MODULE 4 The universal bank concept is most relevant in the United States
and the United Kingdom.
(UNIVERSAL BANK EKB)
Bank - An institution whose current operations consist in granting
loans and receiving deposits from the public.
Four main functions:
1. Offer access to a payment system
2. Transform assets
3. Manage risks
4. Process information and monitor borrowers.
Two types of Commercial Banks in the Philippines:
1. Ordinary Commercial Banks
2. Expanded Commercial Banks (Universal Banks)
REPUBLIC ACT NO. 8791 - AN ACT PROVIDING FOR THE REGULATION
OF THE ORGANIZATION AND OPERATIONS OF BANKS, QUASI-BANKS,
TRUST ENTITIES AND FOR OTHER PURPOSES
1.Equity Investments of a Universal Bank - invest in the equities of
allied and non-allied enterprises as may be determined by the
Monetary Board.
- The total investment in equities and in any one enterprises of allied
and non-allied enterprises shall not exceed fifty percent (50%) of the
net worth of the bank.
2.Equity Investments of a Universal Bank in Financial Allied
Enterprises - can own up to one hundred percent (100%) of the
equity in a thrift bank, a rural bank, or a financial allied enterprise. A
publicly listed universal or commercial bank may own up to one
hundred percent (100%) of the voting stock of only one other
universal or commercial bank.
3.Equity Investments of a Universal Bank in Non-Financial Allied
Enterprises - may own up to 100% of the equity in a non-financial
allied enterprise.
4.Equity Investments of a Universal Bank in Non-Allied Enterprises
— a single non-allied enterprise shall not exceed 35% of the total
equity in that enterprise nor shall it exceed 35% of the voting stock
in that enterprise.
5.Equity Investments in Quasi-Banks - limit to 40% equity
investments of universal banks in quasi-banks.
UNIVERSAL BANK - A universal bank is a bank that combines the
three main services of banking under one roof. The three services
are wholesale banking, retail banking, and investment banking.
Largest Banks in the Philippines: BDO, Metrobank, BPI, Land Bank,
PNB, Security Bank, ChinaBank, Development Bank, Union Bank,
Rizal Commercial Bank.
Retail Banking - members of the public and small and medium-size
businesses.
Wholesale Banking - involves borrowing and lending money on a
very large scale.
Investment Banking - focus on services for major investors and
companies.
Activities or Services under Retail and Investment Banking
➢ Savings Account- an interest-bearing deposit account held at a
bank or other financial institution.
➢ Checking Account- a bank account that allows easy access to the
funds in your bank account. Also called a transactional account, it’s
the account that you will use to pay your bills and make most of
your financial transactions.
➢ Current Account- an account at a bank against which checks can
be drawn by the account depositor, a checking account.
➢ Overdraft- a deficit in a bank account caused by drawing more
money than the account holds.
➢ Personal Loan- A personal loan is money borrowed from a bank,
credit union or online lender that you pay back in fixed monthly
payments, or instalments, typically over two to five years.
➢ Mortgage- a legal agreement by which a bank or other creditor
lends money at interest in exchange for taking title of the debtor's
property.
➢ Credit Card- a small card issued by a bank, business and so on
allowing the holder to purchase goods or services on credit.
➢ Debit Card- a card issued by a bank allowing the holder to
transfer money electronically to another bank account when making
a purchase.
➢ Traveler’s Check- a once-popular but now largely outmoded
medium of exchange utilized as an alternative to hard currency.
➢ Safe Deposit Box or Safety Deposit Box- an individually secured
container, usually a metal box that stays in the safe or vault of a
federally insured bank or credit union.
➢ Certificate of Deposit- a certificate issued by a bank to a person
depositing money for a specified length of time.
➢ Asset Management- the direction of all or part of a client's
portfolio by a financial services institution, usually an investment
bank, or an individual.
➢ Mergers and Acquisitions (M&A)- area of corporate finances,
management and strategy dealing with purchasing and/or joining
with other companies.
Raising Capital- The ability of an individual to obtain money/funds in
order to get the business off the ground or help in the daily
operations of the business such as the purchase of materials and
payment of wages etc.
➢ Securities Trading- investments in debt or equity that
management plans to actively trade for profit in the current period.
➢ Securities Underwriting- process by which investment banks
raise investment capital from investors on behalf of corporations
and governments that are issuing securities.
▪ A domestic bank applying for a UB authority shall, make a public
offering of at least ten percent (10%) of the required minimum
capital and this condition must be complied with before it can be
granted the license for authority to operate as a UB.
▪ Banks may accept or create demand deposits subject to withdrawal
by check. A UB/KB may accept or create demand deposits subject to
withdrawal by check, without prior authority from the Bangko
Sentral. A TB/RB/Coop Bank may accept or create demand deposits
upon prior authority of the Bangko Sentral.
 (COMMERCIAL BANK KB)
Commercial bank can be described as a financial institution that
offers basic investment products like a savings account, current
account, etc. to the individuals and corporates.
▪ A financial institution which performs the functions of accepting
deposits from the general public and giving loans for investment
with the aim of earning profit.
Commercial banks offer mandatory services, but you cannot avail all
services from commercial bank branches and within the same bank.
Some branches provide a large number of services and some only
limited services While universal banks are nothing like commercial
banks, but they provide all types of banking in one single roof.
FUNCTIONS OF KB:
1.Primary functions
▪ Accepting Deposits: who possess surplus funds and are willing to
deposit them so as to earn interest on it. There are various products
offered by the bank to the customers for the deposit of their money,
which includes savings account, current account, fixed deposit and
recurring deposit.
▪ Advancing Loans: lending money to the individuals and companies.
The banks make loans to the customers in the form of term loans,
cash credit, overdraft and discounting of bills of exchange.
2. Secondary functions
▪ Agency Services: There are some facilities provided by the
commercial banks in which they act as an agent of the customers.
Such services are:
• Collection and payment of rent, interest and dividend;
• Collection and payment of cheques and bills;
•Buying and selling securities;
• Payment of insurance premium and subscriptions.
▪ General Utility Services: Commercial banks provide general utility
services to the customers and charges a fee for the same. It covers
services like:
• Safekeeping of valuables, documents, etc. in locker or vault;
• ATM card, credit card and debit card facility;
• Issue of demand draft, pay order and traveler’s cheque;
• Internet and mobile banking; and
• Sale of application forms of competitive exams.
▪ Transfer of funds: Banks assist in the transfer of funds from one
person to another or from one place to another through its credit
instruments.
▪ Credit Creation: The commercial banks are authorized to create
credit, by granting more loans than the amounts deposited by the
