BANKING IN THE PHILIPPINES

AVEC M. JOHN DARREL RILLOECONOMICS

OUTLINE OF THE DISCUSSION 1) The History of Banking in the Philippines. 2) The Central Bank of the Philippines (Bangko Sentral ng Pilipinas) 3) Duties, functions and Operations of the Bangko Sentral ng Pilipinas. 4) Financial Institutions and objectives.

I. The History IN THE YEAR 1900Act No. 52 was passed by the First Philippine Commission placing all banks under the Bureau of Treasury. The Insular Treasurer was authorized to supervise and examine banks and banking activities.

IN 1933Particular group of Filipinos were trying to conceptualize a central bank for the Philippines.Resulted from a careful understanding of the economic provisions of HARE HAWES CUTTING BILL.

IN FEBRUARY OF 1929

The Bureau of Banking under the Department of Finance took over the task of banking supervision.

IN 1939A bill establishing a central bank was drafted by Secretary of Finance Manuel Roxas and approved by the Philippine Legislature. However, the bill was returned by the US government, without action, to the Commonwealth Government.

February 1948

President Manuel Roxas submitted to Congress a bill “Establishing the Central Bank of the Philippines, defining its powers in the administration of the monetary and banking system, amending pertinent provisions of the Administrative Code with respect to the currency and the Bureau of Banking, and for other purposes.

15 June 1948 The bill was signed into law as Republic Act No. 265 (The Central Bank Act) by President Elpidio Quirino.

3 January 1949The Central Bank of the Philippines (CBP) was inaugurated and formally opened with Hon. Miguel Cuaderno, Sr. as the first governor.

3 July 1993 The Bangko Sentral ng Pilipinas (BSP) was established to replace the CBP as the country’s central monetary authority.

BANGKO SENTRAL NG PILIPINAS The Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of the Philippines. It was established on 3 July 1993 pursuant to the provisions of the 1987 Philippine Constitution and the New Central Bank Act of 1993.

The BSP took over from the Central Bank of Philippines, which was established on 3 January 1949, as the country’s central monetary authority. The BSP enjoys fiscal and administrative autonomy from the National Government in the pursuit of its mandated responsibilities.

BANGKO SENTRAL NG PILIPINAS

VISIONThe BSP aims to be a world-class monetary authority and a catalyst for a globally competitive economy and financial system that delivers a high quality of life for all Filipinos.

MISSIONBSP is committed to promote and maintain price stability and provide proactive leadership in bringing about a strong financial system conducive to a balanced and sustainable growth of the economy. Towards this end, it shall conduct sound monetary policy and effective supervision over financial institutions under its jurisdiction.

Functions and Operations OBJECTIVESThe BSP’s primary objective is to maintain price stability conducive to a balanced and sustainable economic growth. The BSP also aims to promote and preserve monetary stability and the convertibility of the national currency

Functions and OperationsRESPONSIBILITIESThe BSP provides policy directions in the areas of money, banking and credit. It supervises operations of banks and exercises regulatory powers over non-bank financial institutions with quasi-banking functions. Under the New Central Bank Act, the BSP performs the following functions, all of which relate to its status as the Republic’s central monetary authority:

Functions and Operations Liquidity Managementformulates and implements monetary policy aimed at influencing money supply consistent with its primary objective to maintain price stability. Currency issuehas the exclusive power to issue the national currency. All notes and coins issued by the BSP are fully guaranteed by the Government and are considered legal tender for all private and public debts.

Functions and Operations Lender of last resortThe BSP extends discounts, loans and advances to banking institutions for liquidity purposes.

Financial SupervisionThe BSP supervises banks and exercises regulatory powers over non-bank institutions performing quasi-banking functions

Functions and Operations Management of foreign currency reservesThe BSP seeks to maintain sufficient international reserves to meet any foreseeable net demands for foreign currencies in order to preserve the international stability and convertibility of the Philippine peso.

