Local Banks

A local (or community) bank is a brick-and-mortal retail bank that services the banking needs of the local community. A
local bank operates as a consumer and a wholesale or commercial bank. The bank manager is generally known to the
community, and is usually active in civic activities and even local government. This type of bank handles all aspects of
banking activities for the community, including bank accounts, bill payment, money transfers, consumer and commercial
loans, insurance and insurance services, and retirement and investment services. Banking careers found in a local bank
are tellers, bank managers, loan officers, credit analysts, and often, retirement and financial advisers. Local customers
usually have their employment checks deposited here, borrow money for their homeowners loans and their auto loans,
and keep their savings here. If the customer is a business owner, he or she may also have a credit line arrangement with
the bank to operate the business. Local banks are typically chartered by the state of residence, but can be supervised
and insured by the Federal Deposit Insurance Corporation and the Federal Reserve Bank.

Most local banks employees know all their customers, because the staff is also usually drawn from residents of the
community. Because of this, the staff is frequently given much more authority to make decisions regarding the
customers accounts and service than would be acceptable in a large banks branch location. Many local banks are
managed not only by a local resident who is the bank manager, but are family-owned banks that have supported the
local populace for a number of generations with many relationship ties to the community. This can both help and hurt
a local bank. The banks customers may have loyalty to the bank, and may prefer to do all their banking locally, but the
very fact that the banks staff knows everybody in the community may encourage substandard business practices.

Certainly the older generation is familiar with and prefers to use the services of their own local community banks, the
familiar staff, and the local banks products and paper accounts. The younger generation, being computer literate and
rarely without a cell phone, is more and more inclined to avoid the old fashioned local-bank way of banking, preferring
instead to use online and telephone services. Online loan services and products, with their search engines that find the
consumer the best interest rate for the desired loan, have made loans easy to obtain, and have rendered many local
banks loan products obsolete. Large banks with credit analysts and loan packaging services can help any commercial
business owner find the lowest rate with the best terms. These innovations in banking, while making banking functions
easier and faster for some, have helped to stymie the profitability of many local banks, and have forced many local
community banks to close.

National Banks

A national bank is one that is federally chartered by the United States of America and is an investing member of its
district division of the Federal Reserve System. A national bank is also insured by the Federal Deposit Insurance
Corporation. In addition, national banks charters and operations are supervised by the Office of the Comptroller of the
Currency of the United States Department of the Treasury.

Most national banks are large commercial banks, with branches in most states and many of each states larger cities.
National banks, due to their size, offer any and all types of banking careers found in any other bank, including tellers,
bank managers and officers, credit and loan officers and analysts, fraud prevention specialists, information technology
professionals, financial analysts, and salespeople. Banking careers in each of these departments will also offer many
levels of management positions. The system of national banks evolved out of the National Banking Acts of 1863 and
1864, during the presidency of Abraham Lincoln, at a time when a bank could charter either as a state or a federal bank.
The two systems were not coordinated and banks had to follow very few regulations. Some state banks issued their own
currencies, most notably, the Confederate dollar. After the acts became law, banks that chose to operate in more than
one state were required to charter with the Federal government and the U.S. Treasury, and were required to submit to
the Treasury and the OCCs examinations and audits. The act also strove to secure the national currency based on the
securities in the U.S. Treasury, and to severely tax the state currencies in order to discourage any other currency than
the U.S. dollar. While the primary concern for these acts appeared to be to ensure a stable and growing national
currency, the true reason was the need to finance the Civil War for the Union army. This was done by selling
government bonds backed by the U. S. Treasury that were offered by the newly chartered national banks.

National banks in the United States today provide all manner of financial services and loans available, including checking
and savings accounts; credit, debit and smart card services; money market funds; mortgage loans and mortgage
services; small and large commercial loans and lines of credit; insurance products; investment products and services;
stock and bond trading; and global banking services, including foreign cash services and international transfers and
payments. Positions for banking careers in national banks can range from front office tellers to loan officers and credit
analysts to bank officers and securities traders.

