THE PHILIPPINE

FINANCIAL SYSTEM
CHAPTER 2
LEARNING OBJECTIVES

 To define what is finance and financial system

 To explain the elements of financial system
 Todiscuss the functions of financial
institutions
 Todiscuss the structure of Philippine financial
system
What is Finance?

 Finance is the study of how people and

businesses evaluate investments and raise
capital to fund them.
 Finance-which is originally a French word, was
adopted by English speaking communities to
mean “the management of money” in the 18th
century.
What is Financial System?

 Is concerned with the functioning and

a c t i v i t y o f c e r t a i n c o mp o n e n t s , t h e m o s t
i mp o r t a n t b e i n g - m o n ey, c r e d i t a n d f i n a n c e .
I t i s a c o mp l ex , we l l i n te g r a te d s e t o f s u b -
s y s te m s o f f i n a n c i a l i n s t i t u t i o n s , m a r ke t s ,
i n s t r u m e n t s , a n d s e r v i c e s w h i c h fa c i l i t a te
s av i n g s , t r a n s fe r a n d a l l o c a t i o n o f f u n d s
e f f i c i e n t l y a n d e f fe c t i ve l y.
ELEMENTS OF FINANCIAL SYSTEM

Compromise money and

right to receive money.

Two Broad - Debt

Category of
- Equity
Claims Financial Claims
 Private or government
organization
Financial
Institution
Financial Intermediaries

(banking and non-banking

institutions) are intermediaries
that mobilize savings and facilitate
the allocation of funds in an
efficient manner.
 (money market and capital market) are a mechanism
enabling participants to deal in financial claims.
Example :
- MSE
- Organizations dealing with money market
 Means of bringing the force of demand and supply of
financial claim.

FINANCIAL MARKETS
 Monetary Board
Government
Agencies
Legislated by Batasang
Pambansa and through
presidential decrees

Has tremendous impact on

financial system
 LAWS AND POLICIES

National Government regulates and supervises the

behavior of the economy.

To ensure the desired levels of investments,

employments, production, income and consumption.
 FUNCTIONS OF FINANCIAL INSTITUTIONS

Investigation and Matching the supply Provision for liquidity

credit analysis and demand for funds
STRUCTURE OF THE PHILIPPINE
FINANCIAL SYSTEM
THE BANKING INSTITUTION IN THE PHILIPPINES

1. Private banking institutions

 Commercial Banking Institutions.
 The Thrift Banks
 The Rural Banks
THE BANKING INSTITUTION IN THE PHILIPPINES

2. Government Banking Institutions

 The Philippine National Bank.
 The Development Bank of the Philippines.
 The Land Bank of the Philippines.
 The Al-Amanah Islamic Investment Bank of the
Philippines.
NON-BANK FINANCIAL INSTITUTION
1.Private Non- bank financial institutions

• A. Investment houses G. Pawnshops

• B. Investments companies H. Lending investors
• C. Financing companies I. Fund managers
• D. Securities dealers/brokers J. Trust companies/department
• E. Non-stock savings and loan associations K. Insurance companies
• F. Building and loan association L. Venture capital corporation

2. Government non-bank financial institutions

• A. Government Service Insurance System (GSIS)

• B. Social Security System (SSS)
• C. National Investment and Development Corporation (NIDC)