customers.
MANAGING A BANK
A. Measuring Returns - This means it would have its highest return
on its equity (ROE) in the long-run as expressed in the usual formula:
ROE = Net Profit (NP) / Stockholder’s Equity (SE)
DUPONT ANALYSIS
Profitability Margin = Net Profit (NP) / Gross Revenues (GR)
Assets Efficiency = Gross Revenues (GR) / Total Assets (TA) shows
how much revenues are being generated given the amount of assets
available.
Leverage = Total Assets (TA) / Stockholder’s Equity (SE) shows how
much assets can be mobilized given the equity of the firm’s owners,
by incurring liabilities.
ROA = Net Profit (NP) / Total Assets (TA
B. Asset Management - As was discussed earlier in Universal Banks,
there are three (risk) areas which banks have to manage:
1.Liquidity Management - Banks need to keep sufficient cash in
order to meet the withdrawals required by its depositors.
2.Managing Credit Risk - When banks make loans, they necessary
runs the risk of not being paid. That is why they have to manage the
credit risk well so that unpaid loans are minimal.
▪Character – refers to the repaying habits of individual or
corporate borrowers.
▪Capacity – is the possession of the means by which to
repay the loan when it becomes due.
▪Collateral – is a bank acceptable asset that is pledged or
mortgaged with the bank by the borrower. These properties are
foreclosed by the bank in the event the borrower defaults.
3. Managing Interest Rate Risk - By charging high interest rates on
longer-term loan maturities, banks provide somehow for the
interest rate risk, and the maturity risk. What banks often do to
minimize interest rate risk is to adopt a floating rate on loans.
C. Liability Management - Banks must manage not only their assets,
but also their liabilities. This refers more to sourcing and cost of
funds.
D. Capital Adequacy Management - Banks also need to manage
their capital to the requirement of the owners or the public. With
regards to its owners, banks still need to provide a reasonable return
on their investment in the bank.
PHILIPPINE DEPOSIT INSURANCE SYSTEM
(PDIC)
R.A. No. 3591 also known as the PDIC Charter Deposit Insurance
System- type of protective institution.
➢ Deposit Insurance System gives assurance to the depositors of
member banks that their money would not be completely lost in
case their banks close down.
➢ In the Philippines, the maximum coverage is presently set from
₱250,000 to ₱500,000.
Sources of Funds:
1. Permanent Insurance Fund (PIF) 3. Borrowings from the BSP
2. Annual assessment premium rate 4. Investment
5. Fund raised by issuing bonds/ debentures and other obligations.
REPUBLIC ACT No. 9576 (April 29, 2009 )
▪ AN ACT INCREASING THE MAXIMUM DEPOSIT INSURANCE
COVERAGE, AND IN CONNECTION THEREWITH, TO STRENGTHEN THE
REGULATORY AND ADMINISTRATIVE AUTHORITY, AND FINANCIAL
CAPABILITY OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION
(PDIC), AMENDING FOR THIS PURPOSE REPUBLIC ACT NUMBERED
THREE THOUSAND FIVE HUNDRED NINETY-ONE, AS AMENDED,
OTHERWISE KNOWN AS THE PDIC CHARTER, AND FOR OTHER
PURPOSES.
▪ The Philippine Deposit Insurance Corporation (PDIC) is a
government-run Philippine deposit insurance fund. It was
established on June 22, 1963 by Republic Act 3591. It guarantees
deposits up to P500,000. The primary functions of PDIC are to
protect the small investors/depositors and to build a strong banking
confidence.
THRIFT BANKS
Thrift Banks are under RA 7906 or The Thrift Banks Act of 1995. It is
the act providing the regulation of the organization and operations
of thrift banks and for other purposes.
▪ Also known as "savings and loan associations," or S&Ls. It is a type
of small financial institution that primarily accepts deposits or
savings as well as mortgages.
▪ One of the good things about Thrift Banks is that it tends to be
“community-focused”
Top 10 Thrift Banks that dominate the Philippines:
1. BPI Family Savings Bank
2. Philippine Savings Bank (PSBank)
3. RCBC Savings Bank (RSB)
4. Philippine Business Bank
5. China Bank Savings (CBS)
6. City Savings Bank
7. PNB Savings Bank
8. Sterling Bank of Asia
9. Bank of Makati
10. Producers Savings Bank
Thrift banks were originally classified into three types:
1. Savings and Mortgage Banks or SMBs - RA. 337 “The General
Banking Act”
▪ A savings and mortgage bank shall be any corporation organized
primarily for the purpose of accumulating the small savings of
depositors and investing them, together with its capital, in bonds or
in loans secured by bonds, real estate mortgages, and other forms of
security
▪ The combined capital accounts of each savings and mortgage bank
shall not be less than an amount equal to 15% of its total assets.
Examples:
1. Union Savings and Mortgage Bank
2. Banco Filipino Savings & Mortgage Bank
3. Anchor Savings and Mortgage Bank
4. Malayan Bank Savings and Mortgage Bank
2. Private Development Banks or PDBs – R.A. No. 4093 “Private
Development Bank’s Act”
▪ Shall exercise all the power and shall assume all the obligations of
Savings and Mortgage bank as provided in the General Banking Act.
▪ Caters to the needs of agriculture and industry providing them with
reasonable rate loans for medium- and long-term purposes.
▪ Shall be organized in the form of a stock corporation and its paid-
up capital shall not be less than four million pesos for class A, two
million pesos for class B, and one million pesos for class C.
Examples:
1. Queen City Development Bank
2. 1st Valley Bank
3. Dumaguete City Development Bank, Inc
4. NorthPoint Development Bank, Inc
5. Wealth Development Bank Corporation
6. Pampanga Development Bank
7. Bataan Development Bank
3. Stock Savings and Loan Associations or SSLAs – R.A. No. 3779
▪ They are corporations engaged in the business of accumulating the
savings of its member stockholders and using such accumulations
together with its capital in the case of stock corporation.
▪ All three are engaged in similar activities but somewhat cater to
specific market. For example, SMBs and SSLAs concentrated on
providing finance for home building and home development, while
PDBs catered more to the capital and credit needs for the promotion
of industrial and agricultural growth.
Monte de Piedad - was the oldest thrift bank in the country.
Chamber of Thrift Banks - caters to the survival and growth of the
thrift bank industry.
General Purposes.
1. Serve the needs of savings and development banks, as well as
savings and loan associations.
2. Coordinate with other banking institutions and government
agencies such as the BSP and PDIC in supervising thrift bank
activities and strengthening the role of the industry.
RURAL BANKS
▪ Government-sponsored/assisted banks which are privately
managed and largely privately owned that provide credit facilities to
farmers and merchants or to cooperatives of such farmers or
merchants at reasonable terms and in general, to the people of rural
community.
▪ Most popular type of banks in the rural communities.
Republic Act 720 - which established rural banks in the Philippines.
(JUNE 1952)
The Rural Bankers Association of the Philippines (RBAP) was
founded as a non-incorporated association of rural financial
institutions. (1955)
The Rural Banks Act of 1992 or Republic Act No. 7353 was passed in
recognition of the need to make credit available and accessible in
the rural areas. (JANUARY 22, 1992)
RB in the Philippines is becoming more competitive in their
markets.
1. Improving efficiency with digitization
2. Reducing overhead costs with cloud technology
3. Providing better service
4. Choosing technology providers that enable growth

