Chapter 2:

PHILIPPINE FINANCIAL
LANDSCAPE: NAVIGATING
THE DYNAMICS OF THE
FINANCIAL SYSTEM

Financial Regulation Market Drivers being Regulated

Financial regulation is a The regulation of market drivers is an
comprehensive framework designed to indispensable facet of maintaining a fair,
oversee and govern the financial industry. It transparent, and stable economic
involves meticulous establishment of environment. Market drivers, pivotal in
regulations and standards to control various steering the trajectory of economic activities,
factors influencing market dynamics. The undergo meticulous regulation to ensure a
primary objective is to monitor businesses' level playing field and foster a competitive
ability in the financial sector to initiate and landscape.
maintain an optimal level of capital, crucial
for sustaining operations effectively. 1. COMPETITIVENESS
- Regulating competitiveness
involves creating a framework
where businesses can vie for
It acts as a safeguard, weaving rules
market share on equitable terms.
and standards to guide entities in the financial
Regulatory measures are
landscape. It ensures adherence to principles
implemented to prevent
fostering transparency, stability, and
monopolistic practices,
responsible financial management. Oversight
encourage innovation, and
extends to monitoring capital deployment,
safeguard fair competition. By
risk management, and overall financial health.
fostering an environment where
enterprises compete based on
merit, market regulators
The goal is to create an environment
contribute to the overall
where businesses can initiate and navigate
dynamism and efficiency of the
financial complexities. It acts as a bulwark
market.
against risks, ensuring businesses maintain a
prudent level of capital for resilience against
2. THE BEHAVIOR OF THE
challenges and market fluctuations.
MARKET (the truthfulness with
which enterprises carry out their
operations and portray themselves).
Financial regulation also serves as a
- Ensuring the truthfulness with
custodian of market integrity, preventing
which enterprises carry out their
malpractices, enhancing efficiency, and
operations and portray
fostering a level playing field for ethical
themselves is a cornerstone of
competition. In summary, it represents a
market regulation. This involves
sophisticated system committed to the
setting standards for ethical
financial ecosystem's sustained health,
conduct, transparency, and
promoting responsible capital management,
accuracy in information
risk mitigation, and upholding transparency
dissemination. Regulatory bodies
and integrity. Through its intricate web of
play a crucial role in monitoring
regulations, financial regulation ensures
and penalizing misleading
businesses endure as resilient contributors to
practices, safeguarding the
economic stability and prosperity.
interests of consumers and
maintaining the integrity of the
market.
 Chapter 2:
3. CONSISTENCY (unwavering
reliability of information disclosures
and policies)
- The unwavering reliability of
information disclosures and
policies is a key focus of market
regulation. Establishing
consistency in how information is
presented and policies are
formulated enhances market
predictability and investor
confidence. Regulatory oversight
aims to prevent abrupt shifts in
market dynamics, providing a
stable environment for businesses
to operate and investors to make
informed decisions.
4. STABILITY
- government mitigates market
risks to safeguard interests of the
stakeholders. Government
intervention to mitigate market
risks is a fundamental aspect of
regulatory measures. By
implementing safeguards, such as
risk management protocols and
crisis- response mechanisms,
regulators aim to ensure the
stability of the market. This not
only protects the interests of
investors but also contributes to
the overall health of the economy
by averting systemic shocks.
In essence, the regulation of market
drivers goes beyond mere oversight; it is a
strategic approach to cultivate a market
environment characterized by healthy
competition, ethical behavior, consistency,
and stability. These regulatory efforts are
geared towards creating an ecosystem where
businesses can flourish, investors can trust,
and economic activities can unfold in a
manner that benefits all stakeholders.
PHILIPPINE FINANCIAL
LANDSCAPE: NAVIGATING
THE DYNAMICS OF THE
FINANCIAL SYSTEM
Financial Activity Regulation
Encompasses the formulation and
implementation of comprehensive rules and
controls to maintain order across various
sources of financial activities. Regulators
emphasize the need for a structured
regulatory framework that governs all aspects
of financial activities, ensuring transparency,
ethical conduct, and overall market stability.
