SY 2023-2024

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GEC 108 MIDTERMS REVIEWER
THE BANGKO SENTRAL NG PILIPINAS SEAL
FM – 2A
The Bangko Sentral ng Pilipinas (BSP) has introduced a new logo in keeping with the changing
times. In contrast to the stylized eagle profile design of the current logo, the new one features a
full-bodied Philippine eagle rendered in gold, taking inspiration from various wildlife photographs of
actual Philippine eagles. The use of the Philippine eagle in the new logo is intended to represent
the BSP as well as the Filipino people which it serves.

DESIGN ELEMENTS
GOLDEN PHILIPPINE EAGLE
 The logo employs a photorealistic rendering of a Philippine eagle in flight, signifying strength
of leadership and foresight that the BSP provides in the financial sector and the economy.

1) OUTSTRETCHED WINGS AND TAIL FEATHERS

 It symbolizes the BSP’s balanced, inclusive approach to growth and
development, while also conveying the central monetary authority’s mastery over
its field.

2) HEAD AND EYES

 The eagle’s head and eye face east, expressing the BSP’s vigilance and
readiness to seize challenges and opportunities that rise over the horizon.

3) TALONS
 It represents the strong will, resolve, and the monetary and financial tools that the
central bank uses in discharging its mandates.

SHAPE
 The logo is contained within a perfect circle – without sides, a beginning, or an end –
accentuated by a bold border, to convey the singular and integrative nature of the BSP and
its impartial approach to holistic growth and development.

GOLDEN STARS
 The three golden stars represent the three pillars of central banking (price stability, stable
banking system, and a safe and efficient payments and settlements system), as well as
the BSP’s commitment to promote and sustain a high quality of life for all Filipinos, across
Luzon, Visayas, and Mindanao.

CORPORATE TEXT
 The name of the Bangko Sentral ng Pilipinas is rendered in gold, using a clean sans-serif
font, to signify the Bank’s operational efficiency, clarity of vision, and single-mindedness
of purpose.

DOMINANT COLORS
 Yellow gold and midnight blue dominate the new logo’s color scheme to evoke the BSP’s
stature as a premier government agency.
1) YELLOW GOLD
 It is the foreground elements representing the BSP’s aim to promote economic
growth and prosperity, and the high standards of ethics and performance it
holds.

2) MIDNIGHT BLUE
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two-tone midnight
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blue background is evocative of the honor, dignity, and
noble character of the Filipino people, and the BSP’s unwavering commitment
to serve the nation.

BSP ORGANIZATION PRIMER

BSP VISION
The BSP aims to be recognized globally as the monetary authority and primary financial system
supervisor that supports a strong economy and promotes a high quality of life for all Filipinos.

BSP MISSION
To promote and maintain price stability, a strong financial system, and a safe and efficient
payments and settlements system conducive to a sustainable and inclusive growth of the
economy.

THE 2020 – 2023 BSP STRATEGY MAP

Significant changes to BSP’s strategy call for a visual redesign of the strategy map.

The new strategy map is a circle, implying BSP’s overall theme of being stakeholder-outcome
focused to make it more relevant to the Filipino people, and its intent to be a united and highly
collaborative organization. At the core is the vision, mission, and core values – the elements that
define BSP, together with the overall strategy of bringing BSP closer to the people.

BSP’s success in achieving this goal begins with the three pillars of central banking, the strategy
objectives – price stability through well-managed inflation; sound, stable and resilient financial
system; and a safe, efficient, and inclusive payments and settlements system.

These are bolstered and strengthened by the strategic programs of Inclusive Financial System,
Digital Transformation, Sustainable Central Banking, and Strategic Communication. To ensure that
the BSP becomes a leaner, more agile, and smarter organization, Organizational Capability
undergirds and supports all the strategic objectives and programs.

This is BSP’s strategy. Its success depends on the support of every BSPer and the leaders who
will encourage and rally their team to the journey of bringing BSP closer to the people. After all, the
BSP strategy is every BSPer’s business,

BSP CORE VALUES

 EXCELLENCE – consistently doing our best to master our craft, continually improving our
competencies, and learning new things in in pursuit of the organizational goals, comparable
to the best practices of other central banks.
 PATRIOTISM – selfless commitment to the service of the Filipino people and the country.
 INTEGRITY – performing mandate with sincerity, honesty, and uprightness, worthy of respect
and emulation from others.
 SOLIDARITY – performing with team spirit; acting and thinking as one in the pursuit of
common goals and objectives.
 ACCOUNTABILITY – taking full responsibility for one’s or group’s actions.