-The Rural Banking Act paved a way for a rural banking industry with
the goal to provide credit facilities and financial services to the
countryside.
-Help farmers by providing credit to buy seedlings, capitalizing farm
machines and equipment, and marketing their produce.
COOPERATIVE BANKING
▪ Cooperative banking is a retail and commercial banking organized
on a cooperative basis.
Financing Institutions Operate within a Cooperative Bank

-Loans and advances are also made to merchants, cooperatives, and
entrepreneurs.
-Rural Banks were not allowed to have branches.
-Their development as a financial institution was bound and limited
to the economic growth of their municipality.
▪ Organized in a form of a stock corporation with no less than 5 nor
more than 15 incorporators.
▪ Shall have a paid-up capital of not less than P500,000, the initial
amount of P300,000 to be put up at the start of operations and
remaining P200,000 to be paid within a period of three years from
the start of operation.
▪ The president and at least a majority of the key executive officers
of the bank must be actual residents of the locality where the rural
bank is operating. No officer or director of a rural bank can be an
officer or director of another rural bank.
FUNCTIONS OF A RURAL BANK
1) Grant loans and make investments.
2) Accept savings and time deposits.
3) Sell domestic drafts.
4) Act as correspondent for other financial institutions.
5) Act as financial agent.
6) Make collections and payments for the account of others.
9) Rediscount papers with the LBP and the DBP or any other bank.
1.) Credit unions - have the purpose of promoting thrift, providing
credit at reasonable rates, and providing other financial services to
its members.
2.) Cooperative banks - cooperative banks are owned by their
customers and follow the cooperative principle of one person, one
vote. Often regulated under both banking and cooperative
legislation.
3.) Cooperative banking systems - Local branches of cooperative
banks select their own boards of directors and manage their own
operations.
4.) Land Development Banks
Thrift Banking System- composed of savings and mortgage banks,
private development banks, stock savings and loan associations and
microfinance thrift banks, accumulates the savings of its depositors
and invests it. Known to provide short-term working capital, and
medium- and long-term financing to businesses engaged in
agriculture, services, industry, housing, and allied services, especially
to small and medium enterprises.
Rural & Cooperative Banks- Rural and cooperative banks are the
more popular type of banks in the rural communities. Their role is to
promote and expand the rural economy in an orderly and effective
manner by providing the people in the rural communities with basic
financial services. Differentiated from each other by ownership.
Strengths of the CB Movement

SERVICES PERFORM BY RURAL BANKS 1.) Social Principles 6.) Rural Accessibility
2.) Wide Network 7.) Local Government Support
1. Open current, demand or checking accounts or Now accounts
3.) Democratic Control 8.) Integration
2. Act as trustee over estates or properties of farmers and
4.) Mutuality 9.) Leadership
merchants.
5.) People's Support
3. Acts as official depository of municipal
4. Rediscount paper with the PND or DBP Weaknesses of the CB Movement
5. Invest in allied undertakings.
1.) Lack of Autonomy
TOP 5 RURAL BANKS 2.) Dependency on Service Providers
3.) Political and External Interference from Service Providers
1. Bank of Makati
4.) Absence of Professionalism
2. One Network Bank, Inc.
5.) Duality of Control
3. Card Bank Inc.
6.) High Establishment Costs
4. 1st Valley Bank, Inc.
5. Bangko Kabayan Inc. Opportunities Threats

