Some Of The

Important Financial
Institutions In The
Philippine Economy.

Week 14
03/02/2021 Jenny Salonga 1
 The economic development of any
country is dependent on its financial
system which includes its banks, stock
markets, insurance sector, pension
funds and a government-run central
bank with authority.

03/02/2021 Jenny Salonga 2

 These sectors influence a nation's
currency and interest rates. In
developed countries, they work
together to promote growth and avoid
runaway price inflation. When a country
is still in a developing stage, the lack of
a strong, sound financial system
generally works against the national
economy.

03/02/2021 Jenny Salonga 3

Banking Systems
 Banks are the cornerstone of a national
financial system. Their key services are
to provide a safe haven for the earnings
of individuals and to make loans to
companies in need of capital, either to
start operating or to stay in business.

03/02/2021 Jenny Salonga 4

 Without this source of available capital,
businesses would be hard-pressed to
continue growing and returning a profit
to their owners and outside investors.
By channeling savings into the business
sector through loans – and also offering
loans to individuals to buy cars and
homes – banks boost overall economic
growth and development.

03/02/2021 Jenny Salonga 5

 The Bangko Sentral ng Pilipinas
(BSP) is the monitory and
regulatory body of all the financial
institutions inside the Philippines.

03/02/2021 Jenny Salonga 6

 Broadly, there are 4 different types of
financial institutions in the country:
 1. Universal and commercial banks: Resource
wise, these represent the largest group of
financial institutions. These banks offer a
range of financial services. The universal
banks differ from commercial banks in ways
that they have the authority to engage in
underwriting and other functions of investment
houses and to invest in equities of non-allied
undertakings in addition to the functions of an
ordinary bank.

03/02/2021 Jenny Salonga 7

 2. Rural and cooperative banks: These
banks are well known and popular
among rural communities in the
Philippines. These banks play an active
role in developing the rural economy by
providing basic financial services to the
rural communities.

03/02/2021 Jenny Salonga 8

 These services can range from helping
farmers through the different stages of
production to buying vehicles. The
difference between the rural banks and
Cooperatives is the way they are
owned. Rural banks are owned and
managed privately while cooperative
banks are organized/owned by
cooperatives or federation of
cooperatives.
03/02/2021 Jenny Salonga 9
 3. Thrift banking system: The system is
composed of savings and mortgage
banks, private development banks,
stock savings and loan associations and
microfinance thrift banks. These banks
are engaged in accumulating savings of
depositors and investing them. They
also provide short-term

03/02/2021 Jenny Salonga 10

 They also provide short-term working
capital and medium- and long-term
financing to businesses engaged in
agriculture, services, industry and
housing, and diversified financial and
allied services, and to their chosen
markets and constituencies, especially
small- and medium- enterprises and
individuals.

03/02/2021 Jenny Salonga 11

 4. The market also consists of some non-
banks with quasi-banking functions. This
group consists of institutions engaged in the
borrowing of funds from 20 or more lenders
for the borrower's own account through
issuance, endorsement or assignment with
recourse or acceptance of deposit substitutes
for purposes of re-lending or purchasing
receivables and other obligations.

03/02/2021 Jenny Salonga 12

 One of the biggest problems for any
economy is to figure out is how to get
money from people who want to save to
people who want to borrow.

03/02/2021 Jenny Salonga 13

Financial Markets
 Stock markets provide an opportunity
for individuals to invest in companies.
By issuing shares, public companies pay
off debt or raise capital for their
operations. The bond market provides
another means to raise money.

03/02/2021 Jenny Salonga 14

 When an individual or an investment
company buys a bond, it receives a steady
stream of interest payments over a set
period. The bond market is accessible to
companies as well as governments, which
also need a reliable stream of funds to
operate. Without the bond market, a
government could only raise money by
levying taxes, an action that tends to
dampen business activity and investment.

03/02/2021 Jenny Salonga 15

Financial Crashes
 In any country, confidence and trust in
the banking system are crucial to
economic health. If banks cannot
redeem savings accounts, and savers
begin to fear a loss of their money, a
bank run results; this quickly drains
cash from the bank and can eventually
cause the institution to fail.