National banks work with the Federal Reserve Bank as investor banks to ensure stabilization and currency control for
both the U.S. currency and the U.S. banking system.

Credit Unions

Credit unions are a type of bank that operate as a not-for-profit, tax exempt, cooperative financial institution owned by
the credit unions depositors, or members. Depositors must be members of a designated group of people, such as
military personnel (active or retired); employees of a school district or a city or county; members of a labor union or
employees of a large company; or members of a religious group. Family members of such depositors can also be
considered as members of a credit union. A member of one of these groups must join the credit union first before
being able to open an account or borrow money. Credit unions are governed by a board of directors, and the directors
are voted onto the board by the members or shareholders of the credit union. Credit unions can incorporate under state
or federal law, except in Wyoming, Delaware, and South Dakota, where credit unions cannot incorporate under state
law and must be federally incorporated.

Credit unions offer similar services to their members, or shareholders, as do banks, but the services are usually titled a
bit differently: savings accounts are share accounts, checking accounts are share draft accounts, and so on. Credit unions
also offer loans, credit cards, debit cards, ATM services, online banking, and bill paying services. Bank careers in a credit
union are similar to a retail and/or a commercial bank, including credit union officer, loan officers, credit analysts,
information technology professionals, and so on.

As credit unions are member services institutions, they are not regulated by the any of the banking oversight regulators.
However, this does not mean in any way that they are not as large nor as well financed as many national banks. While a
depositors accounts are insured up to $250,000 by the FDIC, credit union deposits are insured by the National Credit
Union Share Insurance Fund (NCUSIF) for up to $250,000 per depositor. The NCUSIF, like the FDIC, is backed by the
United States Government but is administered by the National Credit Union Administration. In fact, the NCUSIF has a
higher insurance fund capital ratio than that of the FDIC. Also, credit unions typically have a higher equity capital ratio
than most U.S. banks. A credit union, by definition, is formed to service the member shareholders, and therefore, is said
to be committed to helping the members financial status, rather than to simply reap profits. Credit unions often
advertise that their interest charged on loans is lower than banks, and that their service charges for share or draft
accounts are also lower, due to their not- for-profit status and their member focus.

Most credit unions are comparable to local banks, offering services to the individual consumer, either for personal or
commercial needs. Another type of credit union is a commercial credit union, which provides operational and clearing
house funds support only to credit unions on a commercial basis.

Investment Banks

An investment bank is a financial institution that generates revenue by handling securities transactions for clients.
Transactions can involve derivatives trades, market making, mergers and acquisitions, foreign money transactions,
commodities, equity securities, and fixed-income products and instruments. An investment banks services are referred
to as corporate finance. Careers available in an investment bank include financial sales and financial analysts, credit
analysts, traders, bank officers, fraud analysts and many information technology positions. Clients of an investment bank
can be individuals, commercial corporations or businesses, pension funds, or governments. Prior to the Glass-Steagal Act
of 1933, after the banking collapse of 1929 and the Great Depression, banks could mingle both their investment and
commercial activities. The Glass-Steagal Act effectively separated the two financial services, and until 1999, all banks in
the United States, unlike European banks, were required by law to choose which type of service to offer consumers. U.S.
banks operated separately until 1999, when Congress passed the Gramm-Leach-Bliley Act. This Act effectively tore down
any barriers in the United States between commercial and investment banking financial services and operations,
allowing banks not only to purchase or form insurance agencies, but also allowing for the consolidating of the two
differing financial entities into giant behemoth banks that now offer all manner of banking, investment, insurance, and
financial services.

An investment bank operates with three different distinct divisions: front office, middle office, and back office, meaning
that investment banking careers can be quite varied. The front office is where all transactions, such as purchases, sales
and services of the financial products and instruments, are conducted. This can include investment management, global
currency trades, merchant and commercial banking, mergers and acquisitions, capital finance and capital raising,
derivatives and commodities trading, and proprietary and customer trading. The front office also includes a research
division (not to be confused with research analysis for risk assessment, which is discussed below) in the middle office.
The front offices research departments activities are highly regulated and must remain separated by a type of wall
between itself and the banks investment activities, since the reports on the banks investments can affect the banks
financial status.