The goal is to establish a system that not only
oversees financial operations but also fosters
an environment conducive to fair practices,
investor confidence, and sustained economic
health.
Regulatory Bodies
These regulatory organizations,
distinguished by their specialized functions
and responsibilities, harmoniously collaborate
to intricately mold and govern the intricate
contours of the financial ecosystem. Their
concerted efforts form a robust framework
that not only ensures regulatory compliance
but also fosters an environment of
transparency, stability, and sustainable growth
within the financial landscape, creating a
resilient foundation for economic prosperity.
BANGKO SENTRAL NG PILIPINAS
(BSP)
Its functions are to:
1. Liquidity Management
- The Bangko Sentral ng Pilipinas
(BSP) plays a critical role in
meticulously managing liquidity,
a fundamental function essential
for both effective monetary
policy and overall financial
stability. As the central monetary
authority in the Philippines, the
BSP takes on the responsibility of
vigilant oversight and control
over the money supply and
various liquid assets circulating
Chapter 2:
through the intricate channels of
the financial system. Using its
authority, the BSP ensures an
optimal level of liquidity,
encompassing physical currency,
demand deposits, and other
monetary instruments. To achieve
this, the BSP employs a toolbox
of strategic instruments,
including open market operations
and interest rate policies.
Through these measures, the BSP
aims to strike a delicate balance
that not only fosters economic
growth but also maintains the
stability of prices and the overall
health of the financial system.
The meticulous attention to
liquidity management, embedded
in the core functions of the BSP,
serves as a linchpin in instilling
confidence within the financial
system. Furthermore, it plays a
crucial role in aligning with
broader economic development
goals in the Philippines, ensuring
a resilient and supportive
financial environment for
sustained prosperity.
2. Currency issues
- The Bangko Sentral ng Pilipinas
(BSP) plays a crucial role in
ensuring the stability and
reliability of the Philippine
monetary system, particularly in
matters related to currency.
Acting as the central monetary
authority, the BSP is responsible
for issuing currency and legal
tender. This includes carefully
overseeing the production,
distribution, and regulation of
physical currency like coins and
notes within the economy.
PHILIPPINE FINANCIAL
LANDSCAPE: NAVIGATING
THE DYNAMICS OF THE
FINANCIAL SYSTEM
- The BSP's involvement in
currency matters goes beyond
simply printing and distributing
money. It encompasses the
monitoring and control of the
overall money supply to uphold
economic stability and prevent
issues such as inflation or
deflation. The central bank
employs various tools, including
monetary policy instruments, to
manage the flow of currency and
influence economic conditions.
- Essentially, the BSP's function in
currency matters is a foundational
aspect of its broader mandate to
protect the stability and
dependability of the Philippine
monetary system. This
responsibility involves not only
handling tangible currency but
also strategically managing
monetary policies to support the
country's economic objectives.
3. Lender of last resort
- The Bangko Sentral ng Pilipinas
(BSP) serves as the lender of last
resort, a crucial function in the
realm of monetary policy and
financial stability. In this
capacity, the BSP acts as a
safeguard for financial
institutions facing liquidity crises,
providing them with a source of
emergency funds when all other
avenues have been exhausted. By
fulfilling the role of a lender of
last resort, the BSP contributes to
the resilience of the financial
system, preventing systemic
failures and promoting stability in
times of economic challenges.
Chapter 2:
4. Financial Supervision
- The function of financial
supervision is a crucial role
undertaken by the Bangko Sentral
ng Pilipinas (BSP). Financial
supervision involves the
oversight and regulation of
financial institutions and
activities to ensure their
soundness, stability, and
compliance with established
standards and regulations.
