BASIC

FINANCE
The Philippine Financial System

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 THE BANGKO SENTRAL NG 1
PILIPINAS
• The Bangko Sentral ng Pilipinas (BSP) was created by the Republic Act No. 7653,
otherwise known as the New Central Bank Act of 1993.
• The BSP is now the Philippines’ central monetary authority that provides policy directions
in the areas of money, banking and credit.
• The BSP’s powers and functions are exercised by its Monetary Board, consisting of seven
members appointed by the president of the Philippines.
• One of the government sector members of the Monetary Board must be a member of the
Cabinet designated by the President of the Republic, which position is currently held by
the Secretary of FInance.
• The New Central Bank Act authorizes the Governor of BSP to appoint up to three Deputy
Governors, subject to the approval of the Monetary Board.
 THE BANGKO SENTRAL NG 1
PILIPINAS
• The Governor is the chief executive officer of the BSP and is required to direct and
supervise the operations and interval administration of BSP.
• The BSP is aided in its bank monitoring and examination processes by credit rating
agencies and financial conglomerates.
• The BSP is also into the upgrading of its domestic prudential standards in areas of
capitalization, connected or pooled lending, loan provisioning, data disclosure, and
qualifications of owners and managers.
• The BSP likewise imposes the requirements on the operations on e-bankers.
• The BSP is backstopped in this regard by the passage of e-commerce law in June 2000
which facilitated the exchange of information and promoted the security of electronic
transactions.
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THE BSP
ORGANIZATION
AL STRUCTURE
https://www.bsp.gov.ph/About%20the%20Bank/BSP+Org+Structure.pdf
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THE BANKING
• The Banking Institution in the Philippines can be categorized as private banking and
government banking.
INSTITUTION
• The private banking institutions are comprised of commercial banking such as
universal banks and ordinary commercial banks; thrift banks like savings and
mortgage banks, private development banks, and stock savings and loan association;
and the rural banks.
• The government banking institutions, on the other hand, consist of Philippine
National Bank (PNB), Development Bank of the Philippines (DBP), Land Bank of
the Philippines, and the Philippine Al-Amanah Bank.
 PRIVATE BANKING 5

INSTITUTION
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1 Commercial Banking Institutions

Banks that fall under commercial banking institutions are the ordinary commercial banks
or non-expanded commercial banks. These banks continue to account for the bulk of the
total resources of banking industry.
 PRIVATE BANKING INSTITUTIONS
5
2 The Thrift Banks
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Thrift banks are primarily engaged in mobilizing the small savings of the people. 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 for
financing their production and consumptions input. The following banks fall under the
category of Thrift Banks :

• The Savings and Mortgages Banks

The primary function of a savings and mortgage bank is to receive time deposit of
different types and to invest its funds in long term investment.
• The Savings and Loan Association
Very similar to the savings and mortgage banks are the savings and loans associations
nowadays. However, these institutions may either be stock or non-stock corporations.
 PRIVATE BANKING INSTITUTIONS
5
2 The Thrift Banks continuation...
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• The Private Development Banks

This is quite different from the government institution of the same name. It is a
government entity, formerly the Rehabilitation Finance Corporations.
• The Rural Banks
Rural Banks fulfill the investment function by allowing small farmers to finance their
needs through the granting of loans for capital or other uses.
 GOVERNMENT BANKING 5
INSTITUTIONS
1 The Philippine National Bank
The Philippine National Bank (PNB) operates under the provision of Executive Order No. 80, the
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1996 revised charter of PNB.

The Development Bank of the Philippines
2
The Development Bank of the Philippines (DBP) started operating in 1935 as the National Loan and
Investment Board. Its first mission was to coordinate and manage trust funds.

The Land Bank of the Philippines

3
The Agrarian Reforms Code created the Land Bank of the Philippines (LBP) to finance the
acquisition and distribution of agricultural estates for division and resell these to small landholders.