The middle office directs all corporate strategy and risk management activities of the bank, as well as financial control of
the banks assets, its exposure in the markets, and its profitability. Directors and officers of the investment bank in the
middle office oversee all market and credit risks to the banks financial statement and assure that no risk or credit errors
or manipulation have occurred.

The back office of an investment bank manages and oversees all technology and informational support as well as all
operations and transactions conducted by the bank. Compliance departments, maintaining all facets of the bank's
compliance with regulations, both state, federal and consumer, can be located either in the back office, or increasingly,
in the middle office, as part of the risk analysis of a banks operations.

Retail Banks

A retail bank is a financial institution that offers consumer services directly to the individual consumer, such as checking
and savings accounts, cashiers checks, credit, debit and prepaid cards, and sometimes loans and retirement services.
Retail banks can be simply a local bank with no branches or a branch of a commercial bank or of a local or a state bank
set up to service regional or local individual clients. Credit unions and savings and loan banks could also be considered
retail banks, although credit unions generally also conduct some commercial and investment services. Retail banks are
referred to in the banking industry as the mass-market arm of banks, giving one-stop shopping opportunities to
customers of the bank, and therefore keeping all financial transactions of the client customer within that one bank.
Increasingly, many retail banks have begun to include small business services, such as loans and lines of credit, as well as
commercial bank accounts, in order to retain those individual clients who may also need small commercial services in
addition to their personal accounts. Banking careers available in a retail bank can include such positions as branch
manager, loan officer, bank tellers, and various management positions.

Usually, a retail bank will be a brick-and-mortar bank (in a building and accessible to foot and drive-up traffic) but
increasingly today it may be a virtual or online-only bank, servicing clients via Internet connection or telephone, only,
with no street location for a customer to physically visit. Retail banks can hold deposits, make loans, pay on checks or
pay debits for depositors, and any number of banking services for consumers, but they generally do not perform any
commercial or clearinghouse services. Retail banks may also offer investment or brokerage services to sell and service
investment products, including certificates of deposit, money market funds, mutual funds, and individual retirement
accounts and services. Brokerage services at a retail bank are usually accomplished by only the handling of the consumer
sale and contract rather than the actual brokerage and investment management services. When a retail bank offers
services such as commercial loans, retirement or investment services, it may accommodate its clients with these
offerings through a third-party vendor, or the parent bank, possibly because of lack of staff or because of regulatory
limitations.

Since the advent of the Internet, online banking access and ATMs (Automated Teller Machines), the savings and loan
collapse in the late 1980s and early 1990s, and the financial meltdown of 2008, fewer and fewer retail banks are
continuing as brick-and-mortar locations. Increasingly, banks and financial institutions are asking consumers to use
direct deposit services, ATMs, smart phones, and computer Internet connections in order to conduct retail consumer
banking services. Many banks have begun to charge for face-to-face teller services and even for telephone access to a
teller. Consumers without Internet access or who are not capable of accessing accounts online will be expected, in the
future, to pay more and more for these types of personal services that banking clients have always, up to now, enjoyed.
Banking may become more impersonal, and fewer banks will offer walk-up or drive-up retail services for free, if at all.

Commercial Banks

A commercial bank is a for-profit financial institution that generates revenue by holding deposits from and making loans
to customers, offering various financial services to consumers and earning interest on investments made (usually
securities) on deposits. A commercial banks customers can enjoy the same services as that of a retail bank, such as
savings and checking accounts, certificates of deposits, loans and mortgages, and credit, debit and prepaid cards. The
main difference, however, is that a commercial bank typically will focus on commercial clients and short-term loans, or
lines of credit, for businesses. A commercial bank could be a single, local bank, a branch of a national or state bank, or a
credit union, and offers careers that are similar to those at any other bank. Commercial banks, unlike investment banks,
typically loan money to customers using only their own pool of funds and investment income, rather than drawing on
outside funds in packaging loans.