- As part of financial supervision,
the BSP exercises regulatory
authority over banks and other
financial institutions, monitoring
their operations to safeguard the
interests of depositors and
maintain the overall health of the
financial system. This function
encompasses activities such as
assessing the financial condition
of banks, enforcing prudential
regulations, and conducting
regular examinations to identify
and address potential risks.
- Through financial supervision,
the BSP contributes to the
stability and integrity of the
financial sector, fostering a
secure environment for financial
transactions and protecting the
rights of consumers. The
regulatory measures implemented
under financial supervision play a
crucial role in preventing
financial crises, promoting
transparency, and maintaining
public confidence in the
Philippine financial system.
5. Management of foreign currency
reserves
PHILIPPINE FINANCIAL
LANDSCAPE: NAVIGATING
THE DYNAMICS OF THE
FINANCIAL SYSTEM
- The function of managing foreign
currency reserves is indeed one
of the key responsibilities of the
Bangko Sentral ng Pilipinas
(BSP). This function involves the
strategic management and
oversight of the country's
reserves in foreign currencies,
such as the US dollar and other
major global currencies.
- The BSP, as the central monetary
authority of the Philippines,
engages in activities to maintain
an adequate level of foreign
currency reserves. These reserves
serve various purposes, including
supporting the stability of the
Philippine peso, facilitating
international trade and
transactions, and acting as a
buffer against external economic
shocks.
- Through careful management and
monitoring, the BSP ensures that
the country has a sufficient and
well-utilized reserve of foreign
currencies, contributing to overall
economic stability and resilience
in the face of global economic
challenges.
6. Determination of exchange rate
policy
- The Bangko Sentral ng Pilipinas
(BSP) is like the financial
maestro of the Philippines when
it comes to deciding how the
exchange rate works. Imagine it
as the conductor of an orchestra,
making sure all the instruments
(economic factors like trade and
market conditions) are in
harmony. The BSP, being the
 Chapter 2:
central money authority, uses its
expertise to set policies that keep
the exchange rate stable and
competitive, helping the country's
economy stay strong and making
international trade smoother.
INSURANCE COMMISSION
Under the mandates of Executive
Order 192 and Republic Act 10607,
commonly known as the Insurance Code, the
Insurance Commission assumes the
responsibility of diligent oversight and
regulation over not only the pre-need and
health maintenance organization industries
but also the expansive domain of the
insurance sector at large. In this capacity, the
Insurance Commission plays a pivotal role,
wielding its authority to ensure strict
adherence to regulatory standards and, in
turn, fostering a climate of stability within
these specific segments of the financial
industry. The Commission's proactive
engagement and regulatory measures are
instrumental in maintaining compliance,
promoting fair practices, and contributing to
the overall resilience of the financial system
in these crucial areas.
SECURITIES AND EXCHANGE
COMMISSION (SEC)
In the intricate tapestry of the
financial landscape, the Securities and
Exchange Commission (SEC) emerges as a
central figure, wielding significant influence
through its oversight of the corporate sector,
participants in the capital market, and various
securities and investment instruments.
Beyond its regulatory functions, the SEC
takes on an active role as a proponent and
guardian of the principles of sound corporate
PHILIPPINE FINANCIAL
LANDSCAPE: NAVIGATING
THE DYNAMICS OF THE
FINANCIAL SYSTEM
governance. This proactive engagement
serves as a cornerstone in fostering and
preserving the integrity and transparency of
the financial markets, instilling confidence
and ethical conduct within the financial
community. The SEC's multifaceted
responsibilities position it as a stalwart
defender of fair and accountable practices,
crucial for maintaining a robust and
trustworthy financial environment.
BOARD OF INVESTMENT (BOI)
As a key organization under the
Department of Commerce and Industry, the
BOI takes on the primary responsibility of
promoting investment in the country. By
facilitating domestic and international
investments, the BOI contributes significantly
to economic development. Investors benefit
from the BOI's services, including
consultation, support in actualizing
investments, and post-investment services,
making it a crucial entity for fostering
economic growth and attracting investments
to the country. The collaborative efforts of
these regulatory bodies create a robust
framework that ensures the stability,
compliance, and attractiveness of the
Philippines' financial landscape.
