PHILLIPINE

BANKING
TODAY
 The New Central Bank Act of 1993
established the Bangko Sentral ng
Pilipinas (BSP) as an independent
authority in the Philippines focused
on maintaining price stability.

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 February 2009, the Bangko Sentral ng
Pilipinas (BSP) oversees 21,494
institutions, including 7,743 banks
(universal, commercial, thrift, rural, and
cooperative), 13,744 non-banks (with or
without quasi-banking functions), and 7
offshore banks.

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 The Philippine banking system has
grown extensively, reaching both
urban and rural areas. It includes
commercial banks, rural banks,
development banks, savings banks,
trust companies, and various credit
institutions, established by the private
or public sector.

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 Technology revolutionizes banking,
meeting client demands for safety,
returns, and choices. E-banking
offers online services, while e-money,
like ATMs and home banking,
facilitates transactions without
physical bank visits.
The instruments or
devices used to Access devices
provide e-banking
services are called e-
money. Card-based products

E money can be
divided into three Prepaid software
products or network
groups: money
 Access devices, like
ATMs and home banking,
enable cash transactions,
fund transfers, and bill
payments without visiting
banks or writing checks.

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 Prepaid cards, also
known as stored-value
cards, store funds
electronically on a
computer chip embedded
in the card.

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 Prepaid software
products are digital
assets stored
electronically, such as on a
computer's hard disk, and
transferred across
communication networks.
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 In February 2009, 6,455 banks operated ATMs, with
92 offering electronic banking services like phone,
Internet, and mobile banking for 24/7 transactions. E-
banking is regulated by four BSP guidelines: Circular
No. 240 (2000), Memorandum to All Banks (19 June
2000), Circular Letter (August 2000), and Circular No.
269 (2000).
Republic Act No. 8791, the General
Banking Law of 2000, enacted on May
23, 2000, introduced significant
reforms to the Philippine banking
system.
Republic Act 9160, also known as the Anti-
Money Laundering Act of 2001, enacted on
29 September 2001, introduces significant
measures to combat money laundering in
the Philippines.
The key features include:
1. Criminalization of
money laundering,
making it a
punishable offense.
2. Establishment of a system
for reporting covered
transactions by designated
institutions.

3. Creation of the Anti-

Money Laundering
Council responsible for
implementing the law.
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The commercial banking industry is shifting
towards fewer but stronger main banks to
better compete globally. This trend drives the
current wave of bank mergers and
acquisitions, aiming to create financially
powerful institutions capable of thriving in a
borderless world.
Republic Act 9160, the Anti-Money Laundering
Act of 2001, amended the Bank Secrecy Law
to prevent money laundering while
safeguarding bank account confidentiality. It
also facilitates cooperation with foreign
governments in investigating and prosecuting
money launderers.
On April 19, 2000, the Monetary Board
approved Circular No. 237, consolidating and
clarifying regulations on bank mergers and
consolidations. This aimed to foster stronger
banks, enhance financial services at lower
costs, and promote stability and efficiency in
the Philippine banking sector.
Bank mergers involve one corporation
absorbing others, retaining its identity
and assuming their liabilities.
Consolidation creates a new single
corporation from multiple entities, with
each ceasing to exist separately.
The General Banking Law of 2000
reinforced banking deregulation in the
Philippines to attract investments amidst
globalization.
Section 11 of the General Banking Law of
2000 allows foreign individuals and non-
bank corporations to own or control up to
40% of the voting stock of a domestic bank.
This ownership limit also applies to Filipinos
and domestic non-bank corporations.
Foreign banks entering the Philippines via
branch establishment are regulated by the
Foreign Banks Liberalization Act. Offshore
banking activities in the country are overseen
by Presidential Decree No. 1034, referred to
as the "Offshore Banking System Decree."
Section 73 of the General Banking Law of
2000 permits the Monetary Board to
authorize a foreign bank to acquire up to
100% of the voting stock of one domestic
bank within seven years of the law's
enactment.
Under Section 73 of the General Banking
Law of 2000, the Monetary Board must
ensure that 70% of the banking system's
resources/assets are controlled by banks
majority-owned by Filipinos.
Sec. 74. Local Branches of Foreign Banks.
In the case of a foreign bank which bas
more than one (1) branch in the Philippines,
all such branches shall be treated as one
(1) unit for the purpose of this Act, and all
references to the Philippine branches of
foreign banks shall be held to refer to such
units.
Principles
of
Banking
Business
There are two basic principles upon which banking
resolves.

1.) One such principle states that a certain amount

deposited will support several times as much in
credit.

2.) The other principle state that a greater portion

of deposits in commercial banks arises out the
proceeds of loans.