RESPONSIBILITY AND PRIMARY OBJECTIVES OF THE BSP

It shall be the responsibility of the BSP:
1) To provide policy direction in the areas of money, banking, and credit.
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To supervise the operationsREVIEWER
FM – 2A
of the banks and to exercise such regulatory and examination
powers as provided under Republic Act No. 7653 (The New Central Bank Act), as amended
by Republic Act 11211, and other pertinent laws over the quasi-banking operations of non-
bank financial institutions; and
3) To exercise regulatory and examination powers over money service businesses, credit
granting businesses, and payment system operators.

Its primary objective is to maintain price stability conducive to a balanced and sustainable growth
of the economy and employment. It shall also:

1) Promote and maintain monetary stability and the convertibility of the peso.
2) Promote financial stability and closely work with the National Government, including, but not
limited to, the Department of Finance, the Securities and Exchange Commission, the
Insurance Commission, and the Philippine Deposit Insurance Corporation.
3) Oversee the payments and settlement systems in the Philippines, including critical financial
market infrastructures, in order to promote sound and prudent practices consistent with the
maintenance of financial stability; and
4) Promote broad and convenient access to high quality financial services and consider the
interest of the general public.

PRIVATE BANKING INSTITUTION

COMMERCIAL BANKS
It refers to a financial institution – that accepts deposits, other checking account services,
makes various loans, and offers basic financial products – like certificates of deposit and
saving accounts to individuals and small businesses.

 It is where most people do their banking.

 It makes money by providing and earning interest from loans such as mortgages, auto loans,
business loans, and personal loans.
 Customer deposits provide banks with the capital to make these loans.

POWERS OF COMMERCIAL BANK

Under Batas Pambansa Blg. 61, the powers necessary to carry on the business of commercial
banking are the following:
1. Accepting of drafts
2. Issuing letters of credits
3. Discounting and negotiating promissory notes, drafts, bills of exchange and other evidence of
debts.
4. Receiving deposits (demand, time, and savings) including negotiable order of withdrawal
accounts.
5. Buying and selling foreign exchange and gold or silver bullions.
6. Lending money against personal securities and against mortgages on improved real estate
(land and building) and insured improvements thereon.

ADDITIONAL POWERS AVAILABLE TO COMMERCIAL BANKS INCLUDE THE FOLLOWING:

1. Investing in Equity (Shares of Stocks)
2. Purchasing, holding, and conveying real estate for its immediate accommodation in
transacting its business or as mortgagee, creditor, and buyer under judgement sales
3. Establishing branches
4. Acquiring readily marketable bonds and other debt securities
5. Receiving in custody funds, documents, valuable objects and renting safety deposit boxes for
safeguarding such effects
6. Acting as financial agent in buying and selling, by order of/or for the account of customers,
shares, evidence of debt and all types of securities
7. Making collections and/or payments for the account of others
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such REVIEWER
other services for their customers as these are not incompatible with
FM – 2A
banking.

DEPOSIT OPERATION
A commercial bank is authorized to accept or create demand deposits subject to withdrawal by
check.

Demand deposits, also known as current accounts or checking accounts, do not earn
interest.

It is also authorized to accept savings deposits which earn interest and are evidence by a
passbook issued by the bank in the name of the depositor.

It is also authorized to accept time deposits which earn interest and are evidenced by a
certificate issued by the bank in the name of depositor. The minimum period of time deposit is
thirty days. A commercial bank may also offer NOW accounts.

BORROWING OPERATION
A commercial bank may borrow from the Bangko Sentral and other government and private
financial institutions to augment its working capital and loanable funds. Borrowings from Bangko
Sentral may take the form of:

1. Rediscounting
2. Direct advance or loan
DEPOSIT SUBSTITUTE OPERATIONS
Also known as quasi – banking or money market operations.
1. Borrowing funds for the borrower`s own account
2. Twenty or more lenders at any one time
3. The purpose may be for
(a) relending, or
(b) purchasing of receivables and other obligations.
4. Methods of borrowing are issuance, endorsement, or acceptance of debt instruments of any
kind, other than deposits, such as acceptances, promissory notes, participations, certificates
of assignment or similar instruments with recourse, trust certificates, repurchase agreements,
and such other instruments which the Monetary Board of the BSP may determine and allow
from time to time.