Monetary Policy
A central bank assumes the crucial
role of steering monetary policy, meticulously
overseeing and managing the money supply
within an economy. In the Philippines, the
Bangko Sentral ng Pilipinas (BSP) is
entrusted with this pivotal function,
leveraging it as a tool to uphold monetary
stability and exercise authority over inflation
rates.
 Chapter 2:
This facet of monetary policy, often
considered one of the primary mechanisms
for governmental influence on the economy,
operates in tandem with fiscal policy, which
involves government spending and taxation.
Monetary policy, specifically, revolves around
the intricate process through which the central
bank or the government regulates the
production and availability of money, as well
as influences the pricing of money and the
prevailing interest rates. By deftly navigating
these elements, the central bank contributes
significantly to maintaining economic
equilibrium and fostering a conducive
environment for sustained growth and
stability.
Money Supply and Payment
System
The financial system, a complex
network of interrelated financial processes
fueled by the essence of money, relies heavily
on the concept of money supply, signifying
the availability of financial resources within
the system. Oversight of the monetary
demand within the market, a critical aspect of
this dynamic, is entrusted to the Bangko
Sentral ng Pilipinas (BSP).
Money, in its various forms,
manifests itself within the financial system,
taking on several expressions, each playing a
distinctive role in facilitating economic
transactions. These manifestations include
liquid assets, represented by physical coins
and notes, which provide immediate
purchasing power and liquidity. Additionally,
demand deposits, accessible on short notice,
contribute to the fluidity of financial
transactions by serving as readily available
funds for account holders.
Moreover, the financial system
accommodates alternative forms of financial
PHILIPPINE FINANCIAL
LANDSCAPE: NAVIGATING
THE DYNAMICS OF THE
FINANCIAL SYSTEM
instruments, adding a layer
of complexity to the money supply. These
instruments, ranging from certificates of
deposit to electronic forms of currency,
contribute to the diversity of options available
for conducting financial transactions. The
BSP, in its role as the guardian of monetary
stability, actively manages these various
forms of money to ensure a balanced and
efficient financial system, underscoring the
intricate relationship between the money
supply and the seamless functioning of the
broader economy.
It is believed that monetary policy
would be controlled so that the sovereign may
maintain control over its economy. BSP is
responsible for ensuring that the following
conditions are met in order for monetary
policy to be considered suitable or effective.
• Compatibility with the predetermined
objectives
• Availability/accessibility of
information
• The degree to which the variable set
is responsive
Under Republic Act 7653, the exclusive
authority to issue currency lies with the BSP.
The local banks are in charge of managing
both the paper money and the coins in
circulation. The following requirements need
to be met by the regional banks:
• Banks are required to categorize the
cash deposits that customers make
and sort the notes according to series,
denomination, and whether they are
fit or clean notes or dirty or impure
notes.
• Banks are required to categorize their
cash deposits and sort them by series,
denomination, whether they are fit or
clean notes, or filthy or unclean
notes. Banks are also required to
provide bags or containers that are
 Chapter 2:
securely sealed and correctly labeled
for fit and dirty notes.
• The deposits that banks receive are
required to be packaged in bags or
containers that may be sealed, and
there must be a specified amount of
twenty (20) entire bundles for each
denomination.
• Financial institutions situated in the
provinces have the option of
delivering currency deposits in the
form of direct deposits to the BSP
regional or branch that is
geographically closest to them, or
shipping deposits to the BSP in
Manila in the event that there is no
such institution.
• Just like the bills, the coins have to go
through the same sorting process and
they can't have any sticky tape on
them.
Purchasing Power
In understanding purchasing power,
the consumer price index (CPI) emerges as a
practical metric. The CPI is derived by
computing the weighted average of prices
within a basket encompassing all items
constituting the market. The fluctuation in the
CPI between different time periods is
indicative of the inflation rate, portraying the
extent to which overall price levels have
shifted.
