Name: Renelyn Cas

Section: AM32

1. What is Commercial Banking and its functions?

Answer:
Commercial banking is the provision of services and activities by financial
institutions, commonly known as commercial banks, to individuals, businesses, and
government entities. These banks are primarily concerned with meeting the needs of their
customers and facilitating economic activities by offering a diverse range of financial
products and services. Its function includes providing Depository Services, Lending and
Credit, Payment Services, Investment services, Foreign Exchange Services, Trade Finance
and many other services.

2. Discuss each type/classification of deposits.

Answer:
Deposits are an important component of the banking system. These are the common
types of deposits:
a. Savings Deposits- account designed for individuals who want to save money while
earning interest. These are considered low-risk and often used for emergency funds.
b. Checking (Current) Deposits- used for daily financial transactions. This offers quick
access to funds through checks, debit cards, and electronic transfer. This does not
offer interest rates unlike Savings Deposit.
c. Time Deposits- these are accounts where customers deposit a fixed amount of
money for a specific period which can range from a few months to several years.
This offers a high interest rate compared to SA but funds are locked and withdrawn
before its maturity may result in penalty.
d. Recurring Deposits- these are for individuals who want to save money with a fixed
amount regularly. This requires the customer to make regular contributions usually
on a monthly basis.

3. What are the responsibilities of banks to its depositors? And depositors to its banks?
Answer:
Banks have certain responsibilities to their depositors, and depositors also have
responsibilities toward their banks. These responsibilities are based on the mutual trust and
contractual relationship between the two parties. For banks, its responsibilities are
safeguarding the deposited money, Account access, Privacy and Confidentiality,
Transparency, Customer Service and many more. On the other hand, for the depositors its
responsibilities involves, Compliance with the terms and conditions, Timely Payment,
Awareness of Fees and Charges, Account Security, Understanding the risks and Treating
bank staff respectfully.
 4. What is the reserve requirement of Bangko Sentral ng Pilipinas (BSP)?
Answer:
The reserve requirement ratio (RRR) set by the Bangko Sentral ng Pilipinas (BSP)
for universal and commercial banks in the Philippines was 12% and now 9.5%. Also, the
reserve requirement for digital banks is 6%. This means that these banks were required to
hold a certain percentage of their deposit liabilities in the form of reserves with the BSP.

5. Differentiate primary between secondary reserves.

Answer:
Primary reserves are cash, deposits due from other banks, and the reserves
required by the Federal Reserve System. Secondary reserves are securities banks
purchase, which may be sold to meet short-term cash needs. These securities are usually
government bonds. Primary deposits are simply cash deposits made by the general public
in the bank, while secondary deposits are that part of cash deposits keeping aside the
mandatory reserve as specified by the central bank. The secondary deposits are used to
create credit through loans.

References:
https://economictimes.indiatimes.com/definition/commercial-bank
https://www.indeed.com/career-advice/career-development/what-are-deposits#:~:text=A%2
0deposit%20is%20a%20sum,accounts%20and%20individual%20retirement%20accounts.
https://www.centralbanking.com/central-banks/financial-stability/7958980/philippine-central-
bank-cuts-lenders-reserve-requirements#:~:text=The%20BSP%20will%20cut%20the,%2Do
perative%20banks%20to%201%25.
https://portal.ct.gov/DOB/Consumer/Consumer-Education/ABCs-of-Banking---Banks-and-O
ur-Economy#:~:text=Primary%20reserves%20are%20cash%2C%20deposits,securities%20
are%20usually%20government%20bonds.
https://www.meritnation.com/cbse-class-12-commerce/economics/economics/commercial-b
anking/ncert-solutions/95_16_1634_7562_110_78090#:~:text=Primary%20deposits%20are
%20simply%20cash,to%20create%20credit%20through%20loans.