FINANCIAL SYSTEM is an information system, comprised of one or more applications,

that is used for any of the following: collecting; processing; maintaining; transmitting;
reporting data about financial events; supporting financial planning or budgeting
activities; and accumulating and reporting cost information or supporting the preparation
of financial statements.

*financial system is like a web that connects all the elements or components of entire
system which the function is to provide smooth use of fund for both use the money
credit and banking

*it is an information system because everyone will be provided with the right information
(for the purpose of investing, saving and spending behavior) that is used for any of the
following: collecting the data, the funds; processing with regard to different transaction
that you can do with your money, credit, and banking industry; maintaining; transmitting;
reporting data about financial events-yung ating extension of loans, mula sa
pagkakaroon natinng mga investigation, processing of your requirements, processing of
your applications, etc. ; supporting financial planning or budgeting activities-yung mga
different financial statements, yung mga reports na ginagawa natin then we have to
make sure that wae have a proper forecasting pagdating sa cash inflows and outflows
of the company, that’s very important kasi kahit gano kalaki ang capitalization ng
company, if the specific system are not able to collect the right information to the right
forecasting for the possible inflows and outflows of the company, then all of the assets
will be useless. Try to imagine, you have 1k and then you don’t know kung meron o
wala nang madadagdag, tas pagpunta mo sa mall, nakakita ka ng sale and you buy it.
The following days, magsstruggle ka na kasi wala ka nang other source of income na
darating for you; and accumulating and reporting cost information or supporting the
preparation of financial statements- we have the notes of financial statements contains
all the changes, amendments na mayroon, changes in the system, changes in the
reporting style, changes ng principle na ina-apply ng isang company.

Elements of Financial System

Financial claims are the money and the rights to receive money under specific
circumstances.

*financial claims are intangible in nature. it only represent the money and rights that one
may get from specific asset. Sa part ng issuer, it is a liability. While it is an asset to the
one who avail it, source of income.

*The purpose of claims is to earn additional capitalization, additional source of capital

for the company or government. We should remember that government are not allowed
to issue equities as a whole, because no one is allowed to owned the government.

*again, financial claim is an intangible assets that provides you a rights and the money
that you’ll be receiving is under specific cisrcumstances. Ex: debt- normally, sine-set ito
for a specific period of time. hindi payable agad. Example, you have the bonds for
10yrs., then 10years pa. pano pag kelangan na ng pera? Then, you can sell it to other
person, pero you cannot obliged the one who issued a specific bond to pay you. Ang
pede mo lang icompel for the bond na meron ka if ever ay yung provision for the
quarter, annual, semi-annual na interests, pero lung wala you can’t compel.Pede mo
lang gawin ay humanap ng investors na want bumili. Pano itatransfer? Ypu just have to
deliver the bond certificate and iinform the one who issued it to process the clearance.

For equity, basically ang pinoprovide ay dividends, either cash or stock dividends. It
depends. Pag ayaw na, you can sell it, or inform kung sinong nag-issue sayo. Para
makahanap sila ng investor na interested, kaya need ng time.

TWO CATEGORIES OF CLAIMS:

1. Debts are financial obligations which are to be paid. Ex: bonds that is being issued
by the government or corporate sector. Pag sa government, eto yung mga treasury
bonds. Ini-issue ito ng government pag may mga projects or activities na need
suportahan or i-finance, pero insufficient pa ang capitalization na meron sila. We also
have the corporate bonds which is for corporation.

2. Equities are claims of ownership like shares of stock.Example ay stock.

Commonstock para sa mga gustong maging part ng organization. The ones who wants
to have a voting rights. Commonstock holder is consider as the residual owner of the
company just in case na magkaron ng liquidation, sila yung last to be paid by the
company. Kasi before, naenjoy na nila ang advantages which is magkaron ng boses in
making decisions, and becoming the part of board of directors trustees, or kung ano
mang board that issues the specific stocks. Preferred stocks- provide the stockholder no
right to vote, minsan lang inaallowed depende sa provision, may specific lang activities
o agenda sa company na allowed to vote, with regard sa decision for the company, si
commonstock yon. Ang kagandahan ng preferred stockholder ay sila ang unang
binibigyan sa dividends, at the same time, pagka halimbawang nagkaron ng liquidation,
sila ang unang binibigyan bago ang commonstocks holder

Financial institutions these are private or government organizations whose assets

consist primarily of claims or incomes primarily derived from dealing in and/or
performing services in connection with claims.