Here's a simplified explanation of how
inflation is computed:
• Select a Basket of Goods and
Services: Identify a representative
basket of goods and services that
reflects the spending habits of the
population. This basket typically
includes items such as food, housing,
clothing, transportation, and
healthcare.
PHILIPPINE FINANCIAL
LANDSCAPE: NAVIGATING
THE DYNAMICS OF THE
FINANCIAL SYSTEM
• Determine Base Year: Choose a base
year as a reference point. The prices
in this year are used as a benchmark
against which prices in subsequent
years will be compared.
• Collect Price Data: Gather the current
prices of the selected items in the
basket for the current year. This is
usually done through regular surveys
and data collection.
• Calculate the Index: Compute the
price index for each item in the
basket for the current year using the
formula:
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑌𝑒𝑎𝑟 𝑃𝑟𝑖𝑐𝑒
Price Index = x 100
𝐵𝑎𝑠𝑒 𝑌𝑒𝑎𝑟 𝑃𝑟𝑖𝑐𝑒
Repeat this process for each item in
the basket.
• Calculate the Inflation Rate: Once
you have the price indices for all
items, calculate the overall inflation
rate using the formula:
Inflation Rate =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑒𝑎𝑟 𝑝𝑟𝑖𝑐𝑒−𝐵𝑎𝑠𝑒 𝑌𝑒𝑎𝑟 𝐼𝑛𝑑𝑒𝑥
x 100
𝐵𝑎𝑠𝑒 𝑌𝑒𝑎𝑟 𝐼𝑛𝑑𝑒𝑥
The result will be a percentage that
represents the rate of inflation.
It's important to note that inflation
calculations can vary based on the specific
index and methodology used. Different
countries may use different baskets of goods
and services and may employ various
methods for calculating inflation. The CPI
and PPI are widely used, but other indices,
such as the GDP deflator, are also used in
specific contexts.
In the realm of inflation, we encounter two
discernible categories of rates:
• Core inflation emerges as the primary
metric employed in the majority of
economic assessments due to its
exclusion of the influence of
commodities or events characterized
 Chapter 2:
by highly erratic fluctuations. This
deliberate omission aims to provide a
more stabilized and reliable measure
of inflation, allowing for a clearer
understanding of underlying
economic trends.
• In the realm of economic indicators,
headline inflation emerges as a
significant metric, embodying the
collective fluctuations in the cost of
living. This measure meticulously
considers the overall movement of a
basket of goods or commodities,
encapsulating the broader dynamics
of consumer prices. Rather than
focusing on specific sectors or
components, headline inflation
provides a comprehensive overview
of the general trend in prices, making
it a crucial gauge for understanding
the broader economic landscape and
the impact on consumers' purchasing
power.
Payment System
The payment system functions as a
network of interconnected processes designed
to facilitate the settlement of costs associated
with delivered goods or services. This
exchange is carried out through a variety of
instruments, which may undergo either
banking or non-banking procedures. To
achieve this, several key components are
necessary, including common operational
procedures and regulations governing aspects
such as access, fees, and operating hours.
Additionally, there must be standardized
procedures for transferring payment messages
within the system, agreed-upon methods of
settlement, and established protocols for
transmitting payment messages seamlessly
within the framework. These components
collectively form the backbone of the
payment system, ensuring its smooth
operation and effectiveness in settling
financial transactions.
PHILIPPINE FINANCIAL
LANDSCAPE: NAVIGATING
THE DYNAMICS OF THE
FINANCIAL SYSTEM
History of Philippine Currency
Philippine currency can be likened to
a diverse palette of threads intricately woven
into the intricate tapestry of our society,
entwining with the threads of social, political,
and economic dimensions. The various forms
of Philippine currency, from its earliest bead-
like iterations to the contemporary paper
notes and coins in circulation, stand as
enduring symbols of our societal
transformation and the interconnectedness
that has shaped our relationships-both internal
among our people and external with global
communities-over the course of numerous
centuries.
