Governance of the Bank

The Monetary Board exercises the powers and functions of the BSP, such as the conduct of monetary policy and supervision of the
financial system. Its chairman is the BSP Governor, with five full-time members from the private sector and one member from the
Cabinet.
The Governor is the chief executive officer of the BSP and is required to direct and supervise the operations and internal administration
of the BSP. A deputy governor (or a Senior Assistant Governor in the case of the Currency Management Sector) heads each of the
BSP's operating sector as follows:
 Monetary and Economics Sector is mainly responsible for the operations/activities related to monetary policy formulation,
implementation, and assessment
 Financial Supervision Sector is mainly responsible for the regulation of banks and other BSP-supervised financial
institutions, as well as the oversight and supervision of financial technology and payment systems
 Currency Management Sector is mainly responsible for the forecasting, production, distribution, and retirement of Philippine
currency, as well as security documents, commemorative medals, and medallions
 Corporate Services Sector is mainly responsible for the effective management of corporate strategy, communications, and
risks, as well as the BSP's human, financial, technological, and physical resources to support the BSP's core functions

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.
In the exercise of its authority, the Monetary Board shall:
1. Issue rules and regulations it considers necessary for the
effective discharge of the responsibilities and exercise of the
powers vested upon the Monetary Board and the Bangko
Sentral;
2. Direct the management, operations, and administration of
the Bangko Sentral, reorganize its personnel, and issue such
rules and regulations as it may deem necessary or convenient
for this purpose. The legal units of the Bangko Sentral shall be
under the exclusive supervision and control of the Monetary
Board;
The BSP Monetary Board
Chairman Benjamin E. Diokno
Members Carlos G. Dominguez III , Felipe M. Medalla
Juan De Zuniga, Jr. Peter B. Favila
Antonio S. Abacan, Jr. V. Bruce J. Tolentino
3. Establish a human resource management system which
shall govern the selection, hiring, appointment, transfer,
promotion, or dismissal of all personnel. Such system shall aim
to establish professionalism and excellence at all levels of the
Bangko Sentral in accordance with sound principles of
management.
A compensation structure, based on job evaluation studies
and wage surveys subject to the Board's approval, shall be
instituted as an integral component of the Bangko Sentral's
human resource development program.
On the recommendation of the Governor, appoint, fix the
remunerations and other emoluments, and remove personnel of
the Bangko Sentral, subject to pertinent civil service laws:
Provided, That the Monetary Board shall have exclusive and
final authority to promote, transfer, assign, or reassign
personnel of the Bangko Sentral and these personnel actions
are deemed made in the interest of the service and not
disciplinary: Provided, further, That the Monetary Board may
delegate such authority to the Governor under such guidelines
as it may determine;
4. Adopt an annual budget for and authorize such
expenditures by the Bangko Sentral in the interest of the
effective administration and operations of the Bangko Sentral in
accordance with applicable laws and regulations; and
5. Indemnify its members and other officials of the 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 proceedings to which he
may be, or is, made a party by reason of the performance of his
functions or duties, unless he is finally adjudged in such action
or proceeding to be liable for negligence or misconduct.
 The New Central Bank Act (RA 7653) SECTION 52. Legal Tender Power. — All notes and coins
issued by the Bangko Sentral shall be fully guaranteed by the
Government of the Republic of the Philippines and shall be legal
CHAPTER II
tender in the Philippines for all debts, both public and private:
THE BANGKO SENTRAL AND THE MEANS OF PAYMENT
Provided, however, That, unless otherwise fixed by the
Monetary Board, coins shall be legal tender in amounts not
ARTICLE I - THE UNIT OF MONETARY VALUE
exceeding Fifty pesos (P50.00) for denominations of Twenty-
five centavos and above, and in amounts not exceeding Twenty
SECTION 48. The Peso. — The unit of monetary value in the
pesos (P20.00) for denominations of Ten centavos or less.
Philippines is the "peso," which is represented by the sign "P."
The peso is divided into one hundred (100) equal parts called
SECTION 53. Characteristics of the Currency. — The
"centavos," which are represented by the sign "c."
Monetary Board, with the approval of the President of the
Philippines, shall prescribe the denominations, dimensions,
ARTICLE II - ISSUE OF MEANS OF PAYMENT
designs, inscriptions and other characteristics of notes issued
by the Bangko Sentral: Provided, however, That said notes shall
A. CURRENCY
state that they are liabilities of the Bangko Sentral and are fully
guaranteed by the Government of the Republic of the
SECTION 49. Definition of Currency. — The word "currency"
