 Was designed to set rules and guidelines to be
followed to ensure balance among individuals,
firms and/ or citizens.
 Also designed to reconcile conflicting interests.
 It defined regulation as a process whereby the
designated government authority provides and
establishes rules for firms in the industry.
 Identified by law or by order to execute +++
 Sets regulatory measures to address certain
risks and social factors.
 What are those certain risks and social
factors.
 Is a factor that is considered to ensure the
dynamism and agility of the policy to adopt in
a fast-changing environment.
 Is the probability of a firm to fail its objectives
that may result in ripple effect to the economy.
 Is a factor that requires established policies to
consider the effect on the consumer welfare
 Policies should take into consideration the
alignment to the objectives of the society.
 Is a type of regulation whereby rules and
standards are set to oversee the ability of the
companies to establish and maintain
appropriate levels of capital to sustain ts
operations.
 Includes setting controls over the market
factors that will affect the financial
sustainability of the firms and players in the
industry.
 Reason why some players or firms failed to
survive.
 What are the market drivers?
 Governments are duty bound to regulate
competition in the financial sector.
 Has an important role in shaping the overall
economy of a country hence it is a must that
this must be regulated.
 The following activities are regulated in the
financial sector.
 The main determinant of competition
 Firms in the financial market must be able to
understand how to respond and maximize
their leverage in the industry and compete.
 Investors explore for investments which can
offer
 To prevent connivance in the market
 The behavior of the firms in the industry can
also be regulated.
 The behavior in the market can be
demonstrated through:
 will come into plan by setting parameters to
ensure that firms will comply with certain
standards to ensure integrity of the firms and
level the playing field.
 The government normally sets:
 Is considered as an important principle in the
business.
 Is normally demonstrated by firms through
their information disclosure and policies. The
firm must enable themselves to ensure that
they provide sufficient information to their
customers.
 Is a vital asset in financial markets.
 Is to set standards to regulate and ensure that
information provided in the market is ____,
______, and __________.
 Is a critical factor that firms should achieve in
the long run. Given that market behavior is
dependent on a lot of factors, the risk is very
high.
 Must be able to protect the interest of the
clients as well as the companies to enable
their corporate sustainability.
 Is a threat that arises where a segment or
firms is not able to meet its commitment
because of failure to address the risks of the
market.
 Have been referred to activities that deal with
funding certain transactions or expenditures .
 Are focused on the trading of securities and
financial instruments.
 Setting rules to set standards, control and
order on the financial activities, regardless of
the source.
 Key financial regulators in the Philippine
Financial Systems.
 Is an interrelated financial process which is
fueled by money.
 Is the availability of financial resources for
deployment in the financial system. It is
making the money available for use or for
trade or investment.
 Money supply balanced with the
 This balance is managed by:
 For the case of the Philippines, it is the
 Money will take the form of the following:
 Is expected to be regulated somehow to enable
the sovereign to have control of its economy.
 Is an essential factor in the financial system.
 For a monetary policy to be appropriate or
effective, the BSP must ensure the following
are present:
 Bangko Sentral ng Pilipinas is authorized by
the republic under
 What is its sole authority?
 Violators will be facing what?
 According to ________________ amending the
consolidated rules and regulations on
currency notes and coins issued in the Phil.
 The bank must observe the following for the
deposit of their notes.
 For the deposit of their coins, the following are
observed:
 Personnel in charge for setting up the controls
for financial institution.
 As of 2020 what are the countries using peso
as currency?
 As described by the bsp in its circulars, a
currency note shall be considered unfit for
circulation when?
 A currency coin shall be considered unfit to
circulation when?
 Unfit currencies are no longer allowed to be
used for circulation but may be presented for
 BSP may not accept the currencies if:
 Is practically based on the customer price
index.
 Is the weighted average value of the basket of
prices of all commodities representing the
market.
 The commodity groups in the consumer price
index are
 The degree of movement of the CPI from a
period to another is called
 Inflation is derived in
 Inflation is an indication of the
 In finance, inflation is
 Is one of the credible agencies that sets target
for the country’s inflation
 Is the body that determines the current
inflation based on the current movement of
the commodities set as index in the market
 Two types of inflation
 Captures the changes of the cost of the cost of
living based on the movement of the basket of
commodities as a whole
 Is used for most of economic commodities
since it excludes In the equation the
movement of commodities or incidents with
very volatile movement of outliers
 The business is not a business if without any
 In _____________ there are different ways to
settle an obligation after the delivery of
products or render of service.
 One of the modes of settlement is through
payment of the products or services through a
 Is a set of interrelated processes of settlement
of goods or services rendered in exchange of a
set of instrument that will undergo either
____________.
 There is no ideal or best methodology to
administer a
 Is dependent on the best amenable,
convenient and acceptable solution for both
parties i.e ______________
 Will work on a certain network or subsystems
that will link the parties grounded by certain
rules and procedures.
 According to BSP a payment system normally
requires the following:
 The literal arm’s length exchange of
transactions whereby the seller or obligor
deliver the goods or services while other party
deliver in the instance.
 This becomes a challenge because
 Already provides different ways to settle
obligations or make payments.
