Judy Rose G.

Rodelas
BSBA-3FMB

Monetary

1.) A central bank should have the sole power to issue notes.Why?
The Bangko Sentral shall have the sole power and authority to issue currency, within the territory of the Philippines. No other person or
entity, public or private, may put into circulation notes, coins or any other object or document which, in the opinion of the Monetary Board,
might circulate as currency, nor reproduce or imitate the facsimiles of Bangko Sentral notes without prior authority from the Bangko Sentral.
The Monetary Board may issue such regulations as it may deem advisable in order to prevent the circulation of foreign currency or of
currency substitutes as well as to prevent the reproduction of facsimiles of Bangko Sentral notes. The Bangko Sentral shall have the authority
to investigate, make arrests, conduct searches and seizures in accordance with law, for the purpose of maintaining the integrity of the
currency.
2.)The BSP is an agent of government.What does this mean?
The Bangko Sentral shall act as a banker of the Government, its political subdivisions and instrumentalities.

3.)Illustrate and explain rediscounting,reserve requirement and the procedures in clearing checks.
The process in which reserves or funds are transferred among banks to settle the accounts of checks written on one account and
deposited into another. Check clearing is the heart and sole of daily banking activity and the final step in the use of checkable deposits
as the medium of exchange for conducting transactions in the economy. Check clearing is facilitated by central clearinghouses,
including the Federal Reserve System and a number of private organizations. The check clearing process is also a key component of
the money creation process.
The check clearing process is the transfer of funds between banks when a check written on one bank is deposited into another bank.
This process involves the transfer of billions of dollars of reserves among thousands of banks each day using centralized check
clearing houses. Some clearing houses are local or regional, processing checks for banks within a given city or state, which others are
nationwide (especially the Federal Reserve System), processing checks throughout the country.

The Basic Process

In theory, the check clearing process is relatively simple. When Customer X deposits a check in Bank A written on the account of
Customer Y at Bank B, Bank B sends reserves to Bank A equal to the amount of the check. Bank A then adds a credit to Customer X's
account and Bank B subtracts a debit from Customer Y's account.
For a closer look at how this works, consider the transaction between Yancy Young and Xander Xavier.
First, Yancy gives Xander a $37 check in exchange for a canister of ancient Mayan mummified cocoa beans. Yancy's check is written
on his account at the Byzantine National Bank.
Second, with check in hand, Xander hastens to a branch terminal of her bank, Azimuth Savings Bank, to deposit this $37 check in her
account. Customer X makes a deposit in Bank A of a check written by Customer Y on an account with Bank B.
Third, Azimuth Savings Bank needs to clear or process this 37 check. To do so, it sends the check via Shady Valley Secure Courier
Services to Byzantine National Bank requesting payment.
Fourth, in principle, Byzantine National Bank can "make good" on this check by sending $37 of currency (vault cash) back to
Azimuth Savings Bank. It does this by placing a twenty, a ten, a five, and two ones into an envelope for return delivery via Shady
Valley Secure Courier Services.
Fifth, with these funds in transit, Byzantine National Bank completes its end of the check clearing process by deducting $37 from
Yancy's bank account with an equal $37 deduction from its vault cash asset account.
Sixth, once Azimuth Savings Bank receives this $37 envelope it settles the books on its end of the check clearing process by adding
$37 to Xander's bank account with an equal $37 addition to its vault cash account.
4.) Illustrate and explain open market operation under inflationary situation.
The Bangko Sentral ng Pilipinas (BSP) formally adopted inflation targeting as the framework for monetary policy in January 2002. This
policy move is aimed at providing the BSP with a more focused and forward-looking approach in the pursuit of its primary mandate, which is
to ensure price stability. Two intrinsic features of the approachtransparency and accountability in monetary policyis expected to enhance
the credibility of the BSP in helping create a stable macroeconomic environment in which vital economic reforms to raise the growth
potentials of the economy can continue.
This approach involves the announcement of an explicit inflation target that the BSP promises to achieve over a given time period. The target
inflation rate is set and announced jointly by the BSP and the government through an inter-agency body. Although the responsibility of
achieving the target rests primarily with the BSP, this joint announcement reflects active government participation in achieving the goal of
price stability and government ownership of the inflation target.
In the Philippines, the interest rates applied on the overnight RP/RRP signals the stance of BSPs monetary policy. The BSP created an
Advisory Committee which deliberates, discusses and recommends to the Monetary Board the appropriate monetary policy stance that will
enable the BSP to achieve the desired inflation target. The Advisory Committee meets every six weeks and in between regular meetings,
whenever it is deemed necessary.
OMO is a monetary tool which involves the BSP publicly buying or selling government securities from banks and financial institutions in
order to expand or contract the supply of money. By controlling the money supply, the BSP is able to exert some influence on the prices of
goods and services and achieve its inflation objectives.
When the BSP buys securities, it pays for them by directly crediting its counterpartys Demand Deposit Account that is being maintained with
the BSP. Effectively, the transaction increases the buyers level of reserves and on an aggregate level, expands the systems money supply.
Conversely, when the BSP sells the securities, the buyers payment (via direct debit against the buyers Demand Deposit Account with the
BSP) reduces his reserve account causing money supply to contract.
5.) Explain swap facility
A Swap Execution Facility (SEF) (sometimes Swaps Execution Facility) [1] is a platform for financial swap trading that
provides pre-trade information (i.e. bid and offer prices) and a mechanism for executing swap transactions among eligible
participants.[2]
Swap Execution Facilities are regulated by the Securities and Exchange Commission and the Commodity Futures Trading
Commission. The regulated trading of certain swaps is a result of requirements in the United States by the DoddFrank Wall
Street Reform and Consumer Protection Act (in particular Title VII).[3] Financial swaps have traditionally been traded in over-
the-counter (OTC) markets.[4] However, regulatory changes have driven reporting, clearing, and settlement functions to SEFs,
which are much more tightly regulated.[5] The SEF-execution mandate responds to one of the four derivatives-related European
Union, have proposed similar changes in swap market structure[6] but none have yet been adopted.