LENDING OPERATIONS
1. As collateral
a. Secured Loans – these are secured by real estate mortgage.
b. Unsecured Loans – these are granted against personal security.
 Before this type of loan is granted, the bank must exercise proper caution by ascertaining that
the borrowers, co-makers, indorses, securities and/ or guarantors possess good standing
and are financially capable of fulfilling their commitments to the bank.

2. As to purpose
a. Agriculture – these are granted to finance agricultural production and related activities,
purchase of farm machinery, equipment, and implements and work animals,
including but not limited to the establishment and operation of poultry, piggery,
livestock, and fishery products.
b. Commercial – these are granted to finance the purchase of goods, commodities, or
merchandise for resale.
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Industrial – these are granted to finance the purchase and processing of ra w
materials and manufacture of goods, including the marketing of such goods.
d. Real Estate – these are granted to finance and/or refinance the construction,
acquisition, expansion and / or improvements of urban and rural properties.
e. Others – are granted for purposes other than agriculture, commercial, industrial, and
real estate.

3. As to accounting treatment
a. Demand Loans – these are granted without fixed maturity dates, but which become
due and payable upon call or demand at the option of the lending bank.
b. Bills Discounted – these are those in the interest of which is collected in advance or
discounted from the face of the covering promissory note.
c. Time Loans – these are payable on a fixed date or within a specified period of time,
usually more than one year.

TRUST OPERATION
A commercial bank may engage in trust operation or trust business which refers to the
administration, holding, and management by a trustee of funds and/or property for the use, benefit
or advantage of the trustor or the beneficiaries.

UNIVERSAL BANKING
Universal banking is a system in which banks provide a wide variety of comprehensive
financial services, including those tailored to retail, commercial, and investment services.

Universal banks may offer credit, loans, deposits, asset management, investment advisory,
payment processing, securities transactions, underwriting, and financial analysis.

While a universal banking system allows banks to offer multitude of services, it does not require
them to do so.
RURAL BANKS
A rural bank is a banking institution organized and operating under the provisions of Republic Act
No. 720, as amended (otherwise known as The Rural Banks Act), and the rules and regulations
promulgated by the Monetary Board of the Bangko Sentral implementing said law.

Rural banking has been designed to supply the credit needs of the rural areas. It has been
used as an instrument for rural development objectives.
ORGANIZATION
A rural bank is organized in the form of a stock corporation with no less than five nor more
than fifteen incorporations. If more than fifteen persons are interested in organizing and
investing in a rural bank, the rest may be included as subscribe.
All the incorporators and subscribers must have the following qualifications:
 Filipino citizenship,
- of a good moral character and integrity,
- have the financial capacity in their own rights, and
- with good credit standing.

FUNCTIONS OF RURAL BANKS

1. Grant loans and make investments in accordance with existing rules and regulations.
2. Accept savings and time deposits.
3. Sell domestic drafts.
4. Act as correspondent for.
5. Receive in custody funds, documents, and other valuable objects, and rent safety deposit
boxes for the safeguarding of such objects.
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6. as financial agent, buy and sell, by order of and for the account of its customers, shares,
evidence of indebtedness and all types of securities.
7. Make collections and payments for the account of others and perform such other services for
its customers as are not incompatible with banking business.

LENDING OPERATIONS
A rural bank shall extend loans to as many qualified borrowers as possible, preference to be given
to borrowers whose credit requirements are small. In the case, however, of special financing
programs of the government under supervised credit, preference shall be determined in
accordance with the rules and regulations implementing such programs.

TYPES OF LOANS
1. Agricultural loans – these are granted for the following purposes:
a) Farm expenses, like cause of labor, in connection with the preparation, planting, and
cultivation of the farm and the harvesting, transportation, storage and marketing of
products.
b) Purchase of seeds, fertilizers, work animals, implements, and equipment necessary for
the operation of the farm, or the hire of such work animals, implements, and equipment.
c) Purchase of animals, poultry, or fish for breeding purposes.
d) Minor repairs, construction, or improvements in the farm or fishpond which are
necessary and proper to maintain or increase productivity.
e) Payment of current taxes and irrigation fees.