The Al-Amanah Islamic Investment Bank of the Philippines

4
The Al-Amanah Islamic Investment Bank of the Philippines (Islamic Bank) was created under
Republic Act No. 6848 for the purpose of promoting and accelerating the socio-economic growth of
Mindanao, particularly the provinces of Cotabato, Lanao del Sur, Lanao del Norte, Zamboanga del
Sur, Zamboanga del Norte, and Sulu.
 NON-BANK FINANCIAL INSTITUTIONS
5
These are other financial institutions which engage in specific functions. They provide services
related to claims, financial information, and advice, manage portfolios of financial assets on behalf
of other economic units, buy and sell claims on institution from clients, and assist in finding sources
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for those economic units seeking loans. These either private or government non bank financial
institution.

Private Non-Bank Institutions

Investment House/Banks
1 The term “investment house” is defined to mean as “any enterprise” which engages in the
underwriting of securities of other corporations”. 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 any enterprise, or written evidences of
indebtedness of a person or enterprise.

Securities Brokers/ Dealers

2 Pursuant to the provision of the Revised Securities Act, no broker, dealer, or salesman must engage
in business in the Philippines as such broker, dealer, or salesman to buy or sell any securities,
including securities exempted under the said law.
 NON-BANK FINANCIAL INSTITUTIONS
5
Private Non-Bank Institutions continuation...

Building and Loan Associations

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3 A building and loan association is a special type of savings institution. Because of its very nature,
however, it falls under this catergory in view of the fact that it also receives savings from members
and lends fund to them.
Credit Unions
4 A credit union is another type of savings institutions. It also has for its purpose the inculcation of the
habit of thrift, frugality, and the idea of helping one another.
Private Insurance
5 Private insurance companies contribute to the country’s socio-economic development as well as to
the insured.
Pawnshops
6 Pawnshops provide credit to small borrowers who are not qualified to obtain other small loans from
financial institution. In pawnshop, the cost of borrowing and terms of payment are generally fair.
 NON-BANK FINANCIAL INSTITUTIONS
5
Private Non-Bank Institutions continuation...

Trust companies
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A trust company is any corporation formed or organized for the purpose of acting as trustee or
administering any trust or holding property or on deposit for the use, benefit, or behoof of others.

Non-stock Savings and Loans Association

8 A non-stock savings and loans association is a corporation engaged in the business of accumulating
the savings of its members.
Financing Companies
9 Financing companies or partnerships, except those regulated by the Bangko Sentral, the Insurance
Comissioner, and the Cooperative Administration Office which are primarily organized for the
purpose of extending credit facilities to consumer and to industrial, commercial, or agricultural
enterprises.
Other Non-Bank Financial Institutions
10 These are financial institutions that are unknown to many people. Fund managers, lending investor,
and venture capital corporations are among these institutions.
 GOVERNMENT NON-FINANCIAL 5

INSTITUTIONS
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The Government Service Insurance System

1
On 13 May 1937, the Government Service Insurance System (GSIS) started its operations. Currently,
the GSIS administers the following:
1. Life Insurance Fund 4. Health Insurance Fund/Medicine
2. Retirement Fund 5. General Insurance Fund/Property Insurance
3. State Insurance Fund/Employees’ 6. Barangay Officials’ Life Insurance
Compensation

