FINANCIAL INDUSTRY

STRUCTURE
CHAPTER 13
Learning Objectives
• BANKING INDUSTRY STRUCTURE

• NONDEPOSITORY INSTITUTION
A Brief History of Philippine
Banking
The First Bank:

Founded in 1851, Bank of the Philippine Islands is the first bank in the Philippines and
in the Southeast Asian region. BPI is a universal bank and together with its subsidiaries
and affiliates, it offers a wide range of financial products and solutions that serve both
retail and corporate clients.
Many Kinds of Money: Pre- Period Money
Hispanic Era – today's Pre- Hispanic Era Barter ring/ piloncitos
money Spanish Era Dos mundos/ cobs or
1521-1897 macuquinas
Revolutionary Period Revolutionary notes/ two
1898-1899 centavo copper coins
American Period BPI and PNB notes/ one
1900-1941 Peso Coin
The Japanese Occupation Guerilla Notes/ Japanese
1942-1945 War notes
The Philippine Republic
 Creating a National
Currency:

After the United States took

control of the Philippines, the
United States Congress passed the
Philippine Coinage Act of 1903,
established the unit of currency to
be a theoretical gold peso (not
coined) consisting of 12.9 grains of
gold 0.900 fine (0.0241875 XAU).
The Banking Crisis: 1981
to 1987

Between 1981 and the middle of

1987, the Philippine economy
faced a major crisis in the
financial sector. Three
commercial banks, 128 rural
banks, and 32 thrift institutions
failed, and 2 other private banks
were under intervention.
A Revolution in Banking:
The Bangko Sentral ng Pilipinas
(BSP) aims to achieve 70%
digital banking inclusion among
Filipino adults and a 50%
increase in digital retail
transaction volume by the end of
2023
 The Future of Banks
• A typical large commercial bank now offers
investment and insurance products as well as the
more conventional deposit accounts and loans.
• Allowing a commercial bank, investment bank and
insurance company to merge and form a Financial
Holding Company.
Financial holding companies is a bank
holding company that can offer non-
banking financial services

Non depository Institutions a financial

transaction, and that does not provide
traditional depository services
Five major categories of Nondepository
Institutions:

• Insurance companies
• Pension funds
• Securities firms
• Government sponsored enterprises
• Finance companies
Insurance companies financial intermediaries which offer direct insurance or
reinsurance services, providing financial protection from possible hazards in
the future.
Two types of insurance:
• Life insurance
• Property and Casualty insurance
Life insurance comes in two basic forms:
• Term life insurance provides a payment to the policy holders beneficiaries in
the event of the insured’s death any time during the policy's term
• Whole life insurance is a combination of term life insurance and a savings
account
 Pension fund

An employee benefit that

commits the employer to make
regular contributions to a pool
of money that is set aside in
order to fund payments made
to eligible employees after they
retire.
 Defined benefit plans

provide a fixed, pre-established benefit for

employees at retirement. Employees often
value the fixed benefit provided by this
type of plan. On the employer side,
businesses can generally contribute (and
therefore deduct) more each year than in
defined contribution plans.
 Defined
Contribution (DC) Plan
is a type of retirement plan in which the
employer, employee or both make
contributions on a regular basis.
The most common type of defined
contribution plan is a savings and thrift plan.
Under this type of plan, the employee
contributes a predetermined portion of his or
her earnings (usually pretax) to an individual
account, all or part of which is
matched by the employer.[2]
 Vesting

is the point in time when the rights and

interests arising from legal ownership of
a property are acquired by some person.
Vesting creates an immediately secured
right of present or future deployment.
 Broker

is an individual or firm that acts as an

intermediary between an investor and a
securities exchange. A broker can also
refer to the role of a firm when it acts as
an agent for a customer and charges the
customer a commission for its services.
 Finance Company

is an organization that makes loans

to individuals and businesses.
Unlike a bank, a finance company
does not receive cash deposits from
clients, nor does it provide some
other services common to banks,
such as checking accounts.
 Hedge Fund

Actively managed investment pools whose

managers use a wide range of strategies,
often including buying with borrowed
money and trading esoteric assets, in an
effort to beat average investment returns
fortheir clients.
 THREE TYPES OF LOANS

Consumer finance Business finance Sales finance

• firms provide • companies • companies
small provide loans to specialize in larger
installment businesses. loans for major
loans to purchases such as
individual con- automobiles.
sumers.