THE PHILIPPINE FINANCIAL SYSTEM

THE STRUCTURE OF THE PHILIPPNE FINANCIAL

SYSTEM FNANCIAL SYSTEM
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[TYPE THE
THE PHILIPPINE SIDEBAR
FINANCIAL SYSTEM TITLE]
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THE STRUCTURE OF THE PHILIPPNE
content. A sidebar is a
FINANCIAL SYSTEM FNANCIAL
standalone
SYSTEM
supplement to the
SYSTEM FNANCIAL SYSTEM a network that generates, circulates,
and controls money and credit. main document. It is

SURPLUS INCOME refers to the excess incomes of an individual. often aligned on the

OBRAS PIAS the first credit institution n the Philippines; started by left or right of the
Fr. Juan Fernandez de Leon in 1754 and ended in 1820.
page, or located at the

BANCO ESPAOL Filipino de Isabella II the First Philippine Bank top or bottom. Use the
establish in 1851
Drawing Tools tab to
FIRST AGRICULTURAL BANK OF THE PHILIPPINES established n
1906 and in 1916 all of its asset and liabilities were transferred to the change the formatting
newly organized PNB.
of the sidebar text

FNANCIAL MARKET are physical locations or electronic forums box.]

that facilitate the flow of funds among nvestors, businesses and
governments. It provides the mechanism for allocating financial
resources of funds from savers to borrowers.

ROLES OF THE FNANCIAL MARKET:

1. Money market operation
2. Expedites the transaction of financial claims
3. Serves as a mean of bringing the forces of demand and supply of
financial clams
4. Facilitates the flow of funds among investors, business, and
governments.
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5. Provides the mechanisms for allocating financial resources or funds from savers to borrowers.
6. Raises money by selling shares to investors and its existing share can be bought or sold.
7. Where lenders and their agents can meet borrowers.
8. Convenes many interested sellers n one place.
9. Provides the place where many commodities are traded.
10.Used to match those who want capital to who have it.
11.Facilitates:
The raising capital in capital markets
The transfer of risk in the derivatives market
International trade in the currency market

1942 PNB closes its doors because of the coming of the Japanese imperial Forces.

Rehabilitation Finance Corporation formed in 1946 to provide credit facilities for the rehabilitation of
agricultural, commerce and industry reconstruction of war-damaged properties and later become the
Development Bank of the Philippines.

Offshore Banking Units any branch, subsidiary of affiliate of Foreign Banking Corporation that
conduct banking transactions in foreign currencies.

BANGKO SENTRAL NG PILIPINAS AND ITS ROLE N THE DEPOSIT EXPANSION AND MONEY
SUPPLY
CENTRAL BANK a financial institution vested by the State with the function of regulating the
supply, cost and use of money with a view to promoting national and international economic stability
and welfare.

DEVELOPMENT OF THE BANGKO SENTRALNG PILIPNAS The central bank of countries within the
region of Southeast Asia are comparatively young having been established mostly only after the end of
the Second World War. The Philippines, a young nation, is not an exception. It established its central
bank only on January 3, 1949,

The concept of a central bank was developed in 1933 by Miguel Cuaderno, the first governor of the
Central Bank of the Philippines. The Central Bank of the Philippines was patterned after similar central
banks established in Paraguay and Guatemala, two countries which, like the Philippnes have the same
export economies. The Central Bank of the Philippines came to existence as a result of the approval by
the former President Elpdio Qurino pf Republic Act No. 265, otherwise known as the Central Bank
Act on June 15, 1948. However, actual operations did not commence until January 3, 1949 when the
bank open its doors for business in the old Intendencia Building located at Intramuros, Manila.
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With the accumulation of losses incurred by the Central Bank, P317B as of December 1992, there
emerged the CMA bill to transform the Central Bank into Central Monetary Authority. This CMA bill is
also in response to a call of the International monetary Bank and World Bank to ease the foreign debt
burden and strengthen the credit standing of the Philippines. And then when the CMA law also known
as The New Central Bank Act took effect on June 14, 1993 there is established an independent Central
Monetary Authority which is known as the Bangko Sentral ng PilipInas and has a capital of P50
billion.

THE FUNCTION OF THE BANGKO SENTRAL NG PILIPNAS

Liqudity Management
Currency Issue
Lender of Last Resort
Financial Supervsion
Management of Foreign Currency Reserves
Determination of Exchange Rate Policy
Other Activities (Functions as the banker, financial advisor and official depository of the
Government)

OBJECTIVES OF BSP
1. To maintain price stability conducive to a balanced and sustainable growth of the economy
2. To promote and maintain monetary stability and convertibility of the Philippine peso

THE BSP ON MONEY SUPPLY AND DEPOSIT EXPANSION

MONEY SUPPLY the sum of notes and coins in the circulation and peso demand depositions subject
to withdrawal by check
DEPOSIT EXPANSION the change in money supply as a result of an increase in bank reserve

MONETARY BOARD policy making body of the BSP; exercise the powers and functions of the BSP

THE MAIN FUNCTONS OF THE MONETARY BOARD

1. Issues rules and regulations it considers necessary for the effective discharge of the responsibilities
and exercise the powers vested upon it.
2. Direct the management, operations and administration of the BSP
3. Establish a human resource management system
4. Adopt an annual budget for and authorize such expenditures by Bangko Sentral
5. Indemnify uts members and other officials of Bangko Sentral
THE BSP MONETARY BOARD
Chairman: Armando M. Tetangco, Jr.
Members: Juanito D. Amatong
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Alfredo C. Antonio
Raul A. Boncan
Ignacio R. Bunye
Peter Favila
Nelly F. Villafuerte

MONETARY POLICY AND ITS OBJECTIVES

MONETARY POLICY the management of the expansion and contraction of the volume of money in
circulation for the explicit purpose for attaining a specific objective.
CENTRAL BANK OF THE PHILIPPINES responsible for executing the monetary policy; gives
primary and immediate importance to the maintenance of monetary stability
CONFIDENCE OF MONEY basis for all economic activities in a society based upon credit
ADVANTAGES
1. Impersonal
2. Flexible in operation
3. Operates for the most part free from the weight of political pressures

DISADVANTAGES
1. Attempts to change available money supply through the banking system
2. Results to high-priced goods and services

QUANTITATIVE AND SELECTIVE INSTRUMENTS

1. QUANTITATIVE (Open Market Operations) used to regulate total quality of money available for
all purposes
2. SELECTIVE employed to limit the amount of money available for certain specific purposes

RELATION OF INTEREST RATES TO SAVINGS AND INVESTMENT

INVESTMENT induce a significant increase when the depressions of driving interest rates down
SAVINGS it is contended when there is an increase in interest rate
TIGHT MONEY POLICY AND EASY MONEY POLICY TIGHT MONEY SUPPLY contraction of
money supply
EASY MONEY POLICY expansion of money supply
FINANCIAL STABILITY SSUES AND CHALLENGES
KEY FACTORS THAT AFFECTS THE FINANCIAL SYSTEM:
1. Financial Resources
2. Banking System
3. Non-Bank Financial institution
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ISSUES ARISNG
1. Financial Stability
2. Integrated Regulator (s)
3. Financial Transparency
4. Deregulation of Financial Market
5. Rapid Financial Innovation
6. Space Age Technology]

CHALLENGES ENCOUNTERED
1. Improving Asset Quality
2. Managing Risk Exposure
3. Developing the Domestic Capital Market

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