BANK

RESERVED
BANK RESERVED
 The Bank Reserves are set up primarily to ward off any possible
embarrassment on the part of the bank and to insure the protection of the
depositors and investors.

PRIMARY RESERVES
The Primary Reserves consists mainly of the highly liquid assets of the bank
and main objective is to maintain the bank’s liquidity and solvency. For liquidity
is one of the basic problems of bank management.

LEGAL RESERVES:
Form part and parcel of the Primary Reserves. It is sometimes alluded to as
the required reserves due to the fact that supervisory and regulatory agencies
impose this requirement uniformly and without discrimination on all banks.
Here under the pertinent provision of the Republic Act 7653(New Central Bank Act
of 1993), as embodied in Chapter IV, Article VII, entitled ”Bank Reserves.”

 Sec.94 Reserved Requirements.

In order to control the volume of money created by the credit operations
of the banking system, all banks operating in the Philippines shall be required to
maintain reserves against their deposit liabilities.
 Sec. 95 Definition of Deposit Substitutes
The term “deposit substitutes” is defined as an alternative form of obtaining
funds from the public, other than deposits, through the issuance, endorsement,
or acceptance of debt instruments for the borrower’s own account, for the
purpose of relending or purchasing of receivables and other obligations.
 Sec. 96 Required Reserves Against Peso Deposits.
The Monetary Board may fix and, when it deems necessary, alter the
minimum reserve ratios to peso deposits, as well as to deposit substitutes, which
is bank and/ or quasi- bank may maintain, and such ratio shall be applied
uniformly to all banks of the same category as well as to quasi-banks.
 Sec. 97. Required Reserves Against Foreign Currency Deposits .
The Monetary Board is similarly authorized to prescribe and modify the minimum
reserve ratios applicable to deposits denominated in foreign currencies.
 Sec. 98. Reserve Against Unused Balances of Overdraft Lines.
In order to facilitate Bangko Sentral control over the volume of bank
credit, the Monetary Board may establish minimum reserve requirements for
unused balances of overdraft lines.
 Sec.99. Increase in Reserve Requirements.
Whenever in the opinion of the Monetary Board it becomes necessary to increase
requirements against existing liabilities, the increase shall be made in a gradual
manner and shall not exceed four percentage points in any thirty-day period.
 Sec. 100. Computation on Reserves.
The reserve position of each bank or quasi-bank shall be calculated daily on the
basis of the amount , at the close of business for the day, of the institutions reserves
and the amount of its liability accounts against which reserves are required to be
maintained.
 Sec. 101. Reserve Deficiencies.
Whenever the reserve position of any bank or quasi- bank, computed in the
manner specified in the preceding section of this Act, is below the required
minimum, the bank of quasi-bank shall pay the Bangko Sentral one- tenth of one
percent (1/10 of 1%) per day on the amount of the deficiency or the prevailing
ninety-one-day treasury bill rate plus three percentage points, whichever is
higher.
 Sec. 102. Interbank Settlement.
The Bangko Sentral shall establish facilities for interbank clearing
under such rules and regulations as the Monetary Board may prescribe.
 Sec. 103. Exemption from the Attachment and other Purposes.
Deposits maintained by banks with the Bangko Sentral as part of their
reserve requirements shall be exempted from attachment, garnishment,
or any other order or process of any court, government agency or any
other administrative body issued to satisfy the claim of a party other than
the government, or its political subdivisions or instrumentalities.
WORKING RESERVES
This composed of vault cash in excess of legal requirements and
balances with other banks which are used to meet the depositor’s
demands.

EXCESS RESERVES
Are those over and above the legal reserves requirements. Besides, it
could also be the amount in excess of working reserves. Hence, whatever
is above the required working reserves may be deemed as excess
reserves.
Factors Affecting Size, Primary Reserve Requirements

 THE NUMBER OF DEPOSITORS AND THE DIVERSITY OF THEIR BUSINESS

INTERESTS.
 THE CONFIDENCE OF THE PUBLIC ON THE BANK.
 THE NATURE OF A BANK’S DEPOSITS.
 THE PERCENTAGE OF LEGAL RESERVE REQUIREMENTS.
 THE PERCENTAGE A D QUALITY OF THE SECONDARY RESERVE.
 THE DEMAND FOR LOANS
 HABITS AND CUSTOMS OF THE COMMUNITY
 OTHER FACTORS
SECONDARY RESERVES
The Secondary Reserve is often alluded to as a banks’ next in line of
defense. It is composed of earning assets which are easily converted
to cash with the least delay and without loss.

Quality of Assets:
In order that an asset could be included in the secondary reserve,
it must possess three important quality. The asset must be high quality, it
must be of short duration, and it must be marketable.
Assets in the Secondary Reserves:
Having thus explored the requirements of the assets comprising the
secondary reserve, we could now pinpoint with some accuracy what
specific items could be eligible for this purpose.
 Short-term government securities fit very snugly for the role of highly
marketable assets with the highest quality for the reason that they
represent the government debtor willingness and ability to pay.
 Banker’s acceptances are also considered ideal for the secondary
reserve.
 Commercial papers originating from business with high credit ratings
which need money for short periods of time also qualify for the secondary
requirements.
 Loans of a short term and self-liquidating nature may safely be included in
the secondary reserve.

Size of Secondary Reserves:

The size of the secondary reserve is also a matter of “rule of thumb” on
the part of the bank.
INVESTMENT RESERVE
The Investment Reserve is an economic rather than an accounting
term as in the case of primary and secondary reserves. Assets which do
not qualify for the first two reserves could conveniently be deemed as
eligible for the investment reserve.

Assets Eligible for Investment Reserve:

Investments imply funds that are used for long term purposes,
particularly in corporate securities.
 GROUP 3

SALONGA, ALLAN GLENN A.

MANALUNGSUNG, JESSEL P.
CALIXTERIO, VALENN ROSE C.
CALAGUAS, CAMILLE D.
OCAMPO, NICOLE

THANK YOU & GODBLESS !!!