The Social Security System

2
On 1 September 1957, the Social Security System (SSS) started its operation. At first, SSS granted only
death, disability, sickness, and old-age benefits under its social security program for the workers in the
private sectors. As its capacity, the funding and administrative experience grew, other benefits have
been added to the program such as hospitalization benefits under the Medicare program, employees’
compensation benefits, and maternity benefits.
 GOVERNMENT NON-FINANCIAL 5
INSTITUTIONS
Philippine Export and Foreign Loan Guarantee Corporation
3
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The Presidential Decree No. 1080 entrusts the Philippine Export and Foreign Loan Guarantee
Corporation (PEFLGC) to undertake the following :
• To guarantee approved foreign loans, in whole or in part, granted to any domestic entity, enterprise,
or corporation, majority of the capital of which is owned by citizen of the Philippines
• To guarantee Philippine banking and financial institutions against loss that may be incurred in
connection with:
• the grant of loans/credit accomodations to exporters, producers of export products, or contractors
with approved service contractors abroad, provided that such exporters, producers or service
contractors are Filipinos or entities majority of the capital of which are owned by the citizens of the
Philippines; and
• the issuance of standby letters of credit or of letters of guarantee, as the case may be, to secure the
performance of approved service contracts abroad entered into by any domestic entity majority of
the capital of which are owned by citizens of the Philippines.
 GOVERNMENT NON-FINANCIAL 5
INSTITUTIONS
The National Home Mortgage Finance Corporation
4
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The National Home Mortgage Finance Corporation (NHMFC) primary purpose is to develop and
provide a secondary market for home mortgages granted by public and/or private home financing
institutions. Under Section 5 of PD No. 1267, the NHMCF is authorized to exercise the following
powers and functions:
• To purchase, acquire, sell, discount, refinance, or otherwise deal in home mortgages or
participation therein under such terms and conditions as may be prescribed by the Board of
Directors of the corporations.
• To borrow funds from domestic or foreign private or public financial institutions as may from
time to time be required for its operations, and to issue bonds, promissory notes debentures, and
other debt instruments in local or foreign currency.
• To own, lease, purchase or otherwise acquire, sell or otherwise dispose of property, real or
personal as may be necessary and appropriate for the conduct of its business.
 GOVERNMENT NON-FINANCIAL 5
INSTITUTIONS
The National Home Mortgage Finance Corporation continuation...
4
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• To invest funds or monies of the corporations not invested in mortgage loans in securities issued by
the national government, Bangko Sentral and other government entities, including government-
owned and controlled corporations, the servicing and repayment of which are fully guaranteed by
the Republic of the Philippines.
• To enter into and perform such contracts with any person or entity, public or private, as may be
necessary, proper, or conductive to the attainment or furtherance of the objectives and purposes of
the corporations.
• To adopt, alter, and use a corporate seal; to sue and be sued; and generally, to exercise all the powers
of a corporation under the Corporation Code of the Philippines which are not inconsistent with P.D
1267.
• To promulgate such rules and regulations and to perform any and all things as may be necessary and
proper to carry out its responsibilities, powers, and function under P.D No. 1267.

FINANCIAL SYSTEM
Financial System describes collectively
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the financial markets, the participants, and
the instruments and securities that are traded
in the said markets. The functions of the
financial system is to channel the funds from
lenders to the borrowers, provide a medium
of exchange, provide a mechanism for risk
sharing and provide a channel through which
the central bank can influence the economy,
in general, and the financial system in
particular.
4
Households
Households or consumers are generally
described as that group receiving income,
majority of which typically come from
wages and salaries. Gross savings are equal
to current income less current expenditures.
Financial Institutions/Intermediaries
Financial institutions channel the funds
from lenders to borrowers. They can also
be the lenders and borrowers themselves. If
they buy securities they are lenders but if
they are the ones issuing the securities, they
are borrowers.
Non-Financial Institution 6
Non-Financial Institution are businesses such as trading, manufacturing, extractive industries,
construction and genetic industries. Non-financial institution can also be the lender and borrowers
just like financial institution.

The Government
The government is the national, provincial, city and towns comprising the Philippines as a whole.

The Central Bank

Is an institution that manages a state's currency, money supply and interest rate. Central banks also
usually oversee the commercial banking system of their respective countries.

Foreign Participants
Foreign participants refers to the participants from the rest of the world such as households,
government, financial and non-financial firms, and central bank. They exchange goods and services
across national boundaries. International trade and international finance are parts of
globalization.