 It enables the settlement to be made through
______________________
 The ___________ with the other feature allows
___________ and __________--
 This shows that the payment system that
works within an infrastructure providing
efficient solution and real time processing of
payment may
 Given that the exchange is a contract between
the parties, it is essential that they also agree
on the manner on
 Although the payment made through cheques
is not that warranted, except if it is manager
cheque, some people still prefer this type.
 What is important in a payment system is that
 All transactions for purposes of controls are
charged to accounts payable account.
 Now, the settlement of these transactions
varies depending on the manner on how it is
agreed for settlement.
 The normal means of settlement
 Another key requirement for an effective
payment system is the
 Like any contract these information or
guidelines must be
 These agreements are normally provided by
the payment system facility to provide
guidelines and protection for both parties in
case breach as well protection of the system
that the transactions are cleared from the
settling party.
 These agreements are provided as a template
to all clients or users of the system.
 This provides a
 These policies sent by the banks or financial
intitutions are regulated by
 Is an essential facility to enable the complete
course of transaction.
 Based on the ______ and _______ of payment
system, BSP identified the following
importance of the system among others
 The payment systems are designed to
safeguard the identity and transaction as a
whole especially on
 Are deemed safe given that the characteristics
are __________________
 It is debited to the account of the payor real-
time
 Most of the system require _____________
before it is credited to the account of the payee
 The payor should not worry about the
potential interest due to missed payment as
long as it is clear that the reference should be
 Is required as part of the clearing process, but
most of the time, it is credited real time
especially for fund transfers.
 The ____________ adopts the use of the
 This allows individual and corporate tax
payers to file and pay their tax due.
 This payment system is a hybrid that is
primarily designed to encourage compliance in
tax filing and facilitates the payment to
provide convenience to the taxpayers.
 Since the payment system facility involve well
defined parties and rules. Have verification
process to allow the users validate the
transaction before completing the authority to
make payment. One advantage for established
payment is the ___________________, everything
can be made __________________, this
minimizes the _______, _________, _____
 Although it is an _____________, there are still
risks that need to be recognized upon using
payment systems.
 These risks are:
 System downtime and system “bugs” may
occur
 ability to calculate currently maturing
obligation
 ability of the payor to meet the full value of its
obligation due to unforeseen charges
 changes in rules and regulations
 risk that payment will be made on time
 is very important factor to consider that may
drives the business up or down.
 Relates to volatility of patterns in the
business.
 Risks that are inherent in every financing
transaction.
 Arise in the inability to make payment
consistently.
 Is to allow the business to self- liquidate or
self-finance.
 This type of risk may be quantified by
determining the probability of the borrower to
default in their payments in the duration of
the loan.
 Ensuring the business to be capable of
meeting all its currently maturing obligation.
Focusing on the entire liquidity of the
company or its ability to service its portion of
their debt as it comes due.
 This risk is quantified by determining the
__________ of the lender on the period within
which the borrower were able to recoup
 Is the impact of the market drivers to the
ability of the borrowers to settle the obligation.
 Is classified as a systematic risk because it
arises from the ________ or ________________
 Is the most difficult to quantify. The experts
and analyst can just only set certain
parameters to measure it.
 is dependent on covenants set and agreed in
between the lenders and the borrowers. Will
arise only on the ability of any of the parties to
comply with the covenants of the contract.
 The burden is to ________ to comply given that
the party to payback is them.
 The common defaults in the covenants are as
follows.
 In the emergence of the e banking system as a
platform of payment system, but also widely
used to facilitates the efficient settlement of
the financial market transaction
 Is used to make future analysis or projections
of the investors. Can also be used to validate
the credit rating of certain instruments before
completing the trade.
 Certain platforms are integrated with online
brokerage companie to
 It is not actual money or cash is being traded
but instead the financial instruments are the
one being exchange.
 These instruments are _________ and
_________________
 In the money market, The securities have 3
fundamental characteristics:
 Most money market instruments mature in
___________
 Transactions in the money market are not
confined to ___________
 The traders organize the purchasing snd
selling of the securities among participants
and close the __________---
 Money market securities have an
________________-
 Enables the parties to trade money market
instruments to cater to short-term financial
needs.
 In accounting perspective, most money market
instruments are considered as _______________
due to the fact hat the mature ______________
 Most transactions in the money market are
very large, hence, they are considered as
______________________-
 Dealers and brokers execute transactions in
the trading rooms of brokerage house and
large banks to
 Despite the limitations, individual investors
nowadays can invest in the money market by
 Allows the money market to be the preferred
place for firms to temporarily store excess
fiinds up until such time they are needed
again by org.
 Investors look at the money market as
 Any idle cash becomes an ______________ to
investors by means of the interest income not
earned by holding the cash.
 To reduce opportunity cost, it become a viable
option to temporarily invest idle funds.
 Also use money market instruments to attain
investment requirements or deposit outflows.
 On the other hand, money markets offer a
least expensive alternative for fund demanders
such as the
 sells government securities to raise funds
 allows the government to obtain cash until tax
revenues are collected.
 primary issuer of negotiable certificates of
deposits, banker’s acceptances, and
repurchase agreements.