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Perspective on Bank or Banking

Sec. 3 off New General Banking Law:

"Bank shall refer to entities engaged in

the lending of funds obtained in the form
of deposits."
Perspective on Bank or Banking

Sec. 3 off New General Banking Law:

"Bank shall refer to entities engaged in the lending of funds obtained in the form of deposits."

Nature of Banking Business

"A bank makes money out of other people's money."

Example: Mr. A borrows money and the bank approve his application for the loan. Mr. A could either get
the proceed I cash or simply request the bank to open a current account under his name.

If Mr. A asked the bank to open a current account under his name the entry would be:

Laons and Discount P100,000

Demand Deposits P100,000

Nature of Banking Business

"A bank makes money out of other people's money."

Example: Mr. A borrows money and the bank approve

his application for the loan. Mr. A could either get the
proceed cash or simply request the bank to open a
current account under his name.
If Mr. A asked the bank to open a current
account under his name the entry would be:

Laons and Discount P100,000

Demand Deposits P100,000

Economic Significance of Banks
The banks came out of the need to facilitate trade
transactions, particularly crede transactions. A
bank also facilitates the dealings between
debtors and creditors becer acts as an
intermediary in the flow of credit funds. It allows
others the use of otherwise ide funds of the
community in productive activities.
For the persons depositing money it usually
those who have no immediate need for the
funds and the bank, in turn, lend these funds
to those who are momentarily in need of
them.
Why the State Supervises Banks

The state does not only supervise banks, but

with the advent of central banking, it also
controls the banks' operations. Banks exert an
important influence in the economic setup, not
to mention the maintenance of the trust and
confidence upon which the practice of banking
is ingrained.
The following are some of the reasons why the
state supervises and controls banks:
1. The banks are entrusted with other people's money.
Their mismanagement or malfeasance in the duties
of the board of directors will result to banking
failure. The people's trust will be lost, creating a long
negative influence in the community. Thus, the state
must see to it that people's trust in banks must not
be destroyed or maligned.
2. The state wants to assure that the banks
will perform their functions in the best
interest of their clients through the honest
and efficient conduct of their functions. The
state must be vigilant in order to forestall
any misconduct or inefficient banking
methods.
3. The banks may either abuse their power or use
them prudently. Since in the modern economic
affairs, banks tend to direct the course of
progress or otherwise, the state stands guard in
order that banks will exercise their power with the
necessary prudence. This will prevent the banks
to create any untoward incident that could bring
disaster to the economy.
4. The banks, furthermore, are quasi-public
corporations and as in all other corporations of this
calling, the state must exert its restraining
influence to safeguard the welfare of its
constituents. In the granting of a charter to a
corporate entity, the state is one of the parties
whose duty is to protect the interest of the citizens.
Privately owned banks are organized and
capitalized by private citizens for their profit,
often considered closed corporations.
Publicly owned banks like the Land Bank
of the Philippines, are organized by the
state and may have a minimum of private
ownership, as seen in the Bangko Sentral
ng Pilipinas.
Domestic bank - is incorporated
under Philippine laws, with most
stocks owned by Filipinos, following
the Philippine Corporation Code.
Foreign bank - despite operating in
the Philippines, follows the same
incorporation pattern without
compromising Philippine laws'
supervision and control.
Stock corporation - Banks in the
Philippines are stock corporations,
selling stocks to raise capital. They
must have a par value and aim for
profit.
Non-stock corporation - Savings
and loan associations can be non-
stock corporations, membership-
based, or both, with mutual benefits
and service.
Commercial bank - receives demand
deposits and provides short-term
loans, but now focuses on various
services due to departmentalization.
Trust company - handle fiduciary
activities, such as estate
administration and executor of last
wills and testaments.
Savings banks - receive funds from
non-cash individuals and invest
them in long-term investments.
Rural banks - cater to small farmers,
businesses, and cooperative
associations, receiving deposits and
lending funds.
Development banks - provide loans
for economic development, under the
supervision of the Development Bank
of the Philippines.
Cooperative banks - provide credit to
registered cooperative associations.
Investment banks - assist
government bodies and newly
organized corporations in raising
capital through stock and bond sales.
Central banks - Like the Bangko
Sentral ng Pilipinas, are government-
owned and operated, and are
responsible for supervision and
regulation. Some government
institutions also deal in investment
functions.
A. Unit banks - are corporations with a
single place of business and board of
directors, focusing on individualistic
banking. In the Philippines, rural
banks may fall under this category.
B. Group banking - involves holding a
majority of stocks of multiple banks by
a holding company, allowing control
over operations. This is beneficial for
small stockholders with limited capital
to attract deposits and engage in
lending.
C. Branch banking - involves a single
corporate entity with multiple
branches, controlled by a single
board of directors. This type is
believed to have some monopoly but
is common in the Philippines.
D. Chain banking - involves one or more
persons controlling bank activities, but
has not gained widespread adherents
due to economic difficulties and
instability.
THANK
YOU