*Ex: Bank. Financial institutions aim to transfer the fund for our surplus spending unit
down to our deficit spending unit. They are considered as corporations. They
considered those institution that can issue debt and equity instrument kaya kasama ditto
ang government organizations.

• Financial markets these are institutions which expedite transactions in financial .

It compose of different financial institutions. It compose of different private and

government organization wherein itetrade natin yung mga financial claims. Ex: PSE
Governments agencies monetary policies are formulated by the Monetary Board of the
Central Bank.

*with regards of money credit and banking, it is the Bangko Sentral ng Pilipinas who is
held accountable and liable for whatever issues and problem may arise. We know na
under the BSP, we have policy making body which is the Monetary board that is headed
by the BSP Governor as the chairman of the board and is joined by the secretary of
Department of Finance who happens to be the third, and 5 from private institutions.
Need ay walang conflict of interest sa 7monetary board. The Government of the BSP is
appointed by the president of the Philippines, ang term ay co-terminus, hindi aalis
hanggat di naalis ang president. However, nung president si duterte, inallow pa rin nya
si Amando and de Tango Jr. to continue na kanyang work hanggang sa nagretire at
pinaltan ni Espedilia(dating deputy governor, pumalit sya, nagkasakit) na namatay early
tas pinaltan nan i Benjamin Diokno.

*kasama rin sa government agency ang SEC kasi requirement na register sa SEC. for
the protection of the public, investment public

. Laws and policies the national government and supervises the whole economy in
order to attain its development objectives.

*laws and policies are being regulated imposed by national government. But when it
comes to banking, money and credit, the monetary board can impose a separate na
laws and policies, pero in dominance with government laws, just how constitutionally
laws. It should be incompliance with national gov. ang purpose naman kasi ng laws and
policies dine ay yung maintenance ng 3pillars of banking, specifically yung price stability

Functions of Financial Institution

Its general function is to facilitate the transfer of funds from the savers to the users.

Financial institutions performs specific functions:

• investigation and credit analysis (kaya very hard ang pag-avail ng tao sa financial
institution, ginawan ng paraan o pinipilit ng BSP na babaan ang requirement para
maka-avail na hinihingi ng mga banks, para more Filipinos are can engage in borrowing
woth the bank. Example: nagsurvey sila para sa mga nasa palengke, they don’t want to
avail sa bank, don sila sa mga loan shark. Kasi nadon yung fear nab aka magkamali, na
every time we enter in bank may fear tayo. Another reason pa ay ang dami ng
requirements, kasi di naman lahat ay kayang magprovide ng collarteral. Tas yung
interests. However, malaking difference compare sa loan shark. Meron din naming non-
bank financial institution, somehow madali na sa kanila at hindi naman nalalayo sa
interest ng banks. Ang financial bank institution ay hindi basat nagpapautan, they have
to investigate, kaya part ng binabayaran pag nangungutang ka ay for the credit
investigation, yung credit policy na tinatawag)

• proper evaluation of loan applications .

• ensures the efficient use of credit.

• protects the savings of individual

minimize the risk of nonpayment of loans.

*among these ay process sa process or activities sa bank. It is very important to the

bank na whatever they extended in a form of credit must be collected also, for the
protection of the saving ng mga depositors. Yun kasing pinapahiram ng bank sa mga
corpoprations, government, indivual lenders, ay galling din sa mga savings ng
depositors

• Matching the supply and demand for funds

.financial institutions are money broker. (si broker ang nahanap ng buyer and seller. On
the part of financial institution, hanap sila ng depositor tas hahanap din ng borrower for
a single avenue which is the financial institution, don sila maglalatag ng different
programs offerings. As we can see, hindi pare-parehong interest ang inooffer ng banks.
It depends on the termsof payment, depends on tenure-yung tagal, and purpose. Pag
own business ito, they can issue you a larger fund with low interest rates compare sa
pag-borrow for personal consumptions, or own sure. Shorter term and mataas na
interest rates compare sa kinikita ng pera mo if you are the depositor of the banks)

.they bring the lenders and borrowers together.

• Provision of liquidity (wala pa naman sigurong bank na nagsabi na wala pang

maibabalik sa gusto mong iwithdraw kasi di pa nasisingil ang umutang. The bank must
provide the borrower or depositor the money whenever they need. But there are
instances na kapag malaki ang iwiwithdraw mo, lalo pag dito sa bank ng province, need
ay iinform ang bank ahead of time, kasi ex:dito sa Malvar, hindi sila naglalagay ng
maraming reserve, kaya binabalikan gawng insufficient ang laman. For the rural bank
are, they don’t have to save a high amount of money. Dati kasi, habang nagawa ng
daan, may nakapasok sa bank . The banks must strengthen the security of the money.
They have to make sure that whenever the borrower or the depositor needs the money,
they are capable to provide it.)
Many savers are reluctant to transfer their money to borrowers. They may need cash
before their debtors could pay them.