Philippines. Said notes shall bear the signatures, in facsimile, of
is hereby defined, for purposes of this Act, as meaning all
the President of the Philippines and of the Governor of the
Philippine notes and coins issued or circulating in accordance
Bangko Sentral.
with the provisions of this Act.
Similarly, the Monetary Board, with the approval of the
President of the Philippines, shall prescribe the weight, fineness,
SECTION 50. Exclusive Issue Power. — The Bangko Sentral
designs, denominations and other characteristics of the coins
shall have the sole power and authority to issue currency, within
issued by the Bangko Sentral. In the minting of coins, the
the territory of the Philippines. No other person or entity, public
Monetary Board shall give full consideration to the availability of
or private, may put into circulation notes, coins or any other
suitable metals and to their relative prices and cost of minting.
object or document which, in the opinion of the Monetary Board,
might circulate as currency, nor reproduce or imitate the
SECTION 54. Printing of Notes and Mining of Coins. — The
facsimiles of Bangko Sentral notes without prior authority from
Monetary Board shall prescribe the amounts of notes and coins
the Bangko Sentral.
to be printed and minted, respectively, and the conditions to
The Monetary Board may issue such regulations as it may
which the printing of notes and the minting of coins shall be
deem advisable in order to prevent the circulation of foreign
subject. The Monetary Board shall have the authority to contract
currency or of currency substitutes as well as to prevent the
institutions, mints or firms for such operations.
reproduction of facsimiles of Bangko Sentral notes.
All expenses incurred in the printing of notes and the minting
The Bangko Sentral shall have the authority to investigate,
of coins shall be for the account of the Bangko Sentral.
make arrests, conduct searches and seizures in accordance
with law, for the purpose of maintaining the integrity of the
SECTION 55 Interconvertibility of Currency. — The Bangko
currency.
Sentral shall exchange, on demand and without charge,
Violation of this provision or any regulation issued by the
Philippine currency of any denomination for Philippine notes and
Bangko Sentral pursuant thereto shall constitute an offense
coins of any other denomination requested. If for any reason the
punishable by imprisonment of not less than five (5) years but
Bangko Sentral is temporarily unable to provide notes or coins
not more than ten (10) years. In case the Revised Penal Code
of the denominations requested, it shall meet its obligations by
provides for a greater penalty, then that penalty shall be
delivering notes and coins of the denominations which most
imposed.
nearly approximate those requested.
SECTION 51. Liability for Notes and Coins. — Notes and
SECTION 56. Replacement of Currency Unfit for Circulation.
coins issued by the Bangko Sentral shall be liabilities of the
— The Bangko Sentral shall withdraw from circulation and shall
Bangko Sentral and may be issued only against, and in amounts
demonetize all notes and coins which for any reason
not exceeding, the assets of the Bangko Sentral. Said notes and
whatsoever are unfit for circulation and shall replace them by
coins shall be a first and paramount lien on all assets of the
adequate notes and coins: Provided, however, That the Bangko
Bangko Sentral.
Sentral shall not replace notes and coins the identification of
The Bangko Sentral's holdings of its own notes and coins shall
which is impossible, coins which show signs of filing, clipping or
not be considered as part of its currency issue and, accordingly,
perforation, and notes which have lost more than two-fifths (2/5)
shall not form part of the assets or liabilities of the Bangko
of their surface or all of the signatures inscribed thereon. Notes
Sentral.
and coins in such mutilated conditions shall be withdrawn from
circulation and demonetized without compensation to the
bearer.
SECTION 57. Retirement of Old Notes and Coins. — The
Bangko Sentral may call in for replacement notes of any series
or denomination which are more than five (5) years old and
coins which are more than (10) years old.
Notes and coins called in for replacement in accordance with
this provision shall remain legal tender for a period of one (1)
year from the date of call. After this period, they shall cease to
be legal tender but during the following year, or for such longer
period as the Monetary Board may determine, they may be
exchanged at par and without charge in the Bangko Sentral and
by agents duly authorized by the Bangko Sentral for this
purpose. After the expiration of this latter period, the notes and
coins which have not been exchanged shall cease to be a
liability of the Bangko Sentral and shall be demonetized. The
Bangko Sentral shall also demonetize all notes and coins which
have been called in and replaced.
Monetary system
A monetary system is the set of institutions by which a government provides money in a country's economy. Modern monetary systems
usually consist of the national treasury, the mint, the central banks and commercial banks.[1]