 They issues treasury securities; sell
certificates of deposit and extends loans; offer
individual investors accounts that can be used
to invest in money markets
 Made investment through money market
mutual funds.
 buy and sell money market securities to
manage their cash
 trade securities on behalf of their clients
 help maintain a liquidity of the money market
since they make sure that sellers can easily
sell their securities when the needs arises.
 Companies raise money market instruments
 Lend funds to individual borrowers
 invest on money market to maintain liquidity
level in case of unexpected demands most
especially for property and casualty insurance
companies
 Maintain funds in money market as
preparation for long-term investing in stocks
and bonds market. Huge money market
investment is not necessary (Future obligation
are expected)
 permits small investor to invest in the money
market by accumulating funds from numerous
small investors to buy large denomination
money market securities.
 According to _____________________, _________
is a resource controlled by the entity as a
result of past events and from future economic
benefits are expected to flow to the entity.
 Assets can be classified in terms of physicality:
 Are assets that have physical properties and
can be easily seen, touch and perceived
 Are identifiable asset that do not have physical
substance and usually represent a legal claim
to some future economic benefit.
 Financial instruments is also called
 Basically intangible as future economic benefit
taked the form of a claim to cash that will be
received in the future
 Main vehicle used for transaction in the
financial market
 It may be presented under
 Two parties involved in a financial instrument:
 A party that issues the financial instrument
and agrees to make future cash payment to
the investor.
 The issuing party usually needs funds to
 Is the party that receives and owns the
financial instrument and bears the right to
receive the payment by issuer
 Usually have surplus funds investor recognize
financial instrument as an
 .Financial instrument have 2 main economic
purposes:
 Money market instruments take the form of
 Are governed by Philippine regulations and are
influenced by market movements.
 In cases that certain financial instruments
were acquired more that 12 months before
maturity it will be reported under
_____________ except that the investor intended
to have it traded with the immediate reporting
cycle
 Government securities issued by the Bureau of
Treasury which mature in less than a year
 Three tenors:
 TS are quoted either by
 mature in less than 91 days
 Being government securities, these are no
longer ____________ same with the other
countries such as
 Banks that compose of the majority of the
__________ bid for the bills in the weekly
auctions held by the ______________-
 The banks the resell to the
 In _____, Phil. Government issued a ________
until 3rd quarter of the year
 TS have _________________ since the
government can always print more money that
they can use to redeem vthese security at
maturity
 Is also lower since the maturity term is
shorter.
 Market for TS is both
 Means gghat the market has numerous
different buyers and sellers.
 Means that securities can be quickly traded at
lower transaction cost.
 Are the safest investment instrument in the
market
 They are ______-
 They can be traded easily in the ____ anytime
the market is open
 Is not explicitly stated in TS
 TS are issued at a __
 The return realized by the investors comes
from the
 Treasury bills can be sold in two ways
 The BOT announces the quantity and type of
securities that they will sell. Interested parties
give a bid offering and the treasury accepts the
highest bids
 The treasury accepts bids in ____
 Each accepted bid is awarded at the _______
 Bidders only give the amount of securities that
they want to buy. The Treasury accepts all
noncompetitive bids.
 The price for all the securities under
noncompetitive bids isa set at the
 The main difference between the two methods
is that
 When analyzing investments, investors often
try to compare
 Most investors look at the percentages to be
 From the POC of investors, it indicates how
much return
 The equation for annualized discount rate
 Another variation of the annualized discount
rate is what we call the
 It addresses two weaknesses of discount rate
 It portrays a more accurate representation of
how much an investor will earn from the
security since it uses the_____________ and
________
 Formula for Annualized Investment Rate
 Are also know to be very near to the definition
of ___________-
 Interest earned on TS bills are among the
__________
 Investors may find that earning from TS bills
may
 TS Bills are mostly meant as an
 Is a contract where a party which is a seller or
buyer of an instrument will agree to the buyer
or lender that the instrument will be
___________________
 It enables short term funds to be transferred
between ______ or ________, usually ranging
from _____________
 Some can also range from
 And these are called ___________ which do not
have an indicative date of repurchase.
 Are a key component of the debt securities
market that produces short term cash or
liquidity critical to ___________________
 They commonly use repos to manage liquidity
and take advantage of expected changes in
interest rates.
 Sell their to a bank with an accompanying
repo agreement promising to buy the
securities back at a specified future date
 Repos are
 In the Philippines, the government also uses
rep to
 The BSP purchases government securities
from a bank with a commitment to
 A repo transaction expands the level of money
supply as it
 Under a ___________, the BSP acts as the
______ of _____________, thus, the __________
reduces it reserve account resulting in a
___________
 For both repos, the BSP can only affect the
__________________, given that the parties
involved commit to __________
 At present, BSP enters into repo agreement for
a minimum of _________ for both repos and a
maximum of _______ and __________ for repo
and reverse repo agreement.
 Since repos are collateralized by the
_________________, these are usually treated as
____________________.
 It is considered as a ___________, still, a risk
may be inherent in the sense that there is a
__________________