03/02/2021 Jenny Salonga 16

 Bond and stock markets rise and fall
with the demand for investment; when
individuals fear risk or lose their trust in
the markets, they sell their securities
and cause the value of companies to
fall. This, in turn, makes it difficult for
businesses to raise money, either from
banks or capital markets.

03/02/2021 Jenny Salonga 17

Monetary Policy
 Issuing currency and setting interest rates is
the function of government-operated central
banks, such as the U.S. Federal Reserve,
which are responsible for monetary policy. The
central bank and the U.S. Treasury "primes
the pump" by loaning new money to the
banks; by controlling this flow, the central
bank also keeps currency exchange rates
steady, which is vital for foreign trade and new
investment.

03/02/2021 Jenny Salonga 18

 Setting a higher interest rate tends to
support currency value, while lowering
the rate encourages lending and
investment – at the risk of currency
devaluation and price inflation. Reliable
and consistent monetary policy fosters
economic stability and growth.

03/02/2021 Jenny Salonga 19

The Philippine banking system consists of
different types of banks in the Philippines:

 Universal and commercial banks –

Provide the widest range of banking
services

 Thrift banks – Accumulate savings from

depositors and invests them

03/02/2021 Jenny Salonga 20

 Rural and cooperative banks – Banks in
communities that are engaged in
promoting and developing the rural
economy
 Non-banks with quasi-banking functions
– Financial institutions that do not own
a full banking license but provide bank-
related financial services


03/02/2021 Jenny Salonga 21

 The top 10 banks in the
Philippines are:
 BDO Unibank
 BDO Unibank Inc. is the largest of the
banks in the Philippines in terms of
assets. The full-service universal bank
also takes the lead in consolidated
resources, deposits, customer loans,
and branch and ATM network all over
the country.

03/02/2021 Jenny Salonga 22

 BDO offers a wide range of products and services,
such as deposits, lending, foreign exchange, trusts
and investments, brokering, credit cards,
remittances, and corporate cash management.
Founded in 1968 as a thrift bank called Acme
Savings Bank, it was renamed Banco de Oro
Savings and Mortgage Bank when it was acquired
by the Sy Group in 1976.

 As of 2016, total assets of the bank were

US$48.98 billion and net profit was US$94.67
million.


03/02/2021 Jenny Salonga 23
 Metropolitan Bank & Trust Company
 Metropolitan Bank & Trust Company, or
Metrobank, is one of the premier
financial institutions in the country. It
currently offers a wide range of banking
products and services all over the
world, with its network of more than
2,300 ATMs, 950 local branches, 32
foreign branches, and representative
offices.
03/02/2021 Jenny Salonga 24
 Metrobank was founded in 1962 and opened
its first branch a year later. In 1970, it opened
its first international branch in Taipei. Three
years later, it established a representative
office in Hong Kong. Metrobank was also the
first of the private banks in the Philippines to
open in the US with its office in Guam in 1975.

 As of 2016, the bank’s total assets amounted

to US$102.56 billion and net profit reached
US$1.02 billion.

03/02/2021 Jenny Salonga 25


 Bank of the Philippine Islands
 Originally known as El Banco Español
Filipino de Isabel II, the Bank of the
Philippine Islands was founded in 1851,
making it the oldest of the banks in the
Philippines and in Southeast Asia. It
marked the start of the banking and
finance industry in the Philippines.

03/02/2021 Jenny Salonga 26

 With its network of more than 800 branches
(local and in Hong Kong and Europe) and
3,000 ATMs and cash deposit machines, BPI
offers a comprehensive range of banking
products and services such as consumer
banking and lending, insurance, foreign
exchange, leasing, and corporate and
investment banking.

 In 2016, the bank reported total assets of

US$32.91 billion and a net profit of US$425.23
million.
03/02/2021 Jenny Salonga 27
 Land Bank of the Philippines
 The government-owned Land Bank of
the Philippines is considered the largest
formal credit institution in the rural
areas. It is also one of the top
commercial banks in the Philippines in
terms of assets, loans, and deposits.