PRE-HISPANIC ERA
Long before the Spanish colonization
of the Philippines in 1521, the indigenous
people of the archipelago had already
established robust commercial connections
with neighboring regions such as China, Java,
Borneo, and Thailand, among others. These
interactions involved the intricate exchange of
various goods and services. The Filipinos
were early practitioners of the barter system
of commerce, a method prevalent globally
during that period. However, due to the
inherent challenges of bartering, the
inhabitants eventually adopted cowry shells
as a standardized medium of exchange.
Whether fashioned from gold, jade, quartz, or
wood, cowries gradually evolved into the
predominant and universally accepted form of
currency, shaping the economic transactions
of the region over many centuries.
The Philippines boasts an
exceptionally rich natural reserve of gold.
Throughout ancient times, this precious metal
served various purposes, including personal
adornment, the crafting of trade rings,
jewelry, and the creation of the earliest
indigenous form of currency known as
Piloncitos. These unique artifacts had a
distinctive flat base with an engraved
 Chapter 2:
inscription bearing the letters "MA" or "M,"
stylistically resembling the Javanese script
employed in the 11th century. Scholars posit
that the inscription contained the term
Chinese merchants used to refer to the
Philippines in their business transactions
before the Spanish arrival, providing a
historical link to the region's early economic
interactions.
In the period between the 11th and
14th centuries, early Filipinos engaged in the
craftsmanship of handmade gold rings
specifically designed for bartering purposes.
Crafted from pure gold, these rings,
complemented by metal gongs and other
embellishments fashioned from gold, silver,
and copper, served a significant role in
commercial transactions. Notably, these
transactions extended beyond local
exchanges, as the rings were employed in
trade with the Chinese and neighboring
nations. The meticulous artistry and material
composition of these artifacts reflect the
intricate economic and cultural interactions of
the time, shedding light on the economic
practices and connections that early Filipino
communities established with other
civilizations.
SPANISH ERA (1521-1897)
In the early colonial period, the
circulating currency within the colonies took
the form of coins commonly referred to as
cobs or macuquinas. These coins were crafted
by colonial mints and had their roots in
regions like Mexico and various Spanish
territories. Characteristically, one side of
these silver coins featured the royal coat of
arms of Spain, while the opposite side
displayed a cross.
Between the years 1732 and 1772, the
Spanish dos mundos had widespread
distribution not just in the Philippines but also
across the rest of the globe. Because of the
coin's stunning design, it is highly prized, and
PHILIPPINE FINANCIAL
LANDSCAPE: NAVIGATING
THE DYNAMICS OF THE
FINANCIAL SYSTEM
it is known as the "two
worlds" coin because it depicts two crowned
globes that stand for Spanish control over the
Old World and the New World. Due to the
fact that it has two columns on each side of
the globes, it is also known as the Mexican
Pillar Dollar or the Columnarias.
Because there was a scarcity of
fractional coins, the Spanish government
ordered the Philippines to strike barrillas
there. These coins were produced in the
Philippines. These were the very first coins
made locally in the Philippines out of copper
or bronze, and they were rather rudimentary.
The word "barya," which refers to pocket
money in the Philippines, derives from the
Spanish word "barrilla."
At the beginning of the 19th century,
the majority of Spanish colonies in Central
and South America staged uprisings and
proclaimed their independence from Spain.
They circulated silver coins throughout the
Philippines that had revolutionary slogans and
symbols. The officers of the Spanish
administration stationed on the islands were
concerned that the seditious marks might
motivate Filipinos to fight against Spanish
rule. Because of this, the inscriptions were
obliterated by counter stamping the coins
with the word F7 or YII. The last coins to be
produced in Spain were made of silver and
featured a portrait of a youthful Alfonso XIII.