• Provides payments system(we must aware about the National Retail Prayment
system and PhilPass. With the use of our NRPS which is tayo na mamamayan are
capable of settling our bills, providing our transferring of funds from one account to
another)

. The transfer of goods and services from one person to another should be efficient.
.financial institutions are money broker. (hindi naman literal na ang bangko ang
nagpapasa ng goods and services, but the means para ma-avail mo yung goods and
services, by means of the transfer payment system na meron ang financial institutions)
. they bring the lenders and borrowers together.
To sum up the elements of financial system, try to imagine the Philippine Financial
System as web na binubuo ng 5elements. We have financial claims, financial
institutions, financial markets, laws and policies, and government agencies. Very
important that we have a market kung san natin dadalhin lahat ng elements because no
trading or no transfer of funds will be happen kung wala tayong pagdadalhan o isang
lugar kung saan everyone will meet halfway. Financial market is very important since it
provide avenue for different financial institutions and even the government kung san
don nila ite-trade ang different financial claims. It also significant that we have national
government, different government agencies so that our money or invested public will be
assured that their money are rightfully handled, nadon ang accountability and
responsibility on different institution kung san natin dinadala ang ating pera. The laws
and policy and government agency are exists for the purpose of securing the public
funds, securing that the investment are done with the accordance of the law. And at the
end of the day, all the investors are protected by the law from different risk. Di
mawawala ang risk but somehow, it can be mitigated

History of the Philippine Banking

. Banking in the Philippines began in the 16th Century (went back to the time of
Spanish. Most of the organization are being funded by mayayaman, mga friars, mga
businessmen )

. This was the establishment of Obras Pias (Pious Works) by laymen associated with
the religious orders.

* Obras Pias- yun yung funded by the friars intended lang din for mayayaman. Kahit
balikan yung mga history, walang makikita that friars being good to the Filipinos, hindi
ka basta-basta pedeng i-finance lalo kung hindi kalahi

. Funded from legacies and donations of wealthy individuals(parang lagi pa ring

intended for the wealthy ones)

 The Obras Pias was the source of credit and its funds were invested in mortgage
financing loans, trade with Acapulco and maritime insurance.
. Obras Pias profits were channeled to the construction of churches government
buildings and other charitable and religious project *ang obras pias ay ginamit for
the gallant trade. It finance the mga mamumuhunan during that time. ang hindi
lang goods don ay pag produkto natin, dinadala sa mexico. Ang trading ay
manila to mexico, vice-versa. Pa gang products ay mula sa manila papuntang
mexico, may tariffs. Pero pag mula mexico papuntang Philippines, walang taxes

 Among the first banks that emerged in 19th was the Rodriguez Bank which was
considered as more of a loan association than a regular bank.
. The need for more extensive banking services and facilities led the board of authorities
(Junta de Autoridades) in Manila to establish on August 1, 1851 the first state bank in
the Philippines.

The Banco Espanol-Filipino de Isabel II(most commonly known as the Bank of the
Philippine Island, the oldest bank in the country. It is named after queen Isabel II of
espanys) was the first state bank and Obras Pias provided 50% of its bank capital.

In 1873, British-Orient banks opened in the country as a result of the expanded

Philippine -European trade that followed the opening of the Suez-Canal in 1869.(during
the Spanish regime, majority of the banks function as a loan association, kasi kung sino
lang ang nag-fund ng association , sila lang ang eligible to avail the loan )

The Chartered bank of India, Australia and China opened in Manila in 1872.

. The Hongkong and Shanghai Banking Corporation established its Manila branch in
1875.

. The first mutual savings in the country is Monte de Piedad Y Caja de Ahorros - a
unique combination of savings banks and pawnshops opened in 1882. Initial
capitalization was also provided by Obras Pias.

The bank was later renamed to Monte De Piedad and Savings Bank.

The Banco Espanol-Filipino de Isabel II changed its name to Bank of the Philippine
Islands on January 1, 1912.

BPI established correspondent arrangements with a Paris bank for servicing of client
transactions with counterparts in Europe and other parts of the world.

.BPI is considered as the oldest bank in the country.

During the American Occupation, seven domestic private banks came to existence.

