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1. CHAPTER 4 BANKS AND BANK PERSPECTIVE

2. Discussion 4.1 – Historical Perspective Worldwide & Philippine Banking History Banks have historically served as safe keepers of deposits and money, ensuring the trust and confidence of depositors. From the beginning of financial systems, banking institutions have evolved with the supervision of government agencies to maintain stability and sustainability. The bangko S entral ng P ilipinas (BSP) plays a vital role in regulating and supervising banks, ensuring soundness and public trust.

3. Philippine Banking History The history of Philippine banking began with banks serving mainly as safe keepers of money and later expanding into lending and other financial services. In 1949, only 11 banks operated in the country, consisting of Philippine-chartered banks, foreign bank branches, archdiocese-controlled banks, one government-owned bank (Philippine national bank), and one Filipino private bank (Philippine bank of commerce). To strengthen the sector, the government implemented policies requiring majority Filipino ownership and limiting foreign bank expansion, which gave local banks room to grow. The establishment of the central bank in 1949 ensured stricter supervision and regulation. Over time, the industry expanded to include commercial, thrift, rural, and cooperative banks, with land bank of the Philippines emerging as the largest government-owned bank by 2022.

4. Classification and Function of Banks 1.Universal Banks Universal banks are a type of bank that has the widest scope of activities. They perform the functions of commercial banks but can also engage in investment banking and other financial enterprises. They have higher capital requirements and broader powers, making them the biggest players in the banking system. Examples include BDO UniBank , land bank of the P hilippines, and MetroBank .

5. 2. Commercial Banks Commercial banks are institutions that accept deposits, issue letters of credit and drafts, buy and sell foreign currency, and provide loans. They also invest in securities, receive deposits of money and property, and offer trust and safe-keeping services. They cater to individuals, businesses, and corporations. The number of their branches and offices has shown continuous growth from 2000 to 2022.

6. 3.Thrift banks Thrift banks are banks that encourage savings and grant loans, both secured and unsecured. They invest in receivables, bills of exchange, and other marketable papers, while also providing home financing and support to small and medium enterprises. They are more community-oriented compared to commercial banks. Their branches and offices have also expanded progressively between 2000 and 2022.

7. 4.Rural banks Rural banks are banks that provide loans and advances mainly to farmers, fishermen, and small merchants. They aim to support rural communities by offering credit and other financial services tailored to local needs. Examples include agricultural rural bank, C ebuana L huillier rural bank, and B ayambang rural bank. Their number of branches and offices has fluctuated over the years, showing both growth and decline between 2000 and 2022.

8. 5.Cooperative banks Cooperative banks are institutions organized by cooperatives to provide banking, financial, and credit services to their members. They operate primarily to benefit their cooperative groups rather than to generate profit. Examples in the P hilippines include the cooperative bank of C otabato and the national teachers and employees cooperative bank.

9. 6.Islamic banks Islamic banks offer financial services that comply with I slamic principles, such as safekeeping of funds and opening savings accounts without involving profit and interest ( riba ). They provide opportunities for investment and allow depositors to participate in banking while following sharia rules.

10. 7.Digital banks Digital banks are banks that operate mainly through online and electronic platforms, offering financial products and services without physical branches. They allow clients to open accounts, deposit, withdraw, transfer funds, and invest conveniently through digital channels. These banks issue electronic money, handle foreign currency deposits, and provide a wide range of financial transactions. As of J uly 2022, the B angko S entral ng P ilipinas (BSP) has authorized several digital banks, including overseas F ilipino bank, T onik digital bank, Maya bank, U niondigital bank, G otyme bank, and U nobank .

11. Bank sources of funds Banks obtain their funds mainly from deposits, which serve as the core of their operations. Individuals and businesses place their money in checking, time, and savings deposits, and these funds are then used by banks to provide loans to borrowers. Deposits allow banks to perform their role as financial intermediaries, channeling money from savers to those who need financing. Apart from deposits, banks also earn income through interests on loans, fees from services, and returns from investments or securities trading.

12. Discussion 4.3: non deposit liabilities Non-deposit liabilities are borrowed funds of banks that are not deposits. In the P hilippines, the most common form is repurchase agreements (repos). Under this arrangement, a bank sells securities to a buyer with an agreement to repurchase them at a predetermined price and date. Repos serve as short-term borrowing tools, usually overnight, and are strictly regulated by the BSP.

13. Trust and investment banking Banks also perform fiduciary or trust functions by managing and holding in trust the properties and/or funds of clients. Through legal agreements, they provide investment and wealth management services.

14. Unit Investment Trust Funds (UITFs) Institutional Trust Account a. Employee Agreement b. Preneed Accounts c. Other Institutional Trust Account Individual Trust Accounts a. Personal Trust i . Personal Management Trust ii. Testamentary Trust b. Personal Pension Fund c. Personal Retirement Fund d. Other Individual Trust Accounts

15. DISSCUSION 4.4: BANCASSURANCE In the banking sector, banks offer insurance products to protect depositors' funds. This is done in cooperation with the B angko S entral ng P ilipinas (BSP) and the P hilippine deposit insurance corporation (PDIC). The PDIC provides insurance coverage to depositors of a bank, up to a maximum of P500,000.00 per depositor per bank. Bancassurance is a significant business collaboration within the financial industry, highlighting the synergy between banking and insurance services. Both banking and insurance are integral parts of the financial services sector, and through B ancassurance , these two entities cooperate to deliver enhanced services. This cooperation benefits their clients through cross-selling, which involves presenting and selling various financial products to the bank's clients. This cross-selling approach is conducted with the bank's approval and can take the form of verbal and written agreements.

16. Financial Products with No Investment Risks: 1. Retail Lending - Personal loans - Credit cards - Auto loans - Home mortgage loans - Other related retail loan products 2. Insurance Products - Traditional/Whole life endowment - Term insurance

17. 3. Other retail financial products - Cash cards - Debit cards - Other related products 4. Other similar products authorized by the MB of BSP

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