1.) Professional Management 1.) Competition

2.) Diversification of Activities 2.) Disloyalty of Members
3.) Expansion of Business 3.) Increasing Trend of
Corruptive Practices
COOPERATIVE - A cooperative is an autonomous and duly registered
association of persons, with a common bond of interest, who have
voluntarily joined together to achieve their social, economic, and
cultural needs and aspirations by making equitable contributions to
the capital required, patronizing their products and services and
accepting a fair share of risks and benefits of the undertaking in
accordance with the universally accepted cooperative principles.
-Registered under R.A. 9520 or the Philippine Cooperative Code of
2008
List of Active Cooperative Banks in the Philippines
1. Banco Cooperativa De Zamboanga
2. Bataan Cooperative Bank
3. Cooperative Bank of Aurora
4. Cooperative Bank of Benguet (CBB)
5. Cooperative Bank of Bohol
MODULE 5
GSIS
▪ Created by the Congress of the Philippines through
Commonwealth Act No. 186 on November 14, 1936.
▪ Its primary objective is to promote the welfare of the government
employees through an insurance system that will protect its
members against adverse economic resulting from death, disability,
and old age.
▪ On May 31, 1977, P.D. No. 1146, otherwise known as “The
Government Insurance System Act of 1977”, was issues by the
President Ferdinand E. Marcos.
▪ R.A. No. 8291, otherwise known as “The Government Insurance
System Act of 1997”, was enacted into law to enhance the social
security coverage and benefits of the GSIS.
▪ The principal benefit package of the GSIS consists of compulsory
and optional life insurance, retirement, separation, and employee‘s
compensation benefits.
▪ The governing and policy-making body of the GSIS is the Board of
Trustees, the members of which are appointed by the President of
the Philippines. Composed of the President and General Manager
and 8 other members appointed by the President.
RA NO. 8291 (‘The Government Service Insurance System Act of
1997’)
- AN ACT AMENDING PRESIDENTIAL DECREE NO. 1146, AS
AMENDED, EXPANDING AND INCREASING THE COVERAGE AND
BENEFITS OF THE GOVERNMENT SERVICE INSURANCE SYSTEM,
INSTITUTING REFORMS THEREIN AND FOR OTHER PURPOSES.
DEFINITIONS:
▪ Active Member — A member who is not separated from the
service.
▪ Dependents - The legitimate spouse dependent for support upon
the member, legally adopted child, the parents dependent upon the
member for support.
▪ Primary beneficiaries — The legal dependent spouse until he/she
remarries and the dependent children.
▪ Secondary beneficiaries — The dependent parents and, subject to
the restrictions on dependent children, the legitimate descendants.
▪ Compensation — The basic pay or salary received by an employee.
▪ Average Monthly Compensation (AMC) — The quotient arrived at
after dividing the aggregate compensation received by the member
during his last 36 months of service.
▪ Revalued average monthly compensation — An amount equal to
170% of the first P1,000 of the AMC plus 100% of the average
monthly compensation in excess of P1,000.
▪ Lump sum — The basic monthly pension multiplied by 60.
▪ Gainful Occupation — Any productive activity / job.
▪ Disability — Any loss or impairment of the normal functions of the
physical/mental faculty of a member which reduces or eliminates
his/her capacity to continue with his/her current gainful occupation
or engage in any other gainful occupation.
▪ Total Disability — Complete incapacity to continue with his
present employment.
▪ Permanent Total Disability — Accrues or arises when recovery
from the impairment is medically remote.
▪ Temporary Total Disability — Accrues or arises when the impaired
physical/mental faculties can be rehabilitated and/or restored to
their normal functions.
▪ Permanent Partial Disability — Accrues or arises upon the
irrevocable loss or impairment of certain portion/s of the physical
faculties, despite which the member is able to pursue a gainful
occupation.
BENFITS:
1. Pension
2. Separation Benefits
3. Retirement Benefits
4. Permanent Disability Benefits
5. Temporary DB
6. Survivorship Benefits
7. Funeral Benefits
8. Life Insurance Benefits
GSIS LAWS:
▪ PD No. 1641 - Further amended the Employee‘s Compensation
Program and State Insurance Fund of the Labor Code of the
Philippines and upgraded the benefits structure for all covered
employees.
▪ PD No. 1519 - Revised the Philippine Medical Care Act
▪ PD No. 1368 - Amended the Book Four of the Labor Code of the
Philippines, defined the coverage of the Employee‘s Compensation
Program.
▪ PD No. 1146 - Expanded, increased, and integrated the social
security and insurance benefits of all government employees.
▪ PD No. 626 - Amended the PD No. 442 or the Labor Code of the
Philippines.
▪ RA No. 7699 - Also known as the Portability Law which allows the
addition of all creditable services or periods of contributions made
continuously.
▪ RA No. 6111 - Established the Philippine Medical Care Plan and
created the Philippine Medical Care Commission.
▪ RA No. 4968 - Amended again Commonwealth Act No. 186 to
further define life insurance, retirement insurance, compulsory
membership, and rates of premium contributions.
▪ RA No. 3593 - Amended Commonwealth Act No. 186 to provide
immediate life insurance coverage and compulsory membership as
well as increase additional life insurance coverage to all government
employees.
▪ RA No. 1616 - A retirement option of the GSIS popularly known as
“The Take All” Option.
▪ RA No. 660 - A retirement option of the GSIS which is also known
as the “Magic 87”.
SSS
▪ It was former President Manuel A. Roxas who first proposed a bill
in Congress, seeking the establishment of a social security system for
wage earners and low-salaried employees.
▪ On July 7, 1948, after the death of Pres. Roxas, Pres. Elpidio
Quirino created a Social Security Commission
SSS- The Philippine Social Security System (SSS) is a social insurance
program for employees in the Philippines. Founded in 1957, the SSS
is a government agency that provides retirement and health benefits
to all paid up employees in the Philippines.
Salary loans - depend on the monthly salary of the employee.
Calamity loans - are for such times when there is a calamity that has
been declared by the government in the area where the SSS
member lives.
▪ SSS was established through the approval of the RA 1161 known as
the Social Security Act of 1954. However, the act was then
amended in 1957 through the RA 1792, which formally founded the
Social Security System. In 1997, the RA 8282 was signed to further
strengthen RA 1161.
▪ The Commission is the governing board and policy-making body
that directs and controls the SSS.
- The Secretary of the Department of Finance as the ex-
officio Chairperson.
- The President and CEO as the Vice-Chairperson.
- The Secretary of the DOLE as an ex-officio Member.
- 6 Appointive Members
▪ Coverage in the SSS shall be compulsory upon all employees
including domestic workers or “kasambahays” not over 60 years of
age (up to the day of his/her 60th birthday) and their employers.
Monthly Pension - is a monthly specified cash amount that a
qualified member or a qualified beneficiary will receive on account
of permanent total disability, retirement, or death.
Retirement Benefit - is a monthly pension or lump sum granted to a
member who can no longer work due to old age.
Death Benefit - is a cash benefit either in monthly pension or lump
sum paid to the beneficiaries of a deceased member.
Permanent Disability Benefit - is a cash benefit granted to a
member who becomes permanently disabled either partially or
totally.
Funeral Benefit – The Funeral Benefit is intended to help defray the
cost of funeral expenses upon the death of a member, including
permanently totally disabled or retired member.
Sickness Benefit. – The Sickness Benefit is a daily cash allowance
paid by the employer to the member who is unable to work due to
sickness or injury for each day of compensable confinement or a
fraction.
Unemployment Insurance or Involuntary Separation Benefit – The
unemployment insurance or involuntary separation benefit is a
monthly cash payment equivalent to fifty percent (50%) of the AMSC
for a maximum of two (2) months, subject to the rules and
regulations that the Commission may prescribe.
PAWNSHOPS
▪ Beginning in 1972, The BSP in 1973 was given the authority and
responsibility to regulate pawnshops.
PD NO. 114 (Pawnshop Regulation Act) - enhance consumer
protection and foster confidence in the pawnshop industry by the
pawning public.
- REGULATING THE ESTABLISHMENT AND OPERATION OF
PAWNSHOPS
- Pawnshops are required to maintain a minimum level of
capital. The existing statutory capital of ₱100,000 has
become too small.
- Pawners have 90 days after maturity to redeem their
pawned properties and pawnshops must notify their
clients within the 90 days period before they can sell the
pawned items in an auction for the convenience of
pawners.