Branches of Japanese a well as Chinese banks were also opened during the early part
of the period.(during American, walang masyadong naitayo na malalaking banks. May
mga naitayo na private organization, pero yung nag-last hanggang sa panahon natin ay
wala. During the Japanese naman, ang meron ay postal saving banks, at yung
Philippine national bank. Ang concern naman sa Japan, ang ginagamit ay mickey
mouse money which is not widely accepted by Filipinos especially the part of gerilla)

.The Postal Savings Bank was put up in 1906.

The first agricultural bank was established in 1908 but its assets and liabilities were
transferred to the Philippine National Bank which was organized in 1916.
Three years after the American regime ended, the Central Bank of the Philippines was
created, establishing a managed monetary system in the Philippines.(1946-1948 how
the central bank of Philippines was established nong 1949)

. It was given the sole authority to issue the country's paper money, regulate and
supervise the country's banking system.(hanggang ngayon naman, the BSP has
maintained its name and functions for the past few years. It made sure na hanggang
ngayon ay price stability is there, kita naman natin how it provides the Filipino with the
payment system )

Private Banking Institutions (owned by private individuals, company na responsible

for safe-keeping of funds. Ang basic definition ng banks ay held responsible for safe-
keeping of funds. Nagpa-function ang private bank institution or government institution
by accepting deposit, and from deposits, we can provide credits. Pag nakapag-lend tayo
ng money through the interest rates, we earned. The bank will assist everyone with
mobilization with their funds . instead na nasa pcket mo lang ang money, you let the
bank to facilitate or mobilized it. When we say mobilization of funds, we let the money
work for you, they diversify it. They allow it freely in the system in the form of investment
and credits)

These companies perform the service of safekeeping funds through the acceptance of
money deposits and the provision of credit through lending of money.
The banks assist in the mobilization of funds needed for various industries and other
productive undertaking.

Private Banking Institution

1. Commercial Banks covers the widest range of - functions among all financial
intermediaries. Their services include receiving, collecting, transferring paying, lending,
investing, dealing, exchanging and handling money, safe deposit, custodianship,
trusteeship and money claims domestically and internationally. (they can do local and
foreign transaction and accept deposit. And Commercial bank among all the bank in the
philippines, ay allowed to accept demand deposit. It means, anytime of the day, we can
get the deposit, kasi available. Although may ibang banks na nakakagawa rin non, but
yung large capitalization na meron ang commercial bank eto lang yung allowed to be
more liquidity compare to other banks. Hindi lang credit extension ang ginagawa, they
also do asset management for you, trusteeship, kung mayaman ka meron kang pedeng
maiwan na ari-arian na pedeng sa kanila mo ipa-handle just in case na wala kang
mapagkakatiwalaan sa pamamanahan mo, or iniisip mo na baka magkagulo sila, you
can ask the services ng bank. Ex: may malalaking vaults tas may safety deposit boxes
na ikaw lang ang may susi, that also provided by commercial banks. Hindi yon kayang
ioffer ng maliliit na bank. Exanmples: BDO, bpi, PSbank, union bank)

2. Thrift Banks - are savings and mortgage banks, stock savings and loan
associations, and private development banks which in addition to accepting savings and
time deposits, perform the following functions: grant loans, invest in readily marketable
bonds and other debt securities.(kung sino lang depositors, sila lang ang allowed
mangutang. Parang cooperative banks, sila lang ang pedeng mangutang, to secure na
yung pera ng mga member is only intended for its member)

3. Rural Banks - regional banks operating primarily to serve the needs of people in the
provinces and sub-urban areas. Rural banks perform the following functions: Granting
of short term loans to farmers, merchants, cooperatives to finance their requirements in
the pursuit of their business which are countryside development. principally aimed at
countryside development. (they aim to finance the small businesses, small entirprises
on the certain community esp. for agriculture, livestock)

Government Banks

Development Bank of the Philippines- was established on 1946 as the Rehabilitation

Finance Corporation to attend to the requirements of rehabilitation and development
after the world war II. Today, it is tasked with the development and expansion of the
agricultural industry and promoting the establishment of private development bank.
(build build preoject ni duterte 2018, 2019)

Land Bank of the Philippines - was organized in 1963 to provide timely and adequate
financial support to the Agrarian Reform program. Its lending activities are geared
primarily towards helping farmers acquire land under the agrarian reform program.
(hanggang ngayon tinutuloy ang agrarian reform program. however, hindi lang pang
agriculture ang inooffer ng ;and bank of the Philippines. Most of the government
agencies or offices in the country, dito nag se-safe keep, kaya super haba ang pila.
Kudos sa kanila, it covers the transaction ng mga tao amidst pandemic. Just like others,
di rin ligtas sa covid, dahil sa threat ng virus kaya nagcclose pa rin)

Philippine Amanah Bank - was established in 1974 to promote and accelerate the
socio-economic development in Mindanao especially in the predominantly Muslim
province and economically depressed areas of Cotabato Lanao Del Sur, Lanao del
Norte, Zamboanga del Sur and Norte and Sulu. However, it is also based on the Islamic
concept of banking following the "no-interest and partnership principles.