Prior to the Great Depression, commercial banks were also investment banks. After the banking collapse in 1929, the
U.S. government required banks to limit operations to one of two types of banking: either investment banking (which
deals in commercial capital markets) or commercial banking (which offers consumer-direct banking services, such as
checking and savings; debit and credit and deposits relating to these accounts; loans and mortgages; and other
consumer services). Until the Gramm-Leach-Bliley (GLB) act of 1999, also known as the Financial Modernization Act,
commercial banks were prohibited from also selling any insurance services. After the GLB act, commercial banks were
able to expand consumer financial services greatly to consumers by also becoming insurance agencies, becoming more
and more of the mass-market strategic provider of one-stop shopping and being able to offer almost all manner of
financial services, financial and retirement planning, and saving for consumers.

Today the differences between credit union firms and retail, commercial, and savings and loan banks are a bit blurry to a
consumer, particularly after the savings and loan collapse in the late 1980s and the financial collapse in 2008, and also
because they all seem to offer the same services. The differencess lie in the regulatory oversight of the different types of
banks, thrifts, and credit unions; the respective insuring entities that make a depositors accounts safe from loss; the
myriad behind-the-scenes financial money markets and clearinghouses; and congressional actions making up the many
banking laws and regulations. A smart consumer is wise to do his or her research, shop around for the best price and
access for services, and make sure that he or she is comfortable that the financial firm of choice is capable, insured, and
willing to provide the services needed.

Those seeking banking careers may find many opportunities for careers and advancement in a commercial bank.

Online Banks

An online bank can be a division or department of any retail, commercial, or investment bank, or it might be a bank that
operates entirely online, with no physical location for a customer to walk-up or drive-up to, but that may service all
needs of banking customers. Online banks offer many banking job within their firms that are similar to banking careers
at local and commercial banks and credit unions. Online banking is referred to as E-banking or electronic banking.

Online banks allow a customer to perform almost all banking transactions online, such as checking and savings
transactions, bill paying services, account inquiries, and transfers. The customer of an online banking service can access
his or her account at any time of the day or night with the use of a computer and a customer or user ID number and a
password. Services can also include loan applications and payments as well as credit, debit, and smart card transactions.
Careers with an online bank can include loan officers, credit analysts, as well as banking careers positions in fraud
analysis, investment, and management.

Customers online account balances can be real-time transactions that update the customers account immediately as
the transaction is performed, or the bank can impose a time delay, offering the bank time to hold deposits or
transactions until such time as the requested transaction has passed some type of quality control, typically a software
program that analyzes the data to ensure correctness. Some online banks have very sophisticated software that even
allows customers to deposit checks with an upload of a picture of the check taken by the customer with a smart phone.

Banks with online services have invested many millions of dollars of secure technology software and oversight in their
computer servers and networks to ensure the accounts of depositors against any fraud or illegal access. Commercial
businesses have embraced online banking, because ready access to the bank has simplified many aspects of business
today, including payroll services, lines of credit, short-term loans, and bill paying services. Those working in banking
careers in a companys business office can deposit or transfer funds, pay bills, accept payment from creditors and pay
vendors, as well as deposit payroll funds to the employees bank accounts without ever leaving the office. Nevertheless,
many people fear online banking and prefer to handle banking transactions at a physical location of a bank. Another
disadvantage of a purely online bank is the requirement that deposited or cashed funds must either be mailed by check
to the bank or transferred directly from another bank. This is due to the fact that the customer cannot present the check
at a location and handle the transaction personally, because the online bank has no physical location for customers. Still,
online banking is a vital function of all banks today. All banks are connected electronically to each other, either directly
or through a clearinghouse, and all bank records are kept electronically. Electronic access is much more cost effective
than staffing a bank with people and tellers, and this transformation will only continue as young people embrace
technology and reject face-to-face communication.

