Emmanuel Deo Borgonia BSBA-FM 2

1. A financial system is a system that allows the exchange of funds between financial market
participants such as lenders, investors, and borrowers.

8 Major Fucntions of Financial System

 Achievement of Purposes
- People use the financial system for various reasons, which can be broken down into six
main purposes. However, regardless of the purpose, the financial system is more efficient
when transactions are performed in liquid markets.
 Saving
-Individuals typically save during their working years so they can withdraw money later on to
fund their retirement.
 Borrowing
- People can borrow money through secured loans, like most car loans and mortgages; for
example, the lender can sell the asset posted as collateral if the borrower defaults.
 Raising Equity Capital
- Companies use investment banks to assist in raising equity capital, where investors trade
cash for a share of ownership in the company.
 Managing Risks
- To manage risks, investors use forward contracts, futures contracts, options contracts,
insurance contracts, and other derivatives.
 Efficient Capital Allocation
- Efficient capital allocation allows the market’s scarce capital to be allocated to only the
most productive investments.
 Information-Motivated Trading
- Information-motivated traders believe the information they have allows them to buy
undervalued companies and sell overvalued companies, expecting to profit when the share
prices more accurately reflect the intrinsic value of the companies.
 Exchanging Assets for Immediate Delivery
- People and companies use the spot market to trade a currency to acquire other currencies
or commodities, which will be delivered immediately when the transaction occurs.

2. BSP

3. FINANCIAL SYSTEM PARTICIPANTS

 Central Banks
-Central banks are the financial institutions responsible for the oversight and management
of all other banks.
 Retail and Commercial Banks
- Products offered at retail and commercial banks include checking and savings accounts,
certificates of deposit (CDs), personal and mortgage loans, credit cards, and business
banking accounts.
 Internet Banks
- Internet banks offer the same products and services as conventional banks, but they do so
through online platforms instead of brick-and-mortar locations.
  Credit Unions
- A credit union is a type of financial institution providing traditional banking services and is
created, owned, and operated by its members.
 Savings and Loan (S&L) Associations
- They provide individual consumers with checking and accounts, personal loans, and home
mortgages.
 Investment Banks
- Investment banks do not take deposits; instead, they help individuals, businesses, and
governments raise capital through the issuance of securities.
 Brokerage Firms
- Brokerage firms assist individuals and institutions in buying and selling securities among
available investors.
 Insurance Companies
- Individuals and businesses use insurance companies to protect against financial loss due to
death, disability, accidents, property damage, and other misfortunes.
 Mortgage Companies
- Mortgage companies focus exclusively on originating loans and seek funding from financial
institutions that provide the capital for the mortgages.

4. It was established on 3 July 1993 pursuant to the provisions of the 1987 Philippine Constitution
and the New Central Bank Act of 1993. The BSP took over from Central Bank of Philippines, which
was established on 3 January 1949, as the country's central monetary authority.

5. To help promote financial stability and a secure and reliable banking system, the BSP manages
systemic risks and ensures the safe and sound operation of banks and other BSFIs. To preserve
purchasing power, the BSP's main objective is to maintain price stability.

6. 7 Major Functions of BSP

 Price Stability
-
 Financial Stability
 Efficient Payments & Settlements System
 Issuer of Money
-Only the BSP can issue legal tender
 Manager of Official Reserves
- The BSP manages the country’s GIR
 Determination of the Exchange Rate Policy
- BSP is in charge of the exchange rate policy
 Bank of Banks/Lender of Last Resort
- The BSP transacts with banks only, and gives loans when warranted

7. The BSP organizational structure is composed of (a) the Executive Management Services (EMS); (b)
three functional sectors, namely: the Monetary Stability Sector, the Resource Management Sector,
and the Supervision and Examination Sector; and (c) the Security Plant Complex (SPC).

8. THE MEMBERS OF THE BSP TOP MANAGEMENT

 Felipe Medalla – BSP Governor and Chairman of the Monetary Board

 Francisco G. Dakila, Jr. – Deputy Governor for Monetary and Economic Sector
  Eduardo G. Bobier – Deputy Governor for Corporate Services Sector
 Chuchi Fonacier – Deputy Governor for Financial Supervision Sector
 Mamerto Tangonan – Deputy Governor for Payment and Currency Management Sector
 Bernadette Romulo-Puyat – Deputy Governor for Program Management Sector
 Benjamin Diokno, Secretary of the Department of Finance
 Antonio S. Abacan, Jr.
 V. Bruce J. Tolentino
 Peter B. Favila
 Anita Linda Aquino

9.1. BDO

9.2. Government nonbank financial institutions, on the other hand, consist of the Government
Service Insurance System (GSIS), Social Security System (SSS), National Home Mortgage Finance
Corporation, Philippine Veterans Investment Development Corporation, and National Development
Corporation.