming and other banking scams.

Presentation title 30
 BANK PRODUCTS AND SERVICES
b. Checking Account. Otherwise called current account is a basic deposit account that is different from a savings
account. First, checking account requires higher amount upon opening and likewise its maintaining balance is also
higher than savings account. Second, unlike savings account, checking does not earn or earns very minimal interest.
This type of bank account is appropriate for those who have businesses as well as to individuals who have regular
cashflow such as revenue, payment of expenses, amortizations, and loans.

• A checking account is primarily used for everyday transactions, such as paying bills, making purchases, and
withdrawing cash. It offers easy access to funds and is often used for day-to-day spending.

c. Time Deposit Account. Is another bank account that pays interest higher than the usual savings account. Opening
a time deposit means keeping your funds in the account for a fixed period of one month to seven years. Generally,
you cannot use your money within the time agreed with the bank. There is this term called pre termination,
meaning early withdrawal is possible but it comes with a penalty that can deplete the earnings of the account. Time
deposit interest in the Philippines earns interest higher than 1%, usually up to 3.50%. The higher the amount you
deposit and the longer you hold it in the bank, the higher interest you will earn.

Presentation title 31
 BANK PRODUCTS AND SERVICES
d. Foreign Currency Accounts.

A foreign currency account allows you to withdraw in peso or dollar or other account depending on what
currency the account was opened. Depositors with foreign currency account have a chance to earn money
without having to physically deposit or withdraw money from bank. In times when a certain currency has the
higher exchange rate, depositors usually give a bank advise or notice to withdraw (debit) the account with
higher currency rate and have it deposited (credit) to currency with lower exchange rate. In effect, the
depositor is increasing his money by playing with currency rate differences. Most foreign currency bank
accounts in the Philippines come with a passbook and are typically available in the following dominant and
flexible currencies: Dollar, Yen, Pound, Yuan, etc.

Presentation title 32
 BANK PRODUCTS AND SERVICES
e. Joint Account. Is another bank account appropriate for business partners, associations, and couples for
convenience and transparency in managing their shared inflows and outflows. By its term, joint account
means that the deposit will be under more than one name. Similar to a single account, joint bank accounts
can be a savings account, a checking account, or a time deposit.

• Joint accounts come in two types: joint "AND" and joint "OR" accounts. A joint "and" account needs the
signature of both account holders for withdrawals. On the other hand, a joint "or" account allows co-
owners to withdraw anytime without the other person's signature. For savings deposit only a passbook (no
ATM card) is issued for "and" accounts, while for "or" accounts, an ATM or passbook may be provided.

Presentation title 33
 BANK PRODUCTS AND SERVICES
2. Payment Services:

• Debit Cards: Cards linked to checking accounts that allow customers to make purchases and withdraw cash from ATMs.
With a debit card, you can pay for everyday expenses with just a swipe (and usually your PIN). The money will come
straight from your checking account so there’s no need to carry cash if you prefer not to. Plus, if your debit card is lost or
stolen, you may not be responsible for unauthorized transactions if you report it in a timely manner. Lost cash,
unfortunately, is often lost for good.

• Credit Cards: Cards that allow customers to borrow money up to a certain limit to make purchases, with the option to
pay off the balance over time or in full. A credit card lets you pay for items with a line of credit. In essence, you’re
borrowing the money and then paying it back when the bill comes. But remember that different credit cards charge
different rates of interest, so it’s important to know what you’re agreeing to (so you don’t end up paying too much in the
long run). One way to avoid paying interest is to pay your bill in full each month

Presentation title 34
 BANK PRODUCTS AND SERVICES
2. Payment Services:

• Mobile Banking: Refers to banking services accessed through a mobile device, such as a smartphone or tablet,
using a dedicated banking app provided by the bank.

• Internet Banking: Also known as online banking, involves accessing banking services through a web browser on a
computer or laptop. It typically requires logging in to the bank's website to access account information and
perform transactions

Presentation title 35
 BANK PRODUCTS AND SERVICES
3. Loan Products:

• Mortgages: Loans used to purchase real estate, with the property serving as collateral for the loan.

• Personal Loans: Unsecured loans that individuals can use for various purposes, such as debt consolidation,
home improvements, or unexpected expenses.

• Auto Loans: Loans specifically for purchasing vehicles, with the vehicle serving as collateral.

• Business Loans: Loans provided to businesses for various purposes, including working capital, expansion,
equipment purchases, and inventory financing.

Presentation title 36
 BANK PRODUCTS AND SERVICES
4. Investment Products:

• Savings and Money Market Accounts: Accounts that offer higher interest rates than regular savings
accounts and may include limited check-writing capabilities.

• Individual Retirement Accounts (IRAs): Tax-advantaged accounts designed to help individuals save for
retirement, with options for traditional IRAs, Roth IRAs, and SEP IRAs.

• Investment Advisory Services: Professional investment advice and portfolio management services to help
clients achieve their financial goals.

• Brokerage Services: Facilitation of buying and selling stocks, bonds, mutual funds, and other securities on
behalf of clients.

Presentation title 37
 BANK PRODUCTS AND SERVICES
5. Risk Management Products:

• Insurance Products: Offerings such as life insurance, health insurance, homeowners insurance, and vehicle
insurance to help individuals and businesses manage risks associated with life events, property damage,
and liability.

• Derivative Products: Financial instruments such as options, futures, and swaps used for hedging against
various risks, including interest rate risk, currency risk, and commodity price risk.

6. International Banking Services:

• Foreign Exchange Services: Currency exchange and international wire transfer services for individuals and
businesses engaged in cross-border transactions.

• Trade Finance: Financing and services to facilitate international trade, including letters of credit, trade
finance loans, and export/import financing.

Presentation title 38
 BANK PRODUCTS AND SERVICES

7. Automated Teller Machine. The introduction of ATM’s has given the customers the facility of round the clock
banking. The ATM’s are used by banks for making the customers dealing easier. ATM card is a device that allows
customer who has an ATM card to perform routine banking transaction at any time without interacting with human
teller. It provides exchange services. This service helps the customer to withdraw money even when the banks ate
closed. This can be done by inserting the card in the ATM and entering the Personal Identification Number and
secret Password.

Presentation title 39
Thank you