The different institutions
governed by BSP basically
divided into Banking System
and Non-Banking System
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7
• Monetary Board
• Monetary Stability Sector
• Supervision and Examination Sector
• Resource Management Sector
• The Structure of Different Sector
 Monetary Board 8

Governor

Monetary Stability Supervision and

Sector Examination Sector

Resource Management Security Plant Complex

Sector
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THE MONETARY BOARD
The power and functions of the Bangko Sentral ng
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Pilipinas are exercised by its Monetary Board, which

has 7 member appointed by the President of the
Philippines. Under the "New Central Bank Act."
Establishes certain qualifications for the members of the
Monetary Board and also prohibits members from
holding certain positions with other governmental
agencies and private institutions that may give rise to
conflict of interest. With the exception of the members
of the Cabinet, the Governor and other members of the
Monetary Board serve terms of 6 years only to be
removed for cause.

OBJECTIVES OF BSP
Maintain monetary policies conducive to a
balanced and sustainable growth of the
economy.
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It is about maintaining the rule of conduct or policies
in order to have a good supervising and regulating the
financial system of the Philippines. It is mobilizing and
directing the resources to attain sustainable growth of
the economy. They provide policy directions in the
areas of money, banking, and credit.
Maintain price stability in the country.
One of the goals in the economy is to attain price level
stability or stable in general price level and the failure to
achieve this may mean a problem if inflation.
10
Promote and maintain monetary stability and the
convertibility of the peso.
It should maintain the monetary stability to regulate the supply
of money in the economy. It is about influencing the timing,
cost, and availability of money. And maintaining the
convertibility of peso, the conversion of money. A central bank
needs to be able to meet its domestic and international
payments to create confidence in the people it serves and the
countries it deals with abroad.
Maintain stability of the financial system
They ensure that financial institution encourage people and
companies to save for the future, make deposits, etc., to
oversee that will maintain its permanence in the financial
system.
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OBJECTIVES OF BSP
Provide payment and other financial
services to the government, the public,
financial institutions, and foreign official
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institutions.
They continue to give the needs in
the financial environment offering financial
services like in the: Government - issuing
treasury bills Public – make deposits, borrow
and invest, withdrawals Financial Institutions
acquiring capital for investment Foreign official
institution - letter of credit

Supervise and regulate depository

institutions.
It is about directing and controlling the fund that was
accepted as deposits from surplus units.
FUNCTIONS OF THE 12
MONETARY
BOARD
FUNCTIONS OF THE 12
BANGKO SENTRAL
(BSP)
FUNCTIONS OF THE 12
BANGKO SENTRAL
(BSP)
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CONTROLLER OF CREDIT
Controller of Credit
• BSP needs to control credit because controlling credit can control
money supply and if we control money supply there is a possibility that
the prices of goods and services will just be balanced. BSP needs to limit
the credit; they need to prevent the high percentage of credit because
if the credit is high then the money supply is high. There are 9 ways how
BSP can control credit. First ids increasing or decreasing interest rate,
when the interest rate is high then the people that is possibly borrows
money will decrease. Second increasing or decreasing the legal reserve
requirement of the bank, if the reserved requirement of the bank is high
then the possibility of the bank to borow money can limit also. Then, by
regulating requirements of stock exchange securities, open market
operations can also limit the credit because open market operations
influence the money supply. When BSP sells securities the money supply
will decrease and when they buy securities, money supply will increase.
Credits can also limit by imposing ceilings on total amounts bank can
lend, rationing central bank credit, restricting imports, selecting projects
for funding and moral suasion by encouraging people to support and
cooperate with the rules and regulations of central bank.
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MONETARY POLICY AND
THE
FINANCIAL
Monetary Policy refers to the manipulations of the

SYSTEM
money supply to affect the economy of the country
as a whole. It largely impact interest rates. Increase
in the money supply lower short term interest rates,
encouraging investments and consumptions.
Expansionary monetary policy may lower interest
rates and stimulates investment and consumption in
the long run. Monetary Policy Refers to
Regulations that will affect money supply to
benefit the economy. Among the tools of monetary
policy are money supply, open market operations,
reserve requirement on bank, discount rate, interest
rate, credit control, among others.
 Pateros Technological College | 2024

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