THE PHILIPPINE FINANCIAL

SYSTEM

MA. ELEANOR T. FERNANDEZ

What is a Financial system
 It is a set of institutions, such as
banks, insurance companies, and stock
exchanges, that permit the exchange of
funds.
 It generates, circulates and controls
money and credit.
 It provides intermediation between suppliers and
users of money
The financial system also includes sets of rules
and practices that borrowers and lenders use to
decide which projects get financed, who
finances projects, and terms of financial deals.
Financial intermediaries assist in resolving the
conflict that could occur between lenders and
borrowers and facilitate the flow of funds from
surplus to deficit.
The functions of the financial system are:
To channel the funds from the savings units
(lenders to the deficit units (borrowers);
To provide a medium of exchange;
To provide a mechanism of risk sharing; and
To provide a channel through which the central
bank can influence the economy, in general and
the financial system, in particular
PARTICIPANTS IN THE FINANCIAL
SYSTEM
1.HOUSEHOLDS OR CONSUMERS – are the
wage/salary earners whose income is spent on
goods and services and if there is something left
to save, they save it.
2.FINANCIAL INSTITUTIONS – are the
firms that act as bridge between surplus
units/lenders and deficit units/borrowers.
3. NON- BANK FINANCIAL
INSTITUTIONS – are businesses other than
financial institutions/ intermediaries like
trading, manufacturing, mining and other
businesses.
4. GOVERNMENT – includes all levels of
government from barangays up to national
government. All government units act as either
lenders or borrowers at one time or another.
5. CENTRAL BANK – they are mandated
to ensure that their respective countries have
a stable and healthy financial system. They
oversee the operations of their financial
system and mandate the rules, regulations
and monetary policies.
6. FOREIGN PARTICIPANTS – refer to
the participants from the rest of the world.
ELEMENTS OF THE FINANCIAL
SYSTEM
1.FINANCIAL CLAIMS
-these comprise the money and the rights to receive
money under specific circumstances
-These are evidenced by financial instruments which
specify the terms of the claims
-Two broad categories: debt and equity
DEBT conveys ownership rights while EQUITIES are
investments like shares of stock which earn dividends.
2. FINANCIAL INSTITUTIONS
-These are private or government organizations whose
assets consist primarily of claims or incomes primarily
derived from dealing in and/or performing services in
connection with claims
-Institutions which deal with the creation and issuance
of claims against themselves, and use the proceeds to
acquire and hold claims against others are commonly
referred to as financial intermediaries
3. FINANCIAL MARKETS
-These are institutions which expedite
transactions in financial claims.
-Serves as a means of bringing the forces of
demand and supply of financial claims
4. GOVERNMENT AGENCIES
-The Monetary Board is the policy making
body of the Central Bank of the Philippines.
Laws on money, credit and banking are
legislated by the Batas Pambansa and
through the Presidential Decree issued by the
President of the Philippines.
5. LAWS AND POLICIES
-The national government regulates and
supervises the behavior of the whole economy.
Hence, its control of the financial system is a
vital condition for the whole economic behavior
-Laws and policies have been formulated to
ensure the desired levels of investment,
employment, production, income and
consumption.
The Philippine Monetary System Organization
I. Banking Institutions
A. Private Banking Institutions
1. Commercial Banking Institutions
a. Ordinary Commercial Banks
b. Universal Banks
2. Thrift Banks
a. Savings and Mortgage Banks
b. Private Development Banks
c. Savings and Loan Associations
3. Rural Banks
B. Government Banking Institutions

1.Development Bank of the Philippines

2.Land Bank of the Philippines
3.Amanah Islamic Bank
II. Non-Bank Financial Institutions
1.Investment Banks/Companies
2.Finance Companies
3.Securities Dealers/Brokers
4.Pawnshops
5.Lending Investors
6.Fund Managers
7.Trust Companies/Departments
8.Insurance Companies
B. Government Non-Bank Financial Institutions

1.Government Service Insurance System

2.Social Security System
GROUP ACTIVITY:
1.Discuss the meaning of financial system. What is its
importance to the nation?
2.What is BSP? What is its role in the well-being of the
Philippines
3.Enumerate and explain the functions of BSP
4.Differentiate the department/division of BSP
5.Differentiate banking institutions from non banking
institutions. Give 5 examples each
6.Define the different banking institutions
7.Define the different non bank financial institutions
 For your groupings!
Group 1: Aiarte – Auingan
Group 2: Bacani – Calimag
Group 3: Caranto – Flores
Group 4: Foronda – Mallillin
Group 5: Manuel – Paludipan
Group 6: Perlas – Sosa
Group 7: Tagupa - Yanos
References:
1.www.bsp.gov.ph

2.https://www.investopedia.com/terms/f/
financial-system.asp
3.Mariano,Norma D., Capital Markets,
Rex Bookstore, 2017
4.Fajardo, Feliciano R. Financial
Institutions 3rd Edition 1994