Commodity money system
Main article: Commodity money
A commodity money system is a monetary system in which
a commodity such as gold or silver is made the unit of value and
physically used as money. The money retains its value because
of its physical properties. In some cases, a government may
stamp a metal coin with a face, value or mark that indicates its
weight or asserts its purity, but the value remains the same even
if the coin is melted down.
Commodity-backed money
Main article: Representative money
One step away from commodity money is "commodity-
backed money", also known as "representative money". Many
currencies have consisted of bank-issued notes which have no
inherent physical value, but which may be exchanged for
a precious metal, such as gold. (This is known as the gold
standard.) The silver standard was widespread after the fall of
the Byzantine Empire, and lasted until 1935, when it was
abandoned by China and Hong Kong.
Another alternative which was tried in the twentieth Century
was bimetallism, also called the "double standard", under which
both gold and silver were legal tender. [2]
See also: Bullion
Fiat money
Main article: Fiat money
The alternative to a commodity money system is fiat
money which is defined by a central bank and government law
as legal tender even if it has no intrinsic value. Originally fiat
money was paper currency or base metal coinage, but in
modern economies it mainly exists as data such as bank
B. DEMAND DEPOSITS
SECTION 58. Definition. — For purposes of this Act, the term
"demand deposits" means all those liabilities of the Bangko
Sentral and of other banks which are denominated in Philippine
currency and are subject to payment in legal tender upon
demand by the presentation of checks.
SECTION 59. Issue of Demand Deposits. — Only banks duly
authorized to do so may accept funds or create liabilities
payable in pesos upon demand by the presentation of checks,
and such operations shall be subject to the control of the
Monetary Board in accordance with the powers granted it with
respect thereto under this Act.
SECTION 60. Legal Character. — Checks representing
demand deposits do not have legal tender power and their
acceptance in the payment of debts, both public and private, is
at the option of the creditor: Provided, however, That a check
which has been cleared and credited to the account of the
creditor shall be equivalent to a delivery to the creditor of cash
in an amount equal to the amount credited to his account.
balances and records of credit or debit card purchases,[3] and
the fraction that exists as notes and coins is relatively
small.[4] Money is mostly created, contrary to what is written in
most textbooks, by banks when they loan to customers. Put
simply, banks lending currency to customers creates more
deposits and deficit spending.[5]
In normal times, the central bank does not fix the amount of
money in circulation, nor is central bank money ‘multiplied up’
into more loans and deposits. Although commercial banks
create money through lending, they cannot do so freely without
limit. Banks are limited in how much they can lend if they are to
remain profitable in a competitive banking system. Prudential
regulation also acts as a constraint on banks’ activities in order
to maintain the resilience of the financial system. And the
households and companies who receive the money created by
new lending may take actions that affect the stock of money –
they could quickly ‘destroy’ the money or currency by using it to
repay their existing debt, for instance.[6]
Central banks control the creation of money by commercial
banks, by setting interest rates on reserves. This limits the
amount of money the commercial banks are willing to lend, and
thus create, as it affects the profitability of lending in a
competitive market.[6] This is the opposite of what many people
believe about the creation of fiat money. The most common
misconception was that central banks print all the money, this is
not reflective of what actually happens.
Today's global monetary system is essentially a fiat system
because people can use paper bills or bank balances to buy
goods.[7]
 Commemorative coin.

A limited-edition one-peso coin issued to commemorate

the 150th anniversary of the birth of José Rizal.

CURRENCY OF THE COMMONWEALTH ERA

1935, Ambrosio Morales – designed three (3) silver coins

ONE peso coin:

ONE peso coin:
Governor General Murphy
Presidents Roosevelt
and President Quezon
and Quezon

ALL these coins had a

common reverse – The
FIFTY centavo coin:
COAT of ARMS of the
Murphy and Quezon facing Commonwealth, the
each other Legend “USA" above
and the Date below.

PAPER MONEY (several changes took place) – the new Commonwealth Seal was used in ALL the series issued.
- The signature of President Quezon replaced that of Government General Murphy
- and the single word “Philippines” was used in lieu of “Philippine Island”

OCTOBER 20, 1944 – The United States forced led

by General Douglas McArthur brought in new
Philippine Treasury Certificates.
- These bills continued to be in use even
after 1949, but were then only redeemable
in silver coins.
- These notes had the word “VICTORY”
overprinted in bold black letters.