1. What is a financial market?

(3 points)
2. Differentiate the ff: (4 points each)
a. Capital market and money market
b. Equity and Bonds market
c. Primary and secondary market
3. Describe the components of the financial
market using a concept tree (5 points)
FINANCIAL SERVICE INDUSTRY
 Describe the brief history of banking
 Define what are banks and their classification
 Discuss the different functions of banks
 2000 BC – Temples of Babylon ( lending gold
and silver) 20% interest
 Height of development in Greece
 Dark Ages (Fall of Rome) banking activities
retrogressed
 Jews
 First known registered banking institution
◦ Venice 1157 AD- imposed by government
◦ 17th-18th century –Europe
 1401 Bank of Amsterdam
 1609 Bank of Amsterdam
 1619 Bank of Hamburg
 1621 Nuremberg
 1688
 Stockton
 1694 Bank of England ( first modern bank)
 From the word BANCHI or BANCA meaning
bench or counter where transactions were
made
 Also meaning mound of money/ stack of
money
 Organization with accumulation of money in
large sums intended for a definite purpose
 Establishment for receiving, keeping, lending
and sometimes using money and making
easier the exchange of funds by checks or
notes etc.
 Private Domestic Banks- owned by Filipino
citizens
 Private Foreign Banks- branch or subsidiary
of a foreign bank
 Government Controlled Banks- partly
owned/controlled by the government
 Specialized government banks- controlled
and owned by the government for a specific
purpose to help the gov’t carry out certain
objectives (ex. DBP, Landbank)
 COMMERCIAL BANKS
◦ Universal bank or Uni Bank with expanded
commercial banking authority
◦ Non-unibank- without expanded commercial
banking authority
 THRIFT BANKS
o Savings and mortgage
o Private development banks
o Savings and loan associations
o Cooperatives rural banks
 Regional or unit banks
◦ Rural banks
 Specialized government banks
◦ DBP, Land Bank
 Intermediary between savers and borrowers
 “Department Store of Finance”
 They provide a wide variety of financial services
◦ Deposits
◦ Lending
◦ Investing
◦ Cashier’s checks
◦ Money orders
◦ Trust services
 Help facilitate economic processes of production,
distribution and consumption
 Banks whose business are confined largely
with transactions with businessmen and
business firms
 Loans are mostly short term
 DEPOSITORY
 LOAN AND DISCOUNT
 REMITTANCE AND COLLECTION FUNCTIONS
 TRUST AND FIDUCIARY FUNCTIONS
 CLASSIFICATION OF DEPOSITS
◦ According to source – gov’t or private
◦ According to time of withdrawal
 Demand= can withdraw anytime
 Term= term is indicated
 How are bank deposits protected?
◦ PDIC
◦ BSP bank reserves
 Loans to business
 Lines of credit
 Types of Loans
◦ Demand loan
◦ Time loan
◦ Term loan
◦ Secured / unsecured loans
 Interest= fee on borrowed money
◦ Based on market forces and policy of management
 CHECKING ACCOUNT- checks drawn on other
banks
 Clearing house- association of banks
established to facilitate the clearing of
checks, drafts, notes and other items.
 COLLECTING TRANSIT ITEMS
◦ Cash letter of credit or cash letter
◦ Remittance letter
 Only commercial banks has a foreign
department
 Services exporters, importers, travelers
 IMPORTERS
◦ Opening commercial letters of credit to finance
imports
◦ Selling foreign exchange
◦ Financing importers
 EXPORTERS
◦ Furnishing reports on credit standing of buyers in
foreign countries
◦ Submitting reports on market conditions
◦ Collecting drafts drawn by Filipino exporters on
foreign importers
◦ Paying drafts drawn by Filipino exporters un L/C
◦ Advancing money against drafts for collection or
against L/C
 TRAVELLERS
◦ Selling foreign exchange, travelers checks
◦ Supplying letters of introduction to banks and other
third parties abroad
 A systematic scheme or arrangement whereby
confidence as well as title to property are
placed by one party for sole benefit of
another
 Trustee= recipient of trust
 Beneficiary= recipient of benefit
 EXECUTOR UNDER WILL
◦ Collect assets, pay liabilities, distribute excess
according to the will
 ADMINISTRATOR OF INTERSTATE ESTATE
◦ Court appointed if no will was left
 TRUSTEE UNDER WILL
◦ Testamentary trust
◦ If person does not wish to distribute estate
immediately
◦ Trustee will manage assets according to will
◦ Beneficiary relieved of managing responsibilities
 GUARDIAN OR CONSERVATOR OF ESTATES
◦ Trustee administer estate of a minor ( court
appointed)
 INVESTMENT BANKING
◦ Bridging the gap between those who need funds
and those who supply them
◦ Merchandising securities
◦ Buy and sell securities
◦ For working capital needs
◦ For government needs
◦ Purchase and improvement of real estate
 NON-BANK THRIFT INSTITUTIONS
◦ Savings and loan associations
◦ Building and loan associations

 GOVERNMENT BANKING INSTITUTIONS

◦ PNB
◦ DBP
◦ LAND BANK
◦ PHILIPPINE VETERANS BANKS
 Choose 1 bank and 1 non-banking institution
 Short background history
 Category
 List their products and group according to
function
Internet research or interview
Printed short bond 1-3 pages Arial 11
Be ready to discuss in class