Financial Sector at work in the Philippines

Focuses on financial sector at work

1. FINANCIAL SECTOR Monetary Policy Financial Institutions MONETARY POLICY - Manipulation of money supply in the economy FINANCIAL INSTITUTIONS - Implements the Monetary Policy •To have a balanced economy Investment = Savings •Smooth transfer of money, Stability of Money Supply & Control of Inflation •Classified as Banking & Non-Banking acc. to their functions & objectives BANK - Institution for lending, borrowing, issuing, or managing money. •Receives money deposited by people BANK People who have a lot of money People who need capital for business •For economic progress, people should save money in the bank •Classified based on their objectives and functions

2. 1) COMMERCIAL BANKS •Largest among the banks in terms of functions •Accept all kinds of deposits and give out loans •Implemented the Universal Banking ( Uni -Banking) or Expanded Bank •Some merged their capital ATM is used In their transactions 2) THRIFT BANK or Savings Bank •Most common kind of bank • 3 Types of Thrift Bank: ► Savings and Loan Association - Give loans and accept deposits from the member ► Private Development Bank -Accepts deposit w/c can be used by small medium-scale businessman ► Savings and Mortgage Bank - Encourage people to save in the bank, Accept pawned items 3) RURAL BANK •Aims to help farmers to have capital P2 million to be established •Created through RA No. 720 , known as Rural Banks Act . BANKING INSTITUTIONS

3. 4) TRUST COMPANIES •Take care of the properties and funds of people •Manage funds and properties of church and other charitable inst. 5) SPECIAL BANKS •Promote and implement its program for socio-economic develop’t of the country. •Includes banks that will look after the welfare of the farmers & businessmen, and the Muslims. a) Land Bank of the Philippines - Became the main bank of the Phil after the PNB was privatized. - Established through RA No. 3844 Enforcing land reform - Help entrepreneurs who are in need of capital b) Al- Amanah Islamic Investment Bank of the Philippines -Only bank that is authorized to offer Islamic banking. -Licensed to do both commercial and investment banking -Pres. Corazon Aquino signed into law RA No. 6848 c) Development Bank of the Philippines -Help the government in improving the economy -Gives financial help to promote economic projects and programs in agriculture & industry. -Provide loans to small & medium-scale industries w/ minimal interest Charter of AAIIBP

4. 6) INTERNATIONAL BANKS a) Asian Development Bank -Member countries are from Asia and Far East region -Aims to provide economic and social support to the developing member countries loans and technical support -Started its operation on Dec 1966 in Manila b) International Monetary Fund -Provide loans to the member countries -Like the World Bank , countries that have great contributions, control it. -Created an international reserve currency or Special Drawing Right - SDR: value of w/c the equivalent of the average value of 5 currencies being borrowed by other countries to pay for their trade deficit -Provide short-term loans -IMF and WB Central Bank control the value of the currency or the borrowing country -The United States has the biggest contribution c) World Bank -started in1946 in Washington Int’l Bank for Reconstruction & Develop’t -rebuild the economy of the country that were destroyed during WWII. -give loans to countries that need financial help to rebuild their economy -Provide long-term loans

5. NON-BANKING INSTITUTIONS 1) Government Service Insurance Sysytem (GSIS) •Safeguard the interest and other welfare of all gov’t employees •Members receive various services such as insurance and financial help through loans and pension for the retired members. •Provides dividend to all members 2) Social Security System (SSS) • RA No. 1992 Support all members that come from the private sector •All employees from the private sector pay their contributions to receive the same benefit as to those of the government employees 3) Pag -IBIG ( Pagtutulungan sa Kinabukasan - Ikaw , Bangko at Gobyerno ) •Help the members have their own houses •Receives contribution from members from gov’t , private employees, & OFW’s 4) National Home Mortgage Finance Corporation •Created through Presidential Decree No. 1267 •Help individuals to own a house and lot through modes of installments 5) Pawnshop •one of the business ventures •serves as a middleman to people who need financial help •accepts anything of value as collateral to their loan

6. CENTRAL BANK ●Bank of the Banks ●A central inst. designed to bring about unified control of the financial system of the country. ●A public inst. That operates primarily for service and not for profit ●Deals only with banking system and not directly w/ private customers ●Does not compete with commercial banks ●It is government-owned, like the central bank of the other countries. Objectives: ► Maintain internal and external monetary stability ► Preserve the international value and convertibility of the peso ► Foster monetary credit and exchange conducive to a balanced and sustainable growth of the economy

7. Bangko Sentral ng Pilipinas ●Created through RA No. 265 ●It was patterned after the Central Banks of Guatemala & Paraguay ●It is the country’s central monetary authority ●1 st Governor , Miguel Cuaderno Exchange Control Program Never allowed himself to be dictated by the Int’l Monetary Fund ●In 1933, The Central Bank was reported to bee losing P300 billion ● Pres Fidel Ramos signed into law RA No. 7653 Central Bank Act ● Central Monetary Authority is called Bangko Sentral ng Pilipinas ► 7 Board Members – appointed by the Pres of the Philippines ► Governor – act as a chairman ► Cabinet Member – Government representative ► 5 full time Private Sector representative Bangko Sentral Monetary Board – highest policy-making body ●The members have fixed terms except for the Cabinet Secretary – represents the incumbent administration

8. The Bangko Sentral ng Pilipinas has several functions: Safe keeper and controller of foreign currencies, gold, and payments for foreign and local debts; 2) Issues peso bills in exchange for foreign currencies and regulates the money supply in the economy; 3) Controls & decide whether to lend or not to lend money to other banks; 4) Safe depository of public funds; 5) Acts as clearinghouse that monitors if checks issued by the banks with each other have funds; 6) Acts as rediscounting window by rediscounting the commercial papers of the banks and providing loans to them; and 7) Imposes the reserve requirement system among commercial banks/