03/02/2021 Jenny Salonga 28

 Landbank was established in 1963 to help
farmers and fishermen through revenues from
its commercial banking operations. It enables
the universal bank to strike a balance between
maintaining a financially viable institution and
supporting rural development initiatives. The
universal bank manages a strong rural branch
network consisting of 365 branches and more
than 1,600 ATMs.

 As of 2016, the bank’s total assets were

US$30.83 billion.
03/02/2021 Jenny Salonga 29
 Philippine National Bank
 During the American Occupation in
1916, the Philippine government
established the Philippine National Bank
(PNB), which was 100% privatized in
2007. The bank is considered one of the
largest private universal banks in the
country.

03/02/2021 Jenny Salonga 30

 It offers a full range of banking and
financial products, and works with the
Philippine government, agencies, local
government units, and government-
owned and controlled corporations.

 As of 2016, the bank’s assets totaled

US$14.37 billion and net profit
amounted to US$137.16 million.

03/02/2021 Jenny Salonga 31

 Security Bank Corporation
 Founded in 1951, Security Bank was the
first private and Filipino-controlled bank
during the post-World War II era. It
offers a full range of products and
solutions to major businesses such as
retail, commercial, and financial
sectors.

03/02/2021 Jenny Salonga 32

 In 1995, it listed on the Philippine Stock
Exchange (PSE: SECB) and remains as
one of the most stable banks in the
Philippines today.

 As of 2016, the bank posted total assets

of US$2.68 billion and a net profit of
US$163.30 million.

03/02/2021 Jenny Salonga 33

 China Banking Corporation
 Established in 1920, China Bank was the first
privately-owned local commercial bank in the
country. Its clientele was initially composed of
Chinese-Filipino businessmen. The bank now
offers products and services such as deposits,
investments, trusts, remittances, and cash
management. It also oversees subsidiaries and
affiliates that provide insurance brokerage and
bancassurance solutions.

03/02/2021 Jenny Salonga 34

 In 2012, China Bank was recognized at the
Bell Awards of the Philippine Stock Exchange
as one of the best-governed companies in the
Philippines. It was also the only bank among
the top five awardees under the category of
publicly listed companies.

 As of 2016, total assets of the bank were

US$10.04 billion and net profit was US$107.02
million.

03/02/2021 Jenny Salonga 35

 Union Bank of the Philippines
 Union Bank started the online banking
trend in the Philippines. Aside from
creating the first bank website in the
Philippines, it launched the EON Cyber
Account, the first electronic savings
account in the country, which also
marked the beginning of electronic
checking.

03/02/2021 Jenny Salonga 36

 The bank’s online facility enables
transaction and information access
through multiple channels, including its
branch network nationwide, on-site and
off-site ATMs, internet banking, and a
call center. It also offers corporate cash
management and business-to-business
banking services to local and
multinational companies in the country.


03/02/2021 Jenny Salonga 37
 Rizal Commercial Banking
Corporation (RCBC)
 Founded in 1960 as a development bank,
RCBC is licensed by the Central Bank of the
Philippines for commercial and investment
banking. It provides a wide range of services
to more than 6.5 million customers through its
448 branches and more than 1,100 ATMs
nationwide. It also manages remittance offices
and tie-ups in 24 countries.

03/02/2021 Jenny Salonga 38

 From 2010 to 2014, RCBC received
more than 70 awards, including the
Best Domestic Private Bank in the
Philippines for three consecutive years,
from the financial publication,
Asiamoney.

 In 2016, the bank reported total assets

of US$9.95 billion and a net profit of
US$73.84 million.
03/02/2021 Jenny Salonga 39
Future direction
 Policy directions in the banking
sector will focus on two main
policy objectives that are geared
towards a flexible banking system
and a deeper capital market.
These objectives are to:

03/02/2021 Jenny Salonga 40

 • promote a stronger and more stable
financial system; and

 • develop the domestic capital market

to improve investments, protect
investors, and provide easier access to
funds by small and medium-sized
businesses, both of which are essential
to increasing growth.

03/02/2021 Jenny Salonga 41

Activity 14 (20 pts)
 1. How do the financial markets help in
the economy?

 2. Why does economic development

depend on its financial system?

03/02/2021 Jenny Salonga 42