Unknown to many, banks are classified into three tiers based on their assets, and can be further classified into six
categories based on their functions and services.

Tier 1 is composed of universal and commercial banks--the banks with the biggest assets. Tier 2 is composed of thrift
banks or those with medium-sized assets, and tier 3 that is composed of rural and cooperative banks.

Universal banks offer the widest variety of services among all financial institutions in the Philippines today. In addition,
only banks under this category can engage in the functions of an investment house such as underwriting. Universal
banks can also invest in equities of non-allied undertakings.

Example: Land Bank of the Philippines, Banco de Oro, Bank of the Philippine Islands, Chinabank, Hong Kong Shanghai
Banking Corporation, Union Bank of the Philippines

Commercial banks offer the same variety of banking services offered by a universal bank. However, it cannot engage in
underwriting and other functions of an investment house.

Example: Asia United Bank, Bank of Commerce, East West Bank, Export and Industry Bank, Philippine Bank of
Communications, Philippine Veterans Bank

A thrift bank accumulates the savings of its depositors and invests it. Most thrift banks are known to provide short-term
working capital, and medium- and long-term financing to businesses engaged in agriculture, services, industry, housing
and allied services, especially to small and medium enterprises.

Example: Robinsons Savings Bank

Rural banks are commonly found in far-flung areas that cannot be reached by bigger banking institutions. These
privately-owned banks provide basic financial services to the small but growing economies in the countryside. More
often than not, the rural banks are the ones helping farmers through the stages of production--from providing loans for
inputs and irrigation to harvest.

Example: One Network Bank

Cooperative banks are similar in nature to rural banks. It is only differentiated by its ownership as cooperative banks are
owned by cooperatives or a federation of cooperatives.

Example: Cooperative Bank of Iloilo
The Monetary Board

The powers and function of Bangko Sentral are exercised by its Monetary Board, which has seven members appointed
by the President of The Philippines. Under the New Central Bank Act, one of the government sector members of the
Monetary Board must also be a member of the Cabinet designated by the President.

The New Central Bank Act establishes certain qualifications for the members of the Monetary Board and also prohibits
members from holding certain positions with other governmental agencies and private institutions that may give rise to
conflicts of interest. With the exception of the members of the Cabinet, the Governor and the other members of the
Monetary Board serve terms of six years and may only be removed for cause.

The Monetary Board meets at least once a week. The Board may be called to a meeting by the Governor of the Bangko
Sentral or by two (2) other members of the Board. Usually, the Board meets every Thursday but on some occasions, it
convenes to discuss urgent issues.

The major functions of the Monetary Board include the power to:

Issue rules and regulations it considers necessary for the effective discharge of the responsibilities and exercise of the
powers vested in it;
Direct the management, operations, and administration of Bangko Sentral, organize its personnel and issue such rules
and regulations as it may deem necessary or desirable for this purpose;
Establish a human resource management system which governs the selection, hiring, appointment, transfer, promotion,
or dismissal of all personnel;
Adopt an annual budget for and authorize such expenditures by Bangko Sentral as are in the interest of the effective
administration and operations of Bangko Sentral in accordance with applicable laws and regulations; and
Indemnify its members and other officials of Bangko Sentral, including personnel of the departments performing
supervision and examination functions, against all costs and expenses reasonably incurred by such persons in connection
with any civil or criminal action, suit or proceeding, to which any of them may be made a party by reason of the
performance of his functions or duties, unless such members or other officials is found to be liable for negligence or
misconduct.
The BSP Monetary Board


Chairman
Amando M. Tetangco, Jr.



Members
Cesar V. Purisima


Alfredo C. Antonio

Juan D. De Zuiga, Jr.
Valentin A. Araneta
Felipe M. Medalla

Armando L. Suratos
A banking system in which banks provide a wide variety of financial services, including both
commercial and investment services.