2. Commercial loans – these are granted for the purpose of conducting or carrying on,
developing, or improving commercial operations as well as purchasing commodities for
resale which are considered necessities or semi necessities by consumers or end-users, and
of general acceptability and quick turnover.

3. Industrial Loans – these are granted for the following purposes:

a) Expenses for labor in connection with the manufacture of goods which are in demand
and readily salable, or have quick turnover, considered necessities or semi-necessities,
essentials of semi-essentials.
b) Purchase of raw materials for the manufacture and processing of the goods mentioned
in item a.
c) Marketing of the goods which have been manufactured or processed of the mentioned
in item above.
4. Term Loans – these are granted for the following purposes:
a) Purchase of farmland improved or unimproved to be devoted to agricultural production.
b) Improvement of agricultural, commercial, industrial, or residential real estate for the
borrower’s own use and not for speculation.
c) Acquisition of agricultural or industrial machinery, tools and other equipment needed in
the farm or necessary to set up an essential or semi-essential rural industry already in
operation.
d) Purchase of equipment and materials for live-stock and poultry raising, fish culture, and
coastal fishing.
e) Production and harvesting of agricultural crops which have production cycles of more
than one year.
5. Loans to Cooperative – these consist of the following:
a) Agricultural loans for meeting the credit needs of members of farmer’s cooperatives, in
accordance with the purposes for which agricultural loans may be granted.
b) Commercial loans for the purchase of commodities for resale to members of the
cooperative.
c) Industrial loans to meet the credit needs of the members of the cooperatives of artisans,
jobbers, and manufacturers according to the purposes for which industrial loans may be
granted.
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DEPOSIT OPERATIONS
FM – 2A
Types of deposits accepted by a rural bank.

1. Demand deposit. This is also known as current or checking account. It does not earn
interest. It is withdrawable by check.
2. Saving deposit. This is evidenced by a passbook in the name of the depositor. Withdrawal is
affected through the simultaneous presentation of the passbook and duly accomplished
withdrawal slip. It earns interest.
3. Time deposit. This is evidenced by a certificate issued by the rural bank in the name of the
depositor. It earns interest on the basis of maturity period. When the deposit matures, the
depositor presents the certificate duly endorsed by him to the bank which gives him the
amount of the deposit shown on the face of the certificate plus accrued interest, if it has not
been paid in advance.
4. NOW account. This is a special type of savings deposit which is evidenced by a certificate
issued only to natural persons. It earns interest. Its transfer to another person is restricted
unlike in the case of checks which can be negotiated with as many persons as possible as
long as they are properly endorsed and delivered to the persons concerned.

INTEREST ON DEPOSITS
As mentioned earlier, only savings and time deposits earn interest. In the computation of interest
on savings deposits where interest is computed daily, monthly or quarterly, the basis of
computation shall be 360 days which is considered as the number of days comprising a year. In
the computation of interest on time deposits, the number of days compromising a year shall be
based on the following:

1. When the term is one year or more, a year shall mean 365 days; and
2. When the term is less than one year, the interest shall be computed on the basis of 365 days
a year.

INSURANCE ON DEPOSITS
Philippine Deposit Insurance Corporation (PDIC) provides a maximum deposit insurance coverage
of PhP500,000 per depositor per bank. To pay claims on insured deposits, PDIC builds up the
Deposit Insurance Fund (DIF) primarily through assessments of banks at an annual flat rate of 1/5
of 1% of their total deposit liabilities.

BORRROWING OPERATIONS
A. Rediscounting - is a privilege of a rural bank to negotiate with the Bangko Sentral the
eligible papers of the rural bank’s customers, by transferring the ownership of said papers to
the BS. Rediscounting is also known as the process of securing advances from the BS on the
security of the rural bank’s eligible papers. The privilege to rediscount is given by the Bangko
Sentral to a rural bank to supplement its operating capital which may be insufficient to meet
the demands for credit financing in the community where it operates and when additional
funds are needed to develop the economy of the community and increase its productivity.

