January 28, 2020

• Money has value because it is a government issued commodity. The piece of paper
contains a guaranty from the government that it has value.
⁃ Fiat money- “order” from the government that this money will have the aforementioned
value.
⁃ Checks are not legal tender because they are still subject to “clearing”. But it may be a
substitute to money and may release the obligation upon clearance.

▪ BANKING and the BUSINESS OF BANKING

⁃ Banks are entities engaged in the lending of funds obtained in the form of deposits
Banks must be Corporations (Stock) - Section 8.1 of the GBL
Governed also by RCC and SEC because it is still a corporation
Foreign banks are treated as corporations and therefore must acquire license still from
SEC to do business in the PH
KINDS OF BANKS
1) Universal Banks (investment banking + commercial banking)
Universal banks have the same powers and functions as with commercial banks. In
addition, universal banks may perform the following:
a. Powers of an investment house
can do underwriting of securities (take on financial risk for free; guaranteeing)-
guarantee the sale and distribution of securities
this cannot be done by commercial banks because this is super risky on the part of the
depositors. the fluctuations in the stock market value will discourage depositors from
depositing their moneys in banks if all banks are able to act as an investment house.
b. Power to invest in non-allied enterprises
c. Power to own up to 100% of the equity in a thrift bank, rural bank, a financial allied
enterprise or a non-financial allied enterprise.
d. In case of listed universal banks, the power to own up to 100% of voting stock of
ONLY one universal bank or commercial bank.
2) Commercial Banks

3) Thrift Banks
primarily engaged in saving, mortgage and loans
these banks caters to middle class consumers and borrowers
everything that a thrift banks do, universal ones can also provide

4) Rural Bank

5) Cooperative Banks

6) Islamic Banks

⁃ Investment Banking vs. Quasi Banking