- Pawnshops will be required to comply with explicit “Know
Your Pawner”
- Pawnshops will be required to comply with explicit “Know
Your Pawner”
Pawnshop - shall refer to a person or entity engaged in the business
of lending money on personal property delivered as security for
loans and shall be synonymous, and may be used interchangeably,
with pawnbroker or pawnbrokerage.
Pawner - shall refer to the borrower from a pawnshop.
Pawnee - shall refer to the pawnshop or pawnbroker.
Pawn - is the personal property delivered by the pawner to the
pawnee as security for a loan.
Pawn ticket - is the pawnbrokers' receipt for a pawn.
Property - shall include only such personal property as may actually
be delivered to the control and possession of the pawnshop.
Voting Stock - shall refer to a portion of the authorized capital which
is subscribed and entitled to vote.
Vital Records - shall consist of loans extended/paid registers, general
ledger/journal covering the current.
Bulky Pawns - shall refer to household appliances, office machine
and the like, which occupy considerable amount of space. ( 1.5 x 1.5
x 0.5 feet)
Premises - shall refer to the area where the pawnshop conducts its
business.
▪ Pawnshops may be either in the form of single proprietorship,
partnership, or corporation.
▪ Pawnshops must transact business at a minimum of 6 hours a day
to be selected by them.
▪ The loanable amounts that may be extended by a pawnee to a
pawner must not be, in any way, less than 30% of the appraised
value of the security offered for the loan, unless the pawner
manifest in writing that he is applying for a lesser amount.
Service Charge - referred to as the amount required by the
pawnbroker to be paid by the pawner in consideration for the
handling of the loan transaction. A pawnee may impose a service
charge of 1% of the principal loan but not exceeding ₱5.
5 Advantages of Pawning
1. Instant Access to Cash
2. Easy and Fast Pawning Process
3. No Credit Checks
4. No Effect on Credit History
5. Safe Transactions with Licensed Pawnshops
5 Disadvantages of Pawning
1. High Pawn Loan Interest Rates
2. Low Appraisal
3. Too Short Loan Terms
4. Risk of Losing or Damaging Pawned Item
5. Risk of Getting Scammed
LIST OF TRUSTED PAWNSHOPS IN THE PHILIPPINES
1. Tambunting Pawnshop - A TRUSTED NAME FOR DECADES.
Tambunting Pawnshop is the country’s oldest pawnshop.
2. M Lhuillier - M Lhuillier is one of the country’s largest
pawnshops. Known recently for its Kwarta Padala.
3. Cebuana Lhuillier - THE “SON” OF M LHUILLIER.
4. Palawan Pawnshop - As the name suggests, Palawan
Pawnshop started in Palawan in the mid-1980s.
5. PawnHero Pawnshop - PawnHero.ph is an online pawnshop
where anyone can submit a pawn request anytime, anywhere.
6. Villarica Pawnshop - Villarica pawnshop has grown to a trusted
pawnshop for 26 years, with about 600 branches all over the
Philippines.
OTHER PRODUCTS OFFERED BY PAWNSHOPS:
• Foreign exchange dealer/money changer
• Remittance agent
• Acting as bills payment agent for utility companies and other
entities
• Such other activities as may be allowed by the BSP.
BUILDING & LOAN ASSOCIATION
▪ Building and loan associations accumulate the savings of its
stockholders for the purpose of encouraging industry, frugality, and
homebuilding among their stockholders.
▪ American building and loan associations had their roots in British
building societies, which appear to have originated in Birmingham,
England.
B&LA - Building and loan associations were mutually held financial
institutions that greatly increased the accessibility of home loans.
- Also known as a thrift, gets its start when a pool of
individuals agree to pay a membership fee and subscribe
to a certain number of shares that have a predetermined
maturity value.
- Also refers to a quasi-public corporation that lends funds
to members willing to buy or build homes.
▪ The capital stock of a building and loan association is to be divided
into shares of the matured or par value of P200 each. Any person
may become a stockholder.
▪ It considered unlawful for any building and loan association to
make any loan upon property that is suitable for use only as theater,
public hall, church, convent, school, club, hotel, garage or public
building.
▪ Reserves of every non-stock savings and loan association is
required to create a withdrawable share reserve which will consist
of 3% of the aggregate capital contributions of the members.
Arrearages – refers to the deficiency between the amount, if any
paid, and the amount required under court order.
Arrears – sum of money that has not been paid or has only been
paid in the part at the time it is due.
Capital Stock – number of common and preferred shares that a
company is authorized to issue.
Free Shares – shares which have not been pledged as security for
the payment of a loan.
Paid-up Stock – corporate stock which the subscribers or the
persons who have subscribed for it, have paid for in full.
Pledged Shares – shares which have been pledged as security for the
payment of loan.
Stockholders – someone who owns stocks in a company.
RA NO. 337 - AN ACT REGULATING BANKS AND BANKING
INSTITUTIONS AND FOR OTHER PURPOSES
CHAPTER VI: Building and Loan Associations
TRUST COMPANIES
▪ The Philippines inherited the concept of trust from the Americans
and incorporated it formally in the Civil Code of the Philippines in
1950.
Trust Business - is any activity resulting from a trustor-trustee
relationship (trusteeship)
Trust - is a legal device or arrangement whereby a person delivers
part of all his properties to another person who administers and
manages the property/ies for the designated person/s.
- A separate legal entity that holds the property or assets of
some kind for the benefit of a specific person, group of
people or organization.
- An arrangement composed of 3 parties.
Implied trust - is created by operation of law.
Express trust - is established by the intention of the parties of the
trust.
Parties to the Trust
-Trustor - is the person who owns and uses that property or assets
to create a trust for the benefit if someone else.
-Trustee - the person or institution in whom the confidence is
reposed as regards the management of a property for the benefit of
another person.
-Beneficiary/ies - is the person or group who is receive the benefits
from the trust or for whose benefit the trust has been created.
Certainties of Trust
-Manifest intention to create a trust - The person creating the trust
must expressly show that he really intended a trust arrangement.
-Trust Property - This is the subject matter of the trust.
-A lawful purpose - If the trust violates a law or it against morals
public policy or public order, the trust will be void and of no effect.
▪ A bank, investment house or any corporation can be an
institutional trustee, if it is duly authorized or licensed by the
Monetary Board of BSP.
WHY WILL YOU BENEFIT MORE IN APPOINTING AN INSTUTIONAL
TRUSTEE?
1. Continuity of Existence
2. Continuity of Capacity
3. Specialization
4. Group Judgment/Objectivity
5. Government Supervision
6. Financial Responsibility and Responsiveness
▪ The institutional trustee offers its client a wide array of trust and
other fiduciary services. These services range from the very simple
safekeeping to the more complicated management of estates or
retirement funds.
Various Services offered by an Institutional Trustee:
1. Fiduciary/Trusteeship - The institutional trustee acts as the
fiduciary when it is appointed by the court and serves as the
executor or administrator of the properties left.
Common Trust Fund (CTF) - The CTF is really a big fund consisting of
funds from personal, corporate, institutional accounts.
2. Advisory - Under this role, the institutional trustee makes
financial recommendations to the client.
3. Agency
Safekeeping - The property owner turns over his securities, and
other valuables to the institutional trustee as agent.
Custodianship - To safekeep, preserve the property and to perform
ministerial acts with respect to the property as directed by the
client.
Management of Assets - Undertakes to perform on behalf of the
client managerial duties and responsibilities appropriate to be kind
of assets.
Escrow - Agent for two parties, protects their individual interests by
ensuring that the terms and conditions mutually agreed upon by
these two parties in a separate contract are fulfilled.
Attorney-in-Fact for Various Purposes - The grants the institutional
trustee as agent the power and authority to perform one or more
specific acts on behalf of the client.
SERVICES OF AN I.T. AVAILABLE TO AN INDIVIDUAL:
1.Testamentary Trust - The trustor transfers his property in trust
through his will and testament and this is to take effect only upon
his death.
2.Living or “Inter Vivos” Trust - Starts to operate during the lifetime
of the trustor.
- Revocable - A trust where the trustor reserves the right to
change or amend the terms and conditions of the trust.
