THE PHILIPPNE FINANCIAL SYSTEM THE STRUCTURE OF THE PHILIPPNE FINANCIAL SYSTEM FNANCIAL SYSTEM a network that generates,

, circulates, and controls money andcredit.SURPLUS INCOME refers to the excess incomes of an individual.OBRAS PIAS the first credit institution n the Philippines; started by Fr. JuanFernandez de Leon in 1754 and ended in 1820.BANCO ESPAOL Filipino de Isabella II the First Philippine Bank establish in 1851FIRST AGRICULTURAL BANK OF THE PHILIPPINES established n 1906 and in 1916 allof its asset and liabilities were transferred to the newly organized PNB.FNANCIAL MARKET are physical locations or electronic forums that facilitate theflow of funds among nvestors, businesses and governments. It provides themechanism for allocating financial resources of funds from savers toborrowers.ROLES OF THE FNANCIAL MARKET:1 . M o n e y m a r k e t o p e r a t i o n 2.Expedites the transaction of financial claims3.Serves as a mean of bringing the forces of demand and supply of financialclams4.Facilitates the flow of funds among investors, business, and governments.5.Provides the mechanisms for allocating financial resources or funds fromsavers to borrowers.6.Raises money by selling shares to investors and its existing share can bebought 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 market1942 PNB closes its doors because of the coming of the Japanese imperial Forces.Rehabilitation Finance Corporation formed in 1946 to provide credit facilities forthe rehabilitation of agricultural, commerce and industry reconstruction of war-damaged properties and later become the Development Bank of thePhilippines.Offshore Banking Units any branch, subsidiary of affiliate of Foreign BankingCorporation 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 promotingnational and international economic stability and welfare.DEVELOPMENT OF THE BANGKO SENTRALNG PILIPNAS T h e c e n t r a l b a n k o f c o u n t r i e s w i t h i n t h e r e g i o n o f S o u t h e a s t A s i a a r e comparatively young having been established mostly only after the end of the Second World War. The Philippines, a young nation, is not an exception. Itestablished 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 t h e P h i l i p p i n e s w a s p a t t e r n e d a f t e r s i m i l a r c e n t r a l b a n k s e s t a b l i s h e d i n Paraguay and Guatemala, two countries which, like the Philippnes have thes a m e e x p o r t e c o n o m i e s . T h e C e n t r a l B a n k o f t h e P h i l i p p i n e s c a m e t o 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, 1949when the bank open its doors for business in the old Intendencia Buildinglocated at Intramuros, Manila.With the accumulation of losses incurred by the Central Bank, P317B as of December 1992, there emerged the CMA bill to transform the Central Bankinto 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 debtburden and strengthen the credit standing of the Philippines. And then whenthe CMA law also known as The New Central Bank Act took effect on June14, 1993 there is established an independent Central Monetary Authoritywhich is known as the Bangko Sentral ng PilipInas and has a capital of P50billion. 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 officialdepository of the Government) OBJECTIVES OF BSP1.To maintain price stability conducive to a balanced and sustainable growth of the economy2.To promote and maintain monetary stability and convertibility of thePhilippine peso THE BSP ON MONEY SUPPLY AND DEPOSIT EXPANSION MONEY SUPPLY the sum of notes and coins in the circulation and peso demanddepositions subject to withdrawal by check DEPOSIT EXPANSION the change in money supply as a result of an increase inbank reserve MONETARY BOARD policy making body of the BSP; exercise the powers andfunctions of the BSP THE MAIN FUNCTONS OF THE MONETARY BOARD 1.Issues rules and regulations it considers necessary for the effective dischargeof 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 BangkoSentral 5.Indemnify uts members and other officials of Bangko Sentral THE BSP MONETARY BOARD Chairman: Armando M. Tetangco, Jr.Members: Juanito D. AmatongAlfredo C. AntonioRaul A. BoncanIgnacio R. BunyePeter FavilaNelly F. Villafuerte

Overview of Functions and Operations

Objectives
The BSPs primary objective is to maintain price stability conducive to a balanced and sustainable economic growth. The BSP also aims to promote and preserve monetary stability and the convertibility of the national currency.

Responsibilities
The BSP provides policy directions in the areas of money, banking and credit. It supervises operations of banks and exercises regulatory powers over non-bank financial institutions with quasi-banking functions. Under the New Central Bank Act, the BSP performs the following functions, all of which relate to its status as the Republics central monetary authority.