The first paper currency to be used in
circulation in the Philippines was the pesos
fuertes, which were issued by the El Banco
Espanol Filipino de Isabel II, which was the
country's first bank.
REVOLUTIONARY PERIOD (1898-1899)
In adherence to the provisions laid
out in the Malolos Constitution of 1898,
General Emilio Aguinaldo, the inaugural
President of the Philippines, was vested with
the authority to authorize the issuance of
various currencies for the nascent nation.
 Chapter 2:
Within the confines of the arsenal at Malolos,
two distinct types of copper coins, each
valued at two centavos, were minted.
Complementing these coins were
revolutionary banknotes with denominations
of five pesos and ten pesos, on which the
names of Pedro Paterno, Mariano Limjap, and
Telesforo Chuidian were personally inscribed.
However, subsequent to General Aguinaldo's
surrender to American forces, these
currencies were withdrawn from circulation
and officially declared illegal forms of
money.
AMERICAN PERIOD (1900-1941)
Modern financial, monetary and
credit systems emerged in the Philippines
during the period following American
colonists' influx in 1898. This was one
significant event that helped placed
Philippines among other booming countries in
East Asia. One of the elements of this
development is adopting the gold standard, an
essential part of the Philippine monetary
system. Under this system, the value of the
local currency, the peso, was pegged to the
US dollar at a fixed rate of 2: 1. A major
achievement of great significance occurred in
the year 1903 when Coinage Act for the
Philippine Islands got sanctioned by the US
Congres. Further, it established the first
strong pillar on which Philippines' money
economy could be built.
The design of these coins was due to
an engraver and a Filipino artist, Melecio
Figueroa. Minting produced coins worth from
half centavo to one peso. response: It was the
result of minting, which yielded coins that
had denomination from half centavo up to one
peso. The use of Spanish language only was
abandoned in 1912 when El Banco Espanol
Filipino became known as the bank of the
Philippine Islands. This came into effect in
1933. The one-peso note replaced the series
of silver certificates in May 1918.
PHILIPPINE FINANCIAL
LANDSCAPE: NAVIGATING
THE DYNAMICS OF THE
FINANCIAL SYSTEM
THE JAPANESE OCCUPATION
(1942-1945)
The onset of World War II
precipitated significant upheavals within the
economic structure of the Philippines. During
this time period, the nation used two different
types of notes in circulation. Large-
denomination war notes were printed by the
Japanese Occupation Forces throughout the
conflict. On the other side, provinces and
towns produced their own own guerrilla notes
or resistance currencies. The majority of these
guerrilla notes or resistance currencies were
sanctioned by the Philippine government in
exile, and they were largely repaid after the
war.
THE PHILIPPINE REPUBLIC
The development of Philippine
currency during the time of the Philippine
Republic sent a message that the country was
taking responsibility for determining its own
fate. Old treasury certificates that were
reissued with the word "Victory" imprinted on
them were used as money in the nation after it
had won its independence from the United
States at the conclusion of World War II.
In the wake of the establishment of
the Central Bank of the Philippines in 1949,
the initial issuance of currency took the form
of English series notes crafted by Thomas de
la Rue & Co., Ltd. in England and coins
minted by the United States Bureau of the
Mint. These marked the inception of currency
usage in the Philippines. During the late
1960s, a process commenced to Filipinize the
country's coins and paper currency, an
initiative that persists to the present day. The
circulation of the Ang Bagong Lipunan
(ABL) series of notes characterized the
1970s, and starting in 1978, these notes
underwent production at the Security Printing
Plant in the Philippines. This marked a
significant reformative phase, ushering in a
new era for the currency of the Philippines.
 Chapter 2:
Following the establishment of the
Central Bank of the Philippines in 1949, the
initial release of currency comprised the
English series notes printed by Thomas de la
Rue & Co., Ltd. in England and coins minted
by the United States Bureau of the Mint.
