1. Give and explain the major activities of
What is meant by “off-balance-sheet”
banks for the last 5 decades
Traditional Banking Services (1970s-1980s):
Deposits and Loans: Banks primarily focused on
taking deposits and providing loans to
individuals and businesses.
Payment Services: Offering payment services,
such as check clearing and wire transfers.
Deregulation and Expansion (1980s-1990s):
Diversification: Banks started diversifying their
services, including insurance and investment
products.
Global Expansion: Increased international
presence and operations.
Technological Advances (1990s-2000s):
Digital Banking: Introduction of online banking,
ATMs, and other technological innovations.
Risk Management: Enhanced risk management
practices due to increased financial
complexities.
Financial Crisis and Regulatory Changes (2008-
2010s):
Regulatory Reforms: Stringent regulations post
the 2008 financial crisis to enhance stability.
Focus on Risk Management: Greater emphasis
on risk management and compliance.
Digital Transformation (2010s-Present):
Fintech Collaboration: Collaboration with
fintech firms for innovation and digital services.
Cybersecurity: Heightened focus on
cybersecurity due to increased digitalization.
2.
activities of commercial banks?
Off-balance-sheet activities refer to financial
transactions that do not appear on a bank's
balance sheet but can impact its financial
position. Examples include loan commitments,
letters of credit, and derivatives. These activities
allow banks to manage risk and provide
additional services without directly affecting
their balance sheet ratios.
3. Why are investment banks considered
engaged in “shadows banking”?
Investment banks are considered engaged in
"shadow banking" due to their involvement in
activities outside traditional banking
regulations. Shadow banking involves financial
intermediaries facilitating credit creation and
liquidity outside the traditional banking system.
Investment banks engage in activities like
securitization, money market funds, and
complex financial products, operating in the
shadows of traditional banking regulations.
4. What are sources of income of
investment banks?
Underwriting Fees: Earnings from underwriting
new securities issuances.
Trading and Sales: Profits from buying and
selling financial instruments.
Mergers and Acquisitions (M&A): Advisory fees
for facilitating mergers and acquisitions.
Asset Management: Management fees for
handling investment portfolios.
Advisory Services: Fees for providing financial
advice to clients.
 5. Distinguish between the industry
coverage groups and financial services
group within the organization of
investment banks
Industry Coverage Groups: Focus on specific
industries (e.g., technology, healthcare) and
provide specialized financial services tailored to
the needs of those industries.
Financial Services Group: Covers a range of
financial products and services, including
mergers and acquisitions, restructuring, and
capital raising, not limited to a specific industry.
6. Enumerate / describe the classification
of firms engaged in investment banking
according to size.
Bulge Bracket Firms: Large, globally recognized
investment banks with extensive capabilities
and services.
Middle Market Firms: Medium-sized
investment banks that focus on mid-sized
companies, often regionally or sector-specific.
Boutique Firms: Small, specialized firms that
provide niche services, such as M&A advisory in
specific industries.
Regional/Local Firms: Smaller banks that
operate within a specific region or locality,
offering a range of financial services.
1. Indicators of Improvement in the
Philippine Banking System:
Capital Adequacy: Higher capital adequacy
ratios signify a strengthened financial position,
ensuring banks can absorb potential losses and
maintain stability.
Asset Quality: Improvements in asset quality,
with a lower ratio of non-performing loans
(NPLs) to total loans, reflect effective risk
management.
Profitability: Rising return on assets (ROA) and
return on equity (ROE) indicate that banks are
generating healthy profits from their operations.
Liquidity Position: Adequate liquidity, reflected
in favorable loan-to-deposit ratios and liquid
asset holdings, ensures banks can meet short-
term obligations.
Regulatory Compliance: Adherence to
regulatory standards, such as Basel III
requirements, demonstrates a commitment to
financial stability.
Technological Adoption: Implementation of
innovative technologies and digital banking
services shows adaptability to evolving
customer needs.
Governance and Risk Management:
Strengthened governance practices and robust
risk management frameworks contribute to the
overall stability of the banking sector.
Financial Inclusion: Efforts to enhance access to
financial services for underserved populations
contribute to a more inclusive banking system.
2. Importance of the Banking Sector in the
Philippine Economy:
The banking sector is considered a key anchor of
the country's growing economy for several
reasons:
Financial Intermediation: Banks facilitate the
flow of funds between savers and borrowers,
supporting economic activities and investments.
Credit Provision: Banks provide loans to
businesses and individuals, fostering
entrepreneurship, job creation, and economic
development.
Payment and Settlement Systems: Efficient
banking systems facilitate smooth and secure
transactions, promoting trade and commerce.
Capital Mobilization: Banks play a crucial role in
mobilizing and allocating capital, channeling
funds to sectors with growth potential.
Risk Management: Banks help manage financial
risks, contributing to overall economic stability.
Monetary Policy Transmission: The banking
sector acts as a conduit for monetary policy
implementation, influencing interest rates and
liquidity in the economy.
3. Major Forces Leading to the Growth of
the Philippine Banking System:
Economic Expansion: A growing economy
creates demand for banking services,
encouraging the expansion of the banking
sector.
Financial Inclusion Initiatives: Government
efforts to promote financial inclusion increase
the reach and impact of the banking system.
Regulatory Reforms: Regulatory changes aimed
at enhancing governance, risk management,
and compliance contribute to a more robust
banking sector.
Technological Advancements: Adoption of
modern technologies and digital banking
solutions enhances efficiency and broadens
service offerings.
Globalization: Increased integration with global
financial markets exposes Philippine banks to
international opportunities and fosters
competitiveness.
4. Unfavorable Effects of COVID-19 on the
Philippine Banking and Insurance Industries (as
of Q2 2021):
a. Philippine Banking Industry:
Asset Quality Deterioration: Economic
uncertainties led to an increase in non-
performing loans.
Provisions and Reserves: Banks had to allocate
higher provisions for potential loan losses.
Liquidity Challenges: Some sectors faced
liquidity constraints due to disruptions in
business operations.

b. Philippine Insurance Industry:

Claims and Underwriting Challenges: Increased

claims and underwriting difficulties due to the
pandemic's impact on health and business
activities.

Investment Portfolio Volatility: Market volatility

affected the value and returns of insurance
companies' investment portfolios.

Operational Disruptions: Operational challenges

arose, impacting the seamless delivery of
insurance services.

Both industries experienced challenges related

to economic uncertainties, business disruptions,
and the need to adapt to new operating
conditions during the pandemic. The severity of
these effects varied across sectors and
companies.