- Irrevocable - The trustor at the same time completely and
absolutely relinquishes his ownership to the trust
property.
3.Reversionary Trust - A form of a living trust whereby the trustor
does not reserve the right to get trust property but requires its
automatic return to him after the lapse of a certain period.
4.Life Insurance Trust - The insured/trustor appoints the trustee to
receive or collect the trustor’s life insurance proceeds.
5.Dry Trust - In this type of trust, the trust agreement is executed
before the property is actually transferred to the trustee.
6.Step-Up Trust This is a variant of the dry trust. The trustee holds
no property until the happening of a certain event.
7.Generation-Skipping Trust - Beneficiaries are designated
successively.
8.Accumulation Trust - The trustee is under a direction by the
trustor to keep the income of the trust fund within the trust and
hold it for future distribution to the beneficiary.
9.Discretionary Trust - The trustor gives the trustee sufficient
authority to decide whether to accumulate or distribute the trust
assets in accordance with the requirements of the beneficiary.
10.Sprinkling Trust - The trust arrangement is therefore designed to
enable the trust fund to meet as much as possible all needs of all
beneficiaries, giving the trustee the power to decide how much to
give to each beneficiary.
11.Spendthrift Trust - This trust prohibits the beneficiary from
transferring or assigning his interest in the trust property prior to the
actual distribution of the income or principal to him.
12.Incentive Trust - The funds are set aside in a trust designed to
motivate the beneficiary into accomplishing something.
13. Estate Planning - This is primarily an advisory service whereby
the institutional trustee assists the client in developing a
comprehensive financial plan designed to conserve, make
productive, increase the value and eventually transfer the client’s
assets to his beneficiaries.
OTHER SERVICES WHICH A TRUST ENTITY CAN OFFER FOR
INSTITUTIONAL/CORPORATE/BUSINESS PURPOSES:
1. Employee Benefit Trust
2. Profit Sharing Trust
3. Stock Bonus Trust
4. Corporate Trust
Trust Indenture - This is an effective device for corporate
financing.
Mortgage Trust - Most indentures, so as to attract the
investing public more effectively, impose a direct lien on
the fixed assets of the company whereby the fixed assets
of the company are mortgaged in favor of the trustee.
5. Corporate Agencies
Transfer Agency- The duty of ascertaining, verifying, and
recording the ownership of stock, commercial papers,
certificates of stocks, registered stock purchase warrants
and the like, and their transfers.
Registration Agency - A trust entity can act as registrar of
stocks certificates, …
Fiscal Agency - With their big volume of trust and quasi-
trust business, most trust entities have an established
machinery to service numerous payments to individuals.
▪ Under a circular issued by the Monetary Board, an applicant for a
trust and investment management license must have a combined
capital account of not less than P250 million.
▪ An initial deposit of at least P500, 000.00 with the BSP, in the form
of eligible government securities, as security for the trust entity’s
faithful performance of its trust duties is likewise required.
▪ “Prudent-Man” the trust entity is required to administer the funds
or property under its custody with the skill, care, prudence, and
diligence necessary under the circumstances then prevailing that a
prudent man.
▪ “Yearly Triple Audit” The trust entity is required to submit itself to
an annual triple audit.
▪ No single person controls the entire process of administration of a
trust /investment management fund.
Donor’s Tax- a tax on a donation or gift, and is imposed on the
gratuitous transfer of property between two or more persons who
are living at the time of the transfer.
Underwriters- somebody employed by an insurance company to
assess risks and fix premiums.
Certificate of stocks- a physical piece of paper representing
ownership in a company.
Escrow Agency- An institutional trustee that holds two contracting
parties and protects their individual interests by ensuring that the
terms and conditions mutually agreed upon by these two parties in a
separate contract are fulfilled.
RA NO. 8791 AN ACT PROVIDING FOR THE REGULATION OF THE
ORGANIZATION AND OPERATIONS OF BANKS, QUASI-BANKS, TRUST
ENTITIES AND FOR OTHER PURPOSES CHAPTER IX: TRUST
OPERATIONS
NON-STOCK SAVINGS & LOAN ASSOCIATION
NSSLA - shall mean a non-stock, non-profit corporation engaged in
the business of accumulating the savings of its members and using
such accumulations for loans to members to service the needs of
households by providing long term financing for home building and
development and for personal finance.
▪ The governing law is RA No. 3779, as amended, otherwise known
as Savings and Loan Association Act.
LAWS RELATED TO NSSLA:
1.RA 8367 - Revised Non-Stock Savings and Loan Association Act of
1997. An act providing for the regulation of the organization and
operation of non-stock savings and loan associations.
2.RA 1405 - Bank Secrecy Law. An act prohibiting disclosure of or
inquiry into, deposits with any banking institution and providing
penalty therefor.
3.RA 7653 - The New Central Bank Act. Provides for the
establishment of an independent monetary authority to be known
as the BSP, its primary objective being the maintenance of price
stability.
▪ The governing laws affecting the operations of trust corporations,
B&LA, and NSSLA are the New Central Bank Act, General Banking
Act, and Savings and Loan Association Act.
REGULATORY POWERS OVER ASSOCIATIONS:
1. Assure the safety of the interests which its members
entrust to them.
2. Regulating the operation and activities of Associations.
3. Requiring all accountable officers and employees of every
Association to post bonds for the faithful performance of
their duties.
 4. Issuing rules and regulations for the proper
implementation of this Act.
5. Conducting such investigations, taking such remedial
measures and exercising all powers under Republic Act No.
7653.
▪ The Bangko Sentral shall have the power to enforce the laws,
orders, instructions, rules, and regulations promulgated by the
Monetary Board applicable to Associations.
▪ An SLA organized as a non-stock corporation with a minimum paid-
up capital of P50,000 may be converted into stock savings and loan
association provided it has been operating for the last three years.
▪ An Association shall be exempt from payment of tax in respect to
income it receives, including interest on its deposits with any bank.
NSSLA is authorized to exercise the following:
1. To grant loans not exceeding the member-borrower’s
savings and time deposits in the association.
2. To charge interest within the limits allowed by law.
3. To discount with the resource commercial papers and
accounts receivable, subject to such rules as the MB may
approve.
4. To invest its funds in any sound non-speculative
enterprise.
5. To allow member-depositors to participate in the profits of
the SLA based on their deposits on the date dividends are
declared.
6. To borrow money or incur such obligations not exceeding
20% of the total assets of the association.
7. To maintain deposits with banks and other stock savings
and loan associations.
▪ No Association shall have or carry upon its books for any person
any demand, commercial or checking account, or any credit to be
withdrawn upon the presentation of any negotiable check or draft.
No Association shall advertise or represent itself to the public as a
bank.
▪ No person shall act as an agent or sales representative of an
Association or operate an agency without obtaining a license from
the MB.
▪ Only members are eligible as trustees of an Association.
▪ No trustee, officer, or employee of an Association shall receive
from such Association, and no Association shall pay to any trustee,
officer, or employee of such Association, any commission,
emolument, gratuity or reward based on the volume or number of
loans made or based on the interest or fees collected thereon.
DEPOSIT AND BORROWING OPERATIONS IN NSSLA:
1. DEMAND DEPOSITS
Checking Accounts - No NSSLA shall have or carry upon its
books for any person any demand.
2. SAVINGS DEPOSITS - Savings deposits are deposits
evidenced by a passbook consisting of funds deposited to
the credit of 1 or more individuals with respect to which
the depositor may withdraw anytime, unless prior notice
in writing of an intended withdrawal is required by the
NSSLA.
▪ Savings deposits with NSSLAs may be opened with a
minimum deposit of P100.
▪ Withdrawal from a savings deposit shall be duly
accomplished withdrawal slip together with the
depositor’s passbook. Require the depositor to give prior
written notice of withdrawal of not more than 30 days.
▪ Dormant Savings Deposits - NSSLAs may charge a fee,
the amount of which shall be approved by the BSP for the
maintenance of dormant savings deposits.