Liquidity Management. The BSP formulates and implements monetary policy aimed at influencing money supply consistent with its primary objective to maintain price stability. Currency issue. The BSP has the exclusive power to issue the national currency. All notes and coins issued by the BSP are fully guaranteed by the Government and are considered legal tender for all private and public debts. Lender of last resort. The BSP extends discounts, loans and advances to banking institutions for liquidity purposes. Financial Supervision. The BSP supervises banks and exercises regulatory powers over non-bank institutions performing quasi-banking functions. Management of foreign currency reserves. The BSP seeks to maintain sufficient international reserves to meet any foreseeable net demands for foreign currencies in order to preserve the international stability and convertibility of the Philippine peso. Determination of exchange rate policy. The BSP determines the exchange rate policy of the Philippines. Currently, the BSP adheres to a market-oriented foreign exchange rate policy such that the role of Bangko Sentral is principally to ensure orderly conditions in the market. Other activities. The BSP functions as the banker, financial advisor and official depository of the Government, its political subdivisions and instrumentalities and government-owned and -controlled corporations.

Bangko Sentral ng Pilipinas

The Bangko Sentral ng Pilipinas (English: Central Bank of the Philippines) and commonly abbreviated as BSP is the central bank of the Philippines. It was rechartered on July 3, 1993, pursuant to the provision of the 1987 Philippine

Constitution and the New Central Bank Act of 1993. The BSP was established on January 3, 1949, as the countrys central monetary authority.

History
In 1900, the First Philippine Commission passed Act No. 52, which placed all banks under the Bureau of the Treasury and authorizing the Insular Treasurer to supervise and examine banks and all banking activity. In 1929, the Department of Finance, through the Bureau of Banking, took over bank supervision. By 1933, a group of Filipinos had conceptualized a central bank for the Philippines. It came up with the rudiments of a bill for the establishment of a central bank after a careful study of the economic provisions of the Hare-Hawes-Cutting Act, which would grant Philippine independence after 12 years, but reserving military and naval bases for the United States and imposing tariffs and quotas on Philippine exports. However, the Hare-Hawes-Cutting Act would be rejected by the Senate of the Philippines at the urging of Manuel L. Quezon. This Senate then advocated a new bill that won President Franklin D. Roosevelt's support, this would be the Tydings-McDuffie Act, which would grant Philippine independence on July 4, 1946. During the Commonwealth period, the discussion about a Philippine central bank that would promote price stability and economic growth, continued. The countrys monetary system then was administered by the Department of Finance and the National Treasury. The Philippines was on the exchange standard using the US dollar, which was backed by 100 percent gold reserve, as the standard currency. In 1939, as required by the Tydings-McDuffie Act, the Philippine legislature passed a law establishing a central bank. As it was a monetary law, it required the approval of the United States president; Roosevelt did not give his. A second law was passed in 1944, during the Japanese occupation, but the arrival of the American liberation forces aborted its implementation. Shortly after President Manuel Roxas assumed office in 1946, he instructed Finance Secretary Miguel Cuaderno, Sr. to draw up a charter for a central bank. The establishment of a monetary authority became imperative a year later as a result of the findings of the Joint PhilippineAmerican Finance Commission chaired by Cuaderno. The Commission, which studied Philippine financial, monetary, and fiscal problems in 1947, recommended a shift from the dollar exchange standard to a managed currency system. A central bank was necessary to implement the proposed shift to the new system.

Original BSP Seal (1949-1979)

Seal of Bangko Sentral ng Pilipinas (1993-2010) Roxas then created the Central Bank Council to prepare the charter of a proposed monetary authority. It was submitted to Congress in February 1948. By June of the same year, the newlyproclaimed President Elpidio Quirino, who succeeded President Roxas, affixed his signature on Republic Act (RA) No. 265, the Central Bank Act of 1948. On January 3, 1949, the Central Bank of the Philippines was formally inaugurated with Miguel Cuaderno, Sr. as the first governor. The main duties and responsibilities of the Central Bank were to promote economic development and maintain internal and external monetary stability. Over the years, changes were introduced to make the charter more responsive to the needs of the economy. On November 29, 1972, Ferdinand Marcos's Presidential Decree No. 72 amended Republic Act No. 265, emphasizing the maintenance of domestic and international monetary stability as the primary objective of the Central Bank. The Bank's authority was also expanded to include regulation of the entire financial system of the Philippines and not just supervision of the banking system. In 1981, RA 265, as amended, was further improved to strengthen the financial system, among the changes was the increase in the capitalization of the Central Bank from Ps10 million to Ps10 billion. In the 1973 Constitution, the Interim Batasang Pambansa (National Assembly) was mandated to establish an independent central monetary authority. Later, Presidential Decree No. 1801 designated the Central Bank of the Philippines as the central monetary authority (CMA). Years later, the 1987 Constitution adopted the CMA provisions from the 1973 Constitution that were aimed essentially at establishing an independent monetary authority through increased capitalization and greater private sector representation in the Monetary Board.