These marked the early forms of currency in
the Philippines. The process of Filipinizing
the Republic of the Philippines' coins and
paper currency began in the late 1960s and
continues to evolve. The circulation of the
Ang Bagong Lipunan (ABL) series of notes
occurred in the 1970s, with a transition to
production at the Security Printing Plant in
the Philippines from 1978 onwards. The
introduction of flora and fauna coins in 1983
marked a significant transformation in the
Philippine monetary system, featuring notable
figures from American history and indigenous
species. The ABL series was succeeded by the
new design series of banknotes in 1985,
followed by the introduction, a decade later,
of a new series of coins and notes bearing the
emblem of the Central Bank of the
Philippines (Bangko Sentral ng Pilipinas).
The Museum of the Central Bank of
the Philippines (Museo ng Bangko Sentral ng
Pilipinas), which serves as the repository and
custodian of the country's numismatic
heritage, collects, studies, and preserves the
coins, paper notes, medals, artifacts, and other
monetary items that were discovered in the
Philippines during the various historical
periods. It provides a visual description of the
growth of the Philippine economy with the
development of the country's currency
throughout the course of its history.
Key Takeaways:
• Financial regulation is a
comprehensive framework designed
to govern the financial industry,
ensuring transparency, stability, and
responsible financial management.
PHILIPPINE FINANCIAL
LANDSCAPE: NAVIGATING
THE DYNAMICS OF THE
FINANCIAL SYSTEM
• It oversees factors influencing market
dynamics, monitors businesses'
capital levels, and acts as a safeguard
against risks, fostering an
environment for economic growth.
• Market drivers, including
competitiveness, truthful market
behavior, consistency, and stability,
are regulated to create a fair and
efficient economic environment.
• Regulatory bodies, such as the
Bangko Sentral ng Pilipinas (BSP),
Insurance Commission, Securities
and Exchange Commission (SEC),
and Board of Investment (BOI),
collaborate to form a robust
framework for financial stability.
• Bangko Sentral ng Pilipinas (BSP)
Functions:
1. Liquidity Management: BSP
manages liquidity to ensure a stable
financial system through oversight of
money supply and various liquid
assets.
2. Currency Issues: As the central
monetary authority, BSP ensures
stability in the Philippine monetary
system by overseeing the production,
distribution, and regulation of
currency.
3. Lender of Last Resort: BSP serves
as a lender of last resort, providing
emergency funds to financial
institutions facing liquidity crises,
contributing to financial system
resilience.
4. Financial Supervision: BSP
exercises regulatory authority over
banks, ensuring their soundness,
stability, and compliance with
established standards to protect
Chapter 2:
PHILIPPINE FINANCIAL
LANDSCAPE: NAVIGATING
THE DYNAMICS OF THE
FINANCIAL SYSTEM

depositors and maintain financial

system health.
5. Management of Foreign Currency
Reserves: BSP strategically manages
foreign currency reserves to support
the stability of the Philippine peso
and safeguard against external
economic shocks.
6. Determination of Exchange Rate
Policy: BSP, as the financial maestro,
sets policies to maintain a stable and
competitive exchange rate,
contributing to economic strength and
smooth international trade.

• The Bangko Sentral ng Pilipinas

(BSP) plays a crucial role in steering
monetary policy, managing the
money supply to uphold monetary
stability and influence inflation rates.
• Money supply, payment systems,
purchasing power, and the regulation
of monetary policy are integral
components in maintaining economic
equilibrium and facilitating sustained
growth.
• History of Philippine Currency:
1. The pre-Hispanic era saw the use of
cowry shells and gold rings as early
forms of currency in trade and barter
systems.
2. Spanish colonization introduced
cobs or macuquinas as coins, while
the American period adopted the gold
standard, pegging the peso to the US
dollar.
3. Japanese occupation during World
War II led to the issuance of large-
denomination war notes and guerrilla
resistance currencies.
4. The establishment of the Central
Bank of the Philippines in 1949
marked the Filipinization of
currency, with various series of notes
and coins introduced over the years.