B. Direct Borrowing - a rural bank may, from time to time, obtain a loan from the Development
Bank of the Philippines, which repayable in ten years with interest rate of 2% per annum,
against the security which may be offered by the stockholders of the rural bank, provided:
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The Monetary Board isREVIEWER
convinced that the assets of the rural bank are not enough to
meet the legitimate credit needs of the locality where the rural bank is operating.
2. That private capital account be raised in said locality; and
3. That it is not possible for the stockholders of the rural bank to increase its paid-up
capital.

OTHER OPERATIONS
1. A rural bank may make investment of placements in the money market desks of institutions
authorized to engage in such negotiations. Money market placements include investment in
debt instruments, including purchase of government securities on an outright basis.
2. It can also invest in readily marketable securities and other debt instruments (other than
money market placements) to reduce its over-liquidity.
3. It can sell government securities, such as Premyo Savings Bond and Biglang Bahay Bonds,
including those bonds issued by the Development Bank of the Philippines and other
government entities.
4. It can sell bank money orders issued by the Philippine National Bank.
5. It can sell domestic drafts in relation to its acceptance and servicing of demand deposits.
6. It can act as foreign exchange dealer of the Central Bank for foreign currencies which form
part of our international reserves, such as U.S dollar, Japanese yen, Italian lira, French franc,
etc.

THRIFT BANKS
Thrift banks are primarily engaged in mobilizing the small savings of the people. They encourage
the habit of thrift and savings and provide loans at reasonable interest rates.

The following banks fall under the category of thrift-banks:

(1) savings mortgage banks (saving bank),

(2) private development banks, and
(3) stocks savings and loan associations.
They provide funds for agriculture and industry at reasonable interest rates. The small producers
like farmers, fishermen, craftsmen, and poor consumers can rely on such banks financing their
production and consumption inputs.

1. SAVINGS BANK

The basic provisions of law governing the operations bank can be found in Section 29 to 39 of the
General Banking Act (Republic Act No. 337, as amended).

It is organized for the purpose of accumulating the savings of depositors and investing them,
together with its capital, in readily marketable bonds and debt securities, commercials papers and
accounts receivable, drafts, bills of exchange, acceptances, or notes arising out of commercials
transactions or in loans secured by bonds, mortgage on real estate and insured improvements
thereon, and other forms of security or in loans or personal or household finance, whether secured
or unsecured

2. PRIVATE DEVELOPMENT BANKS

A private development bank is organized under the provision of Republic Act No. 4093 as
amended (otherwise known as the Private Development Bank’s Act).

The principal objective of a private development bank is to cater to the capital needs and demand
for adequate investment credit or medium-and long-term loans for the promotions and growth of
agriculture and industry at reasonable cost. It is for this reason that the government called the
Development Bank of the Philippines, the Philippines National Bank, Government Service
Insurance System, Social System, National Economic and Development of Trade and Industry,
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and other appropriate governmentREVIEWER FM – 2A
agencies, corporations and/or instrumentalities to cooperate
with private development banks and provide them with adequate assistance in the form of savings
deposits, and with technical know-how in agriculture an industry.

3. STOCKS SAVINGS AND LOAN ASSOCIATIONS

A stock savings and loan association are engaged in the business of accumulating the savings of
its stockholders and using such accumulation, together with its capital for loans and/or for
investments in the securities of productive enterprises or in the securities of the government, or
any of its political subdivisions, instrumentalities, or corporations. It shall primarily engage in
servicing the needs of household by providing personal finance and long-term financing for home
building and development.

It is organized and small operate in accordance with the provision of Republic Act No. 3779, as
amended (otherwise known as the Saving and Loan Association Act), and the rules and
regulations promulgated thereunder.

SCOPE OF AUTHORITY
Thrift banks may perform any or all of the following services:

1. To grant loans, whether secured or unsecured.

2. To accept saving and time deposit.
3. To invest in readily marketable bonds and other debt securities, commercial papers and
accounts receivable, drafts, bills of exchange, acceptances or notes arising out of commercial
transactions.
4. To issue domestic letter of credit.

With prior approval of the Monetary Board, thrift banks may undertake the following:

1. Engage in trust business.

2. Perform quasi-banking functions (money market).
3. Accept checking accounts (demand deposits), NOW accounts, government deposits and
foreign currency deposits under Central Bank Circular No. 343.