In accordance with a provision in the 1987 Constitution, President Fidel V. Ramos signed Republic Act No. 7653, otherwise known as the New Central Bank Act, into law on June 14, 1993. The law provides for the establishment of an independent monetary authority to be known as the Bangko Sentral ng Pilipinas, its primary objective being the maintenance of price stability. This objective was only implied in the old Central Bank charter. The law also gives the Bangko Sentral fiscal and administrative autonomy which the old Central Bank did not have. On July 3, 1993, the New Central Bank Act took effect. Within the complex of the Bangko Sentral ng Pilipinas, the nation's central monetary authority, resides a numismatist's haven - the Museo ng Bangko Sentral ng Pilipinas. Inaugurated on January 3, 1999, as part of the celebration of the 50 years of central banking in the Philippines, the Museo showcases the Bank's collection of currencies. As repository and custodian of the country's numismatic heritage, the Museo collects, studies and preserves coins, paper notes, medals, artifacts and monetary items found in the Philippines during its different historical periods. These collections have been placed on permanent display at the Museo. Designed to "walk" the visitor through a number of galleries, individually dedicated to a specific historical period of the country, the Museo visually narrates the development of the Philippine economy, parallel to the evolution of its currency. Complementary paintings from the BSP art collection, together with chosen artifacts, enhance each gallery. A panoramic memorabilia of 50 years of central banking in the Philippines, showcases the strides made in bringing about price stability, to sustain economic growth in the country. The exhibition hall also carries the busts of the governors of the Central Bank/ Bangko Sentral.

[edit] Roles and responsibilities

As prescribed by the New Central Bank Act, the main functions of the Bangko Sentral are: 1. Liquidity Management, by formulating and implementing monetary policy aimed at influencing money supply, consistent with its primary objective to maintain price stability, 2. Currency issue; the BSP has the exclusive power to issue the national currency. All notes and coins issued by the BSP are fully guaranteed by the Government and are considered legal tender for all private and public debts, 3. Lender of last resort, by extending discounts, loans and advances to banking institutions for liquidity purposes, 4. Financial Supervision, by supervising banks and exercising regulatory powers over nonbank institutions performing quasi-banking functions, 5. Management of foreign currency reserves, by maintaining sufficient international reserves to meet any foreseeable net demands for foreign currencies in order to preserve the international stability and convertibility of the Philippine peso, 6. Determination of exchange rate policy, by determining the exchange rate policy of the Philippines. Currently, the BSP adheres to a market-oriented foreign exchange rate policy, and

7. Being the banker, financial advisor and official depository of the Government, its political subdivisions and instrumentalities and GOCCs. 8. and be reasonably responsible for the faults of the people behind it get the blame of the opposition to which it is grouped.

[edit] Organization of the Bangko Sentral

The basic structure of the Bangko Sentral includes:

The Monetary Board, which exercises the powers and functions of the BSP, such as the conduct of monetary policy and supervision of the financial system, The Monetary Stability Sector, which takes charge of the formulation and implementation of the BSPs monetary policy, including serving the banking needs of all banks through accepting deposits, servicing withdrawals and extending credit through the rediscounting facility, The Supervision and Examination Sector, which enforces and monitors compliance to banking laws to promote a sound and healthy banking system, and The Resource Management Sector, which serves the human, financial and physical resource needs of the BSP.

The powers and function of Bangko Sentral are exercised by its Monetary Board, whose seven members are appointed by the President of the Philippines. As provided for by the New Central Bank Act, one of the government sector members of the Monetary Board must also be a member of the President's Cabinet. Members of the Monetary Board are prohibited from holding certain positions in other government agencies and private institutions that may give rise to conflicts of interest. The members have fixed, overlapping, terms, except for the cabinet secretary representing the incumbent administration and it was the expansionary. The current members of the Monetary Board are:

Amando M. Tetangco, Jr., Chairman Cesar Purisima Peter Favila Ignacio Bunye Juanita D. Amatong Alfredo C. Antonio Nelly F. Villafuerte

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