Esguerra, Nicole Anne M.

BSBM3-FM4
1. Define payment system.
A payment system consists of a set of instruments, banking procedures and, typically, interbank
funds transfer systems that ensure the circulation of money. In simple terms, money is
regarded as cash or claims against credit institutions in the form of deposits. The use of bank
deposits to make payments has become an important medium in most developed countries and to
make a payment, the payer must issue an instruction in the form of a paper-based instrument or
an electronic instruction (e.g. using a credit or plastic card). Payment systems are vital part of the
economic and financial infrastructure. Their efficient functioning, allowing transactions to be
completed safely and on time, makes a key contribution to overall economic performance.
http://www.bsp.gov.ph/financial/payments/philpass.pdf
2. What is clearing house and its objectives?
Clearinghouses take the opposite position of each side of a trade. When two parties agree on the
terms of a transaction, a clearinghouse sits in the middle, acting as both the buyer and the seller.
Clearinghouses exist to ensure the smooth functioning of financial markets. Fewer transactions
would take place if sellers were worried that buyers would refuse to pay them, and vice versa. A
clearinghouse ensures that transactions happen as planned.
http://www.investinganswers.com/financial-dictionary/investing/clearinghouse-2830
The objectives of clearing house can be mentioned as followsa. To take economic policy
b. Quick settlement of transaction
c. To save time
d. To accelerate the advantages of transaction
e. Influences on the cash deposit of bank
f. Assistance in realizing economic condition
g. Helpful in transfer of money
h. To supervise the clearing works of the banks from time to time
http://7edubd.blogspot.com/2011/05/objectives-of-clearing-house.html
3. Define financial intermediary.
A financial intermediary such as bank simultaneously interacts with savers and borrowers and
produces a set of services which facilitates the transformation of its liabilities into assets such as
loans.
https://prezi.com/xx1qafgk6hud/chapter-5-the-payments-system-and-financialintermediation/

4. What is financial intermediation?

The function of facilitating liabilities into assets is called intermediation. It can improve
economic efficiency by facilitating transactions, facilitating portfolio creation, easing household
liquidity constraints, spreading risks over time and reducing the problem asymmetric
information.
https://prezi.com/xx1qafgk6hud/chapter-5-the-payments-system-and-financialintermediation/
5. Explain transmutation of assets and economies of scale.
In the strictest sense, transmutation occurs by formal agreement or transfer between spouses that
alters the character of property. In property division, it may be necessary to prove or disprove
that property was transmuted in one of the ways described below.

From separate property to community property For example, both spouses sign their
name to the deed of a house initially purchased by one spouse before marriage.

From community property to separate property For example, a couple starts a business
together but transfers it into the wife's name.

From separate property of one spouse to separate property of the other For example, a
wife signs her inheritance over to her husband.

Transmutation is not limited only to titled assets, such as businesses and professional practices;
the marital home or other real estate; retirement accounts, investments, and joint bank accounts;
and trusts and inheritances. Technically, spouses can transmute assets only in writing or by other
express declaration. The courts are protective of the purportedly relinquishing spouse, and will
seek assurances that this spouse conducted the alleged transmutation with informed consent; i.e.,
absent coercion or fraud. Our divorce lawyers have vast experience proving proper, informed
transmutation of property, as well as, on the other side, demonstrating ignorance or other lack of
intent

to

change

the

character

of

the

asset.

http://www.sflg.com/Property-

Division/Transmutation-of-Assets.shtml
Economies of scale are the cost advantages that enterprises obtain due to size, output or scale of
operation.
6. Illustrate the clearing procedures at the CB, how do we clear checks?

The BSP circular requires banks to return Drawn Against Uncleared Deposit (DAUD) and
Drawn Against Insufficient Funds (DAIF) checks to the Philippine Clearing House Corporation
(PCHC) by 7:30am the next day. What this means is that theres no more window for late
funding. Any unfunded check will be considered as returned or bounced checks. At the same
time, a returned check will be charged a fee of Php2,000 plus Php200 for every Php40,000
fraction of the check amount per day (not sure if this is the rate of BPI or by all banks). As for
checks subject to Stop Payment Order (SPO), they can be honored as long as the check has not
been deposited for clearing by the payee yet. Otherwise, they will be considered unfunded
already and will be charged the corresponding fees. The new BSP Circular simply forces us to
ensure that the account is funded when issuing checks. http://www.pinoymoneytalk.com/bspcircular-cheque-clearing/
7. What is financial market, capital market and money market?

Financial markets are forums in which suppliers of funds and demanders can transact business
directly.
Capital market is a market that enables suppliers and demanders of long-term funds to make
transactions. The key capital market securities are bonds and both common and preferred stock.
Money market is created by a financial relationship between suppliers and demanders of shortterm funds. Most money market transactions are made in marketable securities which are shortterm debt instruments, such as treasury bills, commercial paper, and negotiable certificates of
deposits issued by the government, business, and financial institutions, respectively.