Functions and Operations Determination of exchange rate policydetermines the exchange rate policy of the Philippines. Currently, the BSP adheres to a market-oriented foreign exchange rate policy such that the role of Bangko Sentral is principally to ensure orderly conditions in the market. Other activities, the BSP functions as the banker, financial advisor and official depository of the Government, its political subdivisions and instrumentalities and government-owned and -controlled corporations.

GOVERNANCE OF THE BANK THE MONETARY BOARDexercises the powers and functions of the BSP, such as the conduct of monetary policy and supervision of the financial system. Its chairman is the BSP Governor, with five full-time members from the private sector and one member from the Cabinet.

GOVERNANCE OF THE BANK

Alfredo C. Antonio, Felipe M. Medalla, Armando L. Suratos, Juan D. De Zuñiga, Jr., and Valentin A. Araneta. (Jim Guiao Punzalan)

GOVERNANCE OF THE BANK THE GOVERNOR Is the chief executive officer of the BSP and is required to direct and supervise the operations and internal administration of the BSP.

A deputy governor heads each of the BSP's operating sector as follows:Monetary Stability Sector takes charge of the formulation and implementation of the BSP’s monetary policy, including serving the banking needs of all banks through accepting deposits, servicing withdrawals and extending credit through the rediscounting facility.Supervision and Examination Sector enforces and monitors compliance to banking laws to promote a sound and healthy banking system.Resource Management Sector serves the human, financial and physical resource needs of the BSP

GOVERNANCE OF THE BANK

BSP’S IN THE PHILIPPINES BSP MAIN COMPLEX The BSP Main Complex in Manila houses the offices of the Governor, the Monetary Board and the different operating departments/ offices. The Complex has several buildings, namely: 5-Storey building, Multi-storey building, the EDPC building and the BSP Money Museum, which showcases the Bank's collection of currencies

BSP’S IN THE PHILIPPINES

BSP SECURITY PLANT COMPLEX The Security Plant Complex which is located in Quezon City houses a banknote printing plant, a securities printing plant, a mint and a gold refinery. The banknote printing plant and the mint take care of producing currency notes and coins, respectively.

BSP’S IN THE PHILIPPINES The BSP has three regional offices performing cash operations, cash administration, loans and rediscounting, bank supervision and gold buying operations. These regional offices are located in La Union, Cebu City and Davao City and 19 branches all over the Philippines.

FINANCIAL INSTITUTIONS WHAT ARE FINANCIAL INSTTITUTIONS?- government agency or privately owned entity that collects funds from the public, and from other institutions, and invests those funds in financial assets, such as loans, securities, bank deposits, and income generating property.act as intermediaries between saver and borrowers and are differentiated by the way they obtain and invest their funds.

FINANCIAL INSTITUTIONS IDENTIFIED TYPES OF FINANCIAL INSTITUTIONS: 1) Depository financial institutions-

◦ any group that includes commercial banks, savings and loan associations, mutual savings banks, and credit unions-conduct business by accepting public deposits, which are insured by the federal government against loss, and channeling their depositors' money into lending activities.

FINANCIAL INSTITUTIONS IDENTIFIED TYPES OF FINANCIAL INSTITUTIONS:

2) Nondepository financial institutions◦ such as brokerage firms, life insurance companies, pension funds,

and investment companies, fund their investment activities directly from the financial markets by selling securities to the public or by selling insurance policies, in case of insurance companies.

3)Other types are CREDIT UNIONS, STOCK BROCKERAGE FIRMS, and ASSET MANAGEMENT FIRMS.

◦ (Source: Fitch, Thomas P. Dictionary of banking terms. HG 151 F57 2000)

CAPABILITIES AND OBJECTIVES OF FINANCIAL INSTITUTIONS

COMMON OBJECTIVES:Maintain the balance between the returns and risks.act as an intermediary between the capital market and debt market.responsible to transfer funds from investors to the companies. (assist or manage the flow of money in the economy.)

MERCI BEACOUP MES AMIS…ENCHANTE DEVOUS SAVOIR CONNEAU.