6.) Evaluate central bank operations in less developed countries

The central bank in a developing country aims at the promotion and maintenance of a rising level of production,
employment and real income in the country. The central banks in the majority of underdeveloped countries have
been given wide powers to promote the growth of such economies. They, therefore, perform the following
functions towards this end.

7.)How can the BSP help the attainment of the vision of the Phils (2020)
I commend the initiatives of the local banking community to contribute to the attainment of this vision. The signing of the Statement on
Environment and Sustainable Development by the Bankers Association of the Philippines (BAP) is an explicit signal of the communitys firm
commitment to environmental protection and the conservation of natural resources. Integrating such a commitment into a banks corporate
philosophy is a very laudable move of the banking community for it bespeaks of corporate responsibility.
The Statement affirms the principles that good ecology is sound economics and that being pro-environment is pro-development. Indeed,
good environmental practices and a credible financial performance can go hand in hand. Integrating environmentally sound practices into
daily banking operations and management systems can lead to reduction in costs and help maximize earnings. Specific programs including
those that reduce energy and paper consumption, limit waste production, and promote recycling contribute to the efficiency of banks work
processes. These initiatives can provide clear benefits to the bottom line of banks as well as promote environmental protection.
Beyond these company-specific environmental objectives, banksas intermediaries of financial resourcesare actually in a distinct position
to influence businesses to play a major role in promoting sustainable development. Bankers can do this by including environmental criteria in
their overall lending and investment strategy. Banks can, therefore, be more pro-active in supporting projects that are environmentally sound.
There are new and expanding opportunities in environmental markets and services including those in cleaner technologies and eco-tourism
which can yield both environmental and financial dividends.
Banks can also help propagate the environment ethic among their corporate-clients. A study of Burton Hamner, formerly of the Asian Institute
of Management, suggests that companies are willing to adopt clean technology and invest in pollution prevention if they have an accurate
picture of how these activities can help minimize costs in the long term. Banks can help in this area by identifying and advising corporations
about the financial and economic costs of pollution and the advantages of adopting cleaner production technologies. This requires, however,
that banks develop expertise on environmental cost and benefit analysis to complement their financial analysis in their role as financial
advisers to projects with significant impact on the environment.
To push the principles embodied in the Statement a bit further, the banking sector can engage in a range of activities to foster private
environmental investment. The banking sector can undertake information-sharing programs regarding best practices and effective
environmental management tools so that bank customers themselves can strengthen their own capacity to reduce environmental risks.
Furthermore, financial institutions can support more intensive collaborative efforts with a broader set of stakeholders regarding
environmental concerns to increase the level of environmental awareness nation-wide.
8.)Explain domestic & international monetary stability. How do you relate such stability to economic.
Promoting economic stability is partly a matter of avoiding economic and financial crises, large swings in
economic activity, high inflation, and excessive volatility in foreign exchange and financial markets. Instability
can increase uncertainty, discourage investment, impede economic growth, and hurt living standards. A dynamic
market economy necessarily involves some degree of volatility, as well as gradual structural change. The
challenge for policymakers is to minimize instability in their own country and abroad without reducing the
economys ability to improve living standards through rising productivity, employment, and sustainable growth.
Economic and financial stability is both a national and a multilateral concern. As recent financial crises have
shown, economies have become more interconnected. Vulnerabilities can spread more easily across sectors and
national borders.

9.) What is the composition of the international reserves

According to the OECD, foreign exchange rate reserves are the stocks of foreign currency denominated assets
plus gold, held by a central bank. More simply, they are the assets of the central bank held in currencies outside
the home country currency.A reserve currency, also called an anchor currency, is a currency that is held in significant
quantities by numerous governments and central banks as part of their foreign exchange reserves. These currencies are used to
transact global business, and are the pricing currency for global tradeparticularly in commodities such as gold, and oil.
The primary reserve currency used worldwide is the US dollar, followed by the eurothe official currency of the eurozone --
the British pound, the Japanese yen, and the Swiss franc.
Foreign exchange reserves data is released quarterly by the IMF in its Currency Composition of Official Foreign Exchange
Reserves (COFER) statistics. COFER consist of a monetary authoritys claims on non-resident liquidity in the form of: foreign
bank notes, bank deposits, treasury bills, short- and long-term government securities, and other claims usable in the event of
balance of payments needs.
The amount of foreign exchange reserves that a country can claim is used as an indicator of the ability to repay foreign debt, and
is used in sovereign credit ratings. Reserves are also used for currency defenseto halt downward or upward pressure on a
currency against a benchmark currency. Closely related to foreign reserves, and also affecting debt repayment capability and
credit ratings, are holdings in sovereign wealth funds.

10.)Who are the Monetary Board of BSP?

The BSP Monetary Board

Chairman Amando M. Tetangco, Jr.

Members Carlos G. Dominguez III

Alfredo C. Antonio
Juan D. De Zuiga, Jr.
Valentin A. Araneta
Felipe M. Medalla
Armando L. Suratos