3. TIME DEPOSITS
▪ Term - No time deposit shall be accepted for a term of
less than 30 days.
▪ Only members who have contributed P1,000 or more to the capital
of the NSSLA may open deposit accounts with NSSLAs.
▪ A member-depositor may open and have more than 1 savings
deposit in his own name in the same capacity.
▪ An NSSLA may borrow money up to not more than 20% of the total
assets of the NSSLA, from any public lending institution, and from
private banking institutions, and such private lending institutions as
may be approved by the MB.
▪ Loans shall be approved by the NSSLA’s board of trustees or if
approved by a body or officer/s duly authorized by the board.
▪ The treasurer, cashier or paymaster of the firm employing a
member-borrower shall be required to make deductions from the
salary, wage, income, or retirement pension of the member-
borrower.
▪ Every Association shall create a withdrawable share reserve which
shall consist of 2% of the total capital contributions of the members
which the MB may increase to a maximum of 3%.
PRE-NEED COMPANY, PRIVATE INSURANCE
COMPANIES, & INSURANCE CO.
Pre-need Company - refers to any corporation registered with the
Commission and authorized/licensed to sell or offer to sell pre-need
plans. Refers to schools, memorial chapels, banks, nonbank financial
institutions, and other entities, …
Pre-Need/Pre-Need Planning - denoting or relating to a scheme in
which one pays for a service or facility before it is needed.
▪ Pre-need companies are registered with the SEC and are
authorized to sell or offer for sale pre-need plans, whether single or
multi-plan.
▪ - Pre-need Companies are considered dealers in securities.
Pre-need Plan – a contract that provides for the performance of
future services or the payments of future monetary considerations
at the time of actual need.
▪ The pre-need business in the country began in 1966 with the
establishment of Pacific Memorial Plan Inc.
Professional Pension Plan - offered the first pre-need pension plan,
which entitled plan holders to receive benefits upon retirement or
maturity of the plan.
CLASSIFICATIONS OF PRE-NEED PLANS:
1. Life or Memorial Plan – commonly known as a family
protection program that guarantees ample financial
resources for the payment or delivery of memorial services
in the event of the death of the plan holder.
2. Pension Plan – the plan holder emits fixed contributions
for a definite period of time to guarantee payment of
pension benefits as soon as the plan holder reaches the
retirement age.
3. Educational Plan – the buyer of the (sponsor) pays today,
in lump sum or in installment, the price of the designated
scholar’s future education. There are two types:
▪ Traditional - guarantees the payment of the tuition fee of
the designated scholar whatever its cost will be in the
future.
▪ Fixed-Value - – guarantees the payment of a definite
amount in the future in exchange for the payments made
by the sponsor based on the present value of the
guaranteed amount.
Advantages
▪ The benefits are guaranteed if you will continue to pay for the plan
that you applied for.
▪ Your money’s growth is assured unlike in high return, high risk
investments like mutual funds and stocks where you can lose
money.
▪Pre-need plans can also be considered as a form of “forced
savings”.
Disadvantages
▪ There’s not a lot of flexibility with pre-need plans.
▪ Not all pre-need plans can move with you.
▪ Your health could affect what plan you qualify for.
▪ Your policy may have graded death benefits.
▪ A pre-need policy may be non-transferable and non-refundable.
RA No. 9829 – “Pre-Need Code of the Philippines”
AN ACT ESTABLISHING THE PRE-NEED CODE OF THE PHILIPPINES.
▪ “Commission” refers to the Insurance Commission.
Planholder - refers to any natural or juridical person who purchases
pre-need plans from a preneed company.
Beneficiary - refers to the person designated by the planholder as
the recipient of the benefits.
Sales counselors - refers to natural persons who are engaged in the
sale of, or offer to sell, of prospective planholders for the purpose of
selling.
▪ A pre-need company shall have a minimum paid-up capital of:
-P100,000,000.00. (3 TYPES OF PLANS)
- P75,000,000.00 (2 TYPES)
- P50,000,000.00 (SINGLE TYPE)
Private Insurance Company
▪ It is a risk-pooling institution that underwrites economic risks
associated with death, illness, damage to or loss of property and
other risks of loss.
▪It is an institution that provides a contingent promise of economic
protection in the case of loss. It underwrites or accepts liability from
the user and guarantees payment in any case of loss.
INSURANCE - a contract, represented by a policy, in which an
individual or entity receives financial protection or reimbursement
against losses from insurance companies.
TWO (2) CATEGORIES OF INSURANCE
1. LIFE INSURANCE - a contract that offers financial
compensation in case of death or disability.
BENEFITS OF LIFE INSURANCE:
▪Pays for Medical and Funeral costs.
▪Financial Support
▪Funding Various Financial Goals
▪Acts as a Retirement Nest Egg
▪Covers costs incurred from taxes and debt
PRODUCTS OF LIFE INSURANCE:
A. Term Insurance - the most basic type of insurance
that covers you for a specific period. If you survive the
term, no money will be paid to your family.
B. Whole Life Insurance - covers you for a lifetime.
C. Endowment Policy - is valid for a certain period - a
lump-sum. Amount will be paid to your family in the
event of your death.
D. Term - the simplest form of life insurance you can
obtain. Upon death, the beneficiaries are paid the
benefit.
E. Money-back Policy - a certain percentage of the sum
assured will be paid to you periodically.
F. Variable Universal Life (VUL) - serves as both a life
protection and investment vehicle in one package.
G. Child Plan - is a combination of insurance and
investment that ensure a secure future for your child.
H. Pension Plans - is a retirement plan that requires an
employer to make contributions to a pool of funds set
aside for a worker's future benefit.
COMMON CLASSIFICATIONS USED BASED ON RISK
CATEGORY:
A. Preferred Plus – The best classification you can get.
You’re in excellent health.
B. Preferred – You’re in excellent health but may have
minor issues.
C. Standard Plus – You’re in very good health but some
factors prevent you from getting a better rating.
D. Standard – Most policyholders are tagged with this
health class. You’re deemed to be healthy in general
and have a normal life expectancy.
E. Substandard – People with serious health issues are
placed on a table rating system.
2. NON-LIFE INSURANCE - this covers people like accidental
death or injury, property like property loss, or legal
liabilities insurance.
 PRODUCTS OF NON-LIFE INSURANCE:
A. Health Insurance - pays for or reimburses the amount
you pay towards the treatment of any injury or
illness. It usually covers hospitalization, treatment of
critical illnesses, medical bills, day care procedures.
B. Motor Insurance- a general insurance that offers
protection to your vehicle from loss due to accidents,
damages, theft, etc.
C. Travel Insurance- compensates the person or pays for
any financial liabilities arising out of medical and non-
medical emergencies during your travel abroad or
within the country.
D. Home Insurance- pays or compensates you for
damage to your home due to natural calamities, man-
made disasters, or threats.
E. Fire Insurance- pays or compensates for the damages
caused to the person’s property or goods due to fire.
INSURANCE COMPANY - A company, which may be for-profit, non-
profit or government-owned, that sells the promise to pay for
certain expenses in exchange for a regular fee, called a premium.
TYPES OF INSURERS IN THE PHILIPPINES:
1. Government
2. Private
2 CLASSIFICATIONS DEPENDING ON THE OWNERSHIP STRUCTURE
OF THE ORGANIZATION:
1. STOCK INSURANCE COMPANY - a corporation owned by
its stockholders or shareholders, and its objective is to
make a profit for them.
2. MUTUAL INSURANCE COMPANY - a corporation owned
exclusively by the policyholders who are "contractual
creditors" with a right to vote on the board of directors.
Insurance Commission - The insurance regulator.
-A government agency under the Department of Finance. -The
Commission supervises and regulates the operations of insurance
and reinsurance corporations, which need to be authorized.
TWO (2) CATEGORIES OF INSURANCE COMPANIES:
1. LIFE INSURANCE COMPANIES
A. Loan Value - is the amount that can be borrowed
against the policy during the term of the policy.
B. Cash Surrender Value – is the amount that will be
given to the insured if it decides to surrender the
policy before the term ends.
C. Accident Insurance – insures against death or
disability caused by accidents.
TYPES OF LIFE INSURANCE:
A. TERM LIFE INSURANCE - is a "pure" insurance policy.
B. WHOLE LIFE INSURANCE
C. PERMANENT LIFE INSURANCE- is an umbrella term
that covers several different, more specific life
insurance types.