Private Non-Bank Financial Institutions

1. Investment Houses -Mutual funds

2. Investment Companies

*para silang angel investors. They look for business which is feasible and viable para
ifinance nila. They also buy and sell. bibili sila tas hahanap ng buyer on a quota or
commission basis.

3. Financing Companies- they provide loans to finance activities

4. Securities Dealers/Brokers- they are mostly dominant when it comes to stock
exchanges

5. Non-stock Savings and Loan Associations- privately owned compose of people na

parang more on membership lang. registered as non-profit to avoid taxes, mga
cooperatives bank can be considered.

6. Building and Loan Associations-para sa building

7. Pawnshops

8. Trust Corporations-very minimal kasi ang trusteeship ay covered nan g commercial

bank

9. Insurance Companies-

10. Fund Managers- hindi naman sila yung non-bank financial institutions. They are
working for mutual funds. Nagpupull ng funds, tas fund manager ang magda-diversify,
to provide one portfolio that can provide don sa investor return. Sila ang nag-eensure na
ang risk are napag-aralan

11. Lending Investors-private individual

12 Venture Capital Corporations- Start-up, naghahanap ng entrepreneurs who want to

be finance tas aaralin saka ififinance para makakilala ang business. Hindi lahat
corporation, yung iba angel investor

Government Non-Bank Financial Institution

Government Service Insurance System (GSIS) was entrusted with the administration

of a life insurance fund. It then extended life insurance coverage and benefits to
government employees in the country. It provides social insurance and security benefits
to members and has supported financially a wide range of economic development both
government and private.

• Social Security System - grants to its members those from the private sector benefits
such as sickness, disability, death and old-age pension.(from private sector)

Philippine Deposit Insurance Corporation (PDIC)

.PDIC is a government instrumentality created in 1963 by virtue of Republic Act 3591 to

insure the deposits of all banks which are entitled to the benefits of insurance. The
latest amendments to RA 3591 are contained in RA 9576 signed into law on April 29,
2009. RA 9576 increased the maximum deposit insurance coverage to P500,000.00.
The new law also includes important provisions to ensure that the PDIC remains
financially and institutionally strong to fulfill its mandate under its Charter. (example
meron ka sa BPI Malvar at tanauan, isa lang yon)

• The PDIC now has the authority to determine which deposit products are covered by
insurance. The PDIC is also authorized to conduct independent special examination of
banks and may inquire into or examine deposit accounts of ailing banks in the event
there is a finding of unsafe and unsound banking practices.
Part of the financial strengthening measures for the PDIC, on the other hand, include
exemption from taxes and the authority to issue sovereign bonds, debentures and other
debt issuances. The PDIC is an attached agency of the Department of Finance. (need
ay 3months dapat nadon ang money mo for you to be covered)

PDIC's overall mandate

.PDIC exists to provide permanent and continuing deposit insurance coverage for the
depositing public to help promote public confidence and stability in the economy.

It ensures prompt payment of insured deposits, exercises complementary supervision of

banks, adopts responsive resolution methods, and applies efficient management of
receivership and liquidation functions.

*ang pinaka purpose ay may assurance na may makukuha.

Functions of PDIC

• Deposit Insurer- tayo ang insured

. Co-regulator of Banks-pagdating sa security of money and funds

• Receiver and Liquidator of Closed Banks-make sure na smooth ang liquidation

process ng banks. Depositor are creditors of the bank

insured deposit
. means the amount due to any bona fide depositor for legitimate deposits in an insured
bank net of any obligation of the depositor to the insured bank as of date of closure, but
not to exceed P500,000.00.
- A joint account shall be insured separately from account. any individually-owned
deposit

specific risks that PDIC covers

PDIC covers only the risk of a bank closure ordered by the Monetary Board. Thus, bank
losses due to theft, fire, closure by reason of strike or existence of public disorder,
revolution or civil war, are not covered by PDIC.