D. UNIVERSAL LIFE INSURANCE - Your premiums go
toward both the cash value and the death benefit.
E. VARIABLE LIFE INSURANCE- cash value, though, is
more along the lines of what you’d expect when you
think of investing.
F. SIMPLIFIED ISSUE LIFE INSURANCE- known as a "no
exam policy", a simplified issue policy gets your life
insurance without the health exam.
G. GUARANTEED ISSUE - useful for elderly applicants.
H. FINAL EXPENSE INSURANCE-a unique type of policy.
2. PROPERTY / CASUALTY INSURANCE COMPANIES - Offer
protection against pure risk and ensure against injury or
property loss resulting from accidents, work-related
injuries, malpractice, natural calamities, and at the
extreme, exotic adventures as trips.
TYPES OF PROPERTY / CASUALTY INSURANCE:
A. DISABILITY INSURANCE- provides help if a person
meets an accident.
B. HOMEOWNERS INSURANCE- homeowner’s policy
provides insurance for damages or losses due to fire,
theft, and other named perils.
C. AUTOMOBILE / VEHICLE INSURANCE- covers a
person who live in one home and other licensed
drivers to whom the insurer gives permission to drive
his car.
D. FLOOD INSURANCE- is a separate type of coverage
that one has to purchase if he considers flood to be a
risk for his business or property.
E. WINDSTORM INSURANCE- a separate type of
coverage that protects one’s home or business
against wind damage.
F. HEALTH INSURANCE- is a type of insurance that pays
for medical expenses in exchange for premiums.
G. LONG-TERM CARE (LTC) INSURANCE- is defined as a
need for assistance with some of the activities of daily
living (ADL).
H. PROFESSIONAL LIABILITY INSURANCE- a specialty
coverage not covered under any property or
homeowners’ endorsements.
I. CREDIT INSURANCE- an optional protection
purchased from lenders and is often associated with
mortgages, loans, or credit cards.
J. UMBRELLA LIABILITY POLICY- refers to an additional
policy that starts when other’s insurance policy has
reached its limit.
▪ RA NO. 10607 - The Insurance Code
An act strengthening the insurance industry, further amending
Presidential Decree no. 612, otherwise known as the “Insurance
Code”, as amended by Presidential Decree nos. 1141, 1280, 1455,
1460, 1814 and 1981, and Batas Pambansa Blg. 874, and for other
purposes.
Cancelled plan - refers to a plan that can no longer be reinstated by
reason of delinquency in the payment of installments for more than
2 years or a longer period as provided in the contract.
Contingent benefit plans - refer to plans the timing of the provision
of the benefits of which is conditional on the occurrence of the
contingency.
Fixed value plans - refer to pre-need plans whose 'benefits and costs
are fixed and predetermined at the inception or purchase of the
plan.
In - force plan - refers to a plan for which the pre-need company has
an outstanding obligation for the delivery of benefits or services or
payment of termination value. Insurer - is an entity that provides
insurance.
INVESTMENT HOUSES & SECURITIES
DEALERS AND BROKERS
FUNCTIONS OF INVESTMENT HOUSE:
1. Arranging Finance - Bond Financing. In here, the
Investment House would plan the bond issuances, price
the bond issuance so there is enough demand for the
bonds, and help sells the bond.
2. Underwriting Deals - Investment Houses typically
undertake the underwriting of securities.
3. Mergers and Acquisitions - An investment banker offers
advice on how the company should go about the
acquisition, including the pricing of the offer.
▪ As a type of financial intermediary, investment bank is the largest
group in the non-bank sector in terms of assets. It provides a major
source of investment credit which is required today for three major
purposes:
 To meet the needs of business enterprises for fixed and to
some extent working capital.
 To meet the needs of governments that wish to undertake
certain economic projects requiring huge expenditure –
very much in excess of their current revenues.
 For the purchase and improvement of real estate.
▪ Investment houses shall be organized in the form of stock
corporations, in accordance with PD No. 129, as amended by
Presidential Decree 590, otherwise known as the Investment
Houses Law.
▪ The minimum initial paid-in capital of any investment house is P40
million. (or 2o million)
MAJOR ACTIVITIES:
1. Investigation and Purchase - it is fundamental that he
should possess adequate evidence that the borrower in
question is financially sound and, moreover, that the issue
is legal.
2. Underwriting - the investment banker, in effect, promises
that the issuer will receive on a specified date the total
amount of the purchase price of the issue.
3. Distribution of Securities - their organizations are geared
toward selling to the individual investors a part of the
amount of the issue they have purchased.
CLASSES OF INVESTMENT BANKING HOUSES:
1. Wholesaling and Retailing Investment Securities - act as
middlemen standing between those who want to borrow
funds for long periods of time and great mass of
individuals, as well as institutional investors, who want to
make long-term investments with their idle funds.
2. New Issues of Securities in the Capital Market - They are
underwriters which purchase new issues in bulk outright
from issuing corporations and governmental entities and
sell them to the general investing public.
3. The Originator - a single investment banking house may
undertake to bring out a new issue of corporation
securities.
▪ In some cases, investment houses may provide consultation and
advisory support to the business. They are able to provide useful
advice to the business at crucial junctures.
Top Ten Investment Houses in the Philippines:
1. AB Capital Securities, Inc.
2. BPI Capital Corporation
3. Eastgate Capital Partners, Inc.
4. Asian Alliance Investment Corporation
5. Asian Focus Group Inc.
6. First Abacus Financial Holdings Corporation
7. First Metro Investment Corporation
8. FSG Capital Inc.
9. Insular Investment & Trust Corporation
10. Investment & Capital Corporation of the Philippines
PD No. 129 – "The Investment Houses Law"
GOVERNING THE ESTABLISHMENT, OPERATION AND REGULATION
OF INVESTMENT HOUSES. (February 15, 1973)
Underwriting - is the act or process of guaranteeing the distribution
and sale of securities of any kind issued by another corporation.
Securities - are written evidences of ownership, interest, or
participation, in an enterprise, or written evidences of indebtedness
of a person or enterprise.
▪ Investment Houses shall be organized in the form of stock
corporations.
RA NO. 8366 - “THE INVESTMENT HOUSES LAW”
AN ACT LIBERALIZING THE PHILIPPINE INVESTMENT HOUSE
INDUSTRY, AMENDING CERTAIN SECTIONS OF PRESIDENTIAL DECREE
NO. 129, AS AMENDED, OTHERWISE KNOWN AS THE INVESTMENT
HOUSES LAW.
Securities Brokers/Dealers – They can be counted among the other
finance companies.
Securities brokers - are only compensated by means of commission.
They act as financial intermediaries in that they look for investors or
savings units for the benefit of the borrowers or deficit units.
Securities Dealers - buy securities and resell them and make a profit
on the difference between their purchase price and their selling
price.
Broker - Any person engaged in the business of effecting
transactions in securities for the account of others but does not
include a bank.
Dealer - any person engaged in the business of buying and selling
securities for his own account, through a broker, but does not
include any person insofar as he buys or sells securities for his own
account.

Stockbroker - includes all persons whose business it is, for

themselves as such brokers or for other brokers.

Dealer in Securities - means a merchant of stocks or securities,

whether an individual, partnership, or corporation engaged in the
purchase of securities and their resale to customer.

Salesman - include every natural person, other than a dealer,

employed or appointed or authorized by a dealer, issuer or broker to
sell securities in any manner.

Exchange - provides a market place or facilities for bringing together

purchasers and sellers of securities.

Facility - to be interpreted in relation to an "exchange", to include its

premises, tangible or intangible property.

Member - any natural person permitted to effect transactions on

the floor of the exchange. Any registered broker or dealer.

▪ The Philippine Association of Securities Brokers and Dealers, Inc.

(PASBDI) is a nonstock, non-profit association, incorporated on
December 12, 1974 with the Securities and Exchange Commission
for the purpose of institutionalizing a medium through which its
membership can collectively assist and coordinate with the national
government, it’s appropriate agencies and instrumentalities in the
development of the securities market in the Philippines.

RA NO. 8799 - SECURITIES REGULATION CODE Regulations of

Securities Market Professionals

▪ No person shall engage in the business of buying or selling

securities unless registered as such with the Commission.