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CENTRAL BANK
OF THE
PHILIPPINES

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The Bangkok Sentral ng Pilipinas is the central monetary authority. It is primarily

responsible in implementing and administering the policies formulated by the Monetary
Board.

It regulates the flow of money and credit into the whole economy in order to attain
monetary stability and sustainable economic growth.

The Bangkok Sentral supervises the banking institutions and regulates many non-bank
financial institutions.

Cooperatives are under the supervision of the Cooperative Development Authority , office
of the president .

Private insurance companies are supervised by the Insurance Commission.

On the other hand, the Securities and Exchange Commission has the power to supervise
and regulate the operations of other financial institutions such as investment, houses,
investment companies, financing companies, securities dealers and brokers, and lending
investors.

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The Development of Central Banking

The development and growth of central banking has been a gradual and slow process .

The oldest central banks emerged in Europe because of the great need to protect the interest of the bankers and to
improve monetary and financial conditions.

The first central banks were privately owned and we're generally unknown as banks of issue or national banks.

1656- The oldest central bank is the Riksbank of Sweden

1694- The Bank of England is considered as the first central bank because it developed the fundamentals of central
banking.

1800- In Europe, central banks were organized in countries such as France, Netherlands (1814) and Norway (1816).

1860- Russia founded its central bank

1882- Japan organized it's Bank of Japan

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The Development of Central Banking

At the start of the 20th century, the countries of the New World, and some part of the Old World, like China and
India, were still without central banks.

1914- The United States organized its central banking system (composed of 12 Federal Reserve Banks)

1942- The Bank of Thailand was established

1953- Bank of Indonesia

1958- Central Bank of Malaysia

In the Philippines, its central bank had been created by law in 1948 but started its operations in 1949.

February 1929- The Bureau of Banking under the Department of Finance took over the task of Banking
supervision.

February 1948- President Manuel Roxas submitted To Congress a bill establishing the Central Bank of the
Philippines

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The Development of Central Banking

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

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

July 3, 1993- Republic Act No. 7653 also known as The New Central Bank Act, was passed
establishing the BSP, replacing CBR as the country’s central monetary authority.

February 14, 2019- Republic Act No. 11211 was passed amending R.A. No. 7653. The charter
amendments bolster the capability vof the BSP to safeguard price stability and financial
system stability.

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The Central Bank of the Philippines

The concept of a Central Bank was developed in 1933 by Miguel Cuaderno, the first governor of the
Central Bank of the Philippines.

For thirteen years, he conducted a research on the various central banks of many countries.

1946- a formal preparation for the establishment of a Central Bank began upon instruction of
President Manuel Roxas.

Central of Guatemala as the model for our Central Bank

The Monetary Board is the policy making body of the Bangkok Sentral ng Pilipinas. It is composed
of seven members who are appointed by the President of the Philippines.

The chairman is the Governor of the Bangkok Sentral ng Pilipinas who serves a six- year term.
Other five members come from private sectors.

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Latest Composition
of Monetary Board 1. The Minister of Finance
was the chairman f the
Monetary Board.
4. The governor of the
Central Bank
1972- change in the 2. The members were the
President of the

5. Three other

person
from private sector
Philippine National Bank
membership of the (PNB).

3. The chairman of the

Monetary Board Development Bank of the
Philippines (DBP)

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Changes was proposed:

1. To emphasize the important role of the Monetary functions
2. To stress the need for more efficient coordination of the planning and private investment function
with the regulation of the financial and monetary system
3. To eliminate the possible conflict of interests of the PNB and DBP which are regulated by the
Central Bank, being members of the Monetary Board.

The New Central Bank Act took effect on June 14, 1993. It established an independent Central
Monetary Authority which is known as the Bangkok Sentral ng Pilipinas.
The capital of the Bangkok Sentral is P50 billion.
In contrast, the 1972 CB Act amendment gave only two seats in the Monetary Board to the private
sector.

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Objectives of the Bangko Sentral

The Bangkok Sentral is responsible for the administering the monetary, banking and credit system of the
country. It has been given the task of attaining the following principal objectives:

1. The primary objective is to maintain price stability conducive to a balanced and sustainable growth of the
economy.
2. It shall also promote and maintain monetary stability and the convertibility of the peso.

To achieve the primary goal of the Bangkok Sentral, there is a great need for a close and efficient
coordination and cooperation between monetary and fiscal policies and practices.
The internal factors which hamper the achievement of the principal objectives of the Bangkok Sentral are

1. wrong economic planning

2. improper implementation
3. unfavorable policies
4, lack of coordination between the BS and the national government in matters of policies.

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Functions of the Central Bank

1. It is a bank of issue. A central bank has a complete monopoly of note issue.
*The main reasons for granting the central bank,
the sole power to issue notes are:
1. To ensure uniformity in money
2.To effect government supervision over money supply
3. To give prestige on the central bank,
4. To become a good source of profit for the government

2.It is the government’s banker, agent and advised.

3. It is the custodian of the cash reserves of banks.

4. It is the custodian of the nation’s reserves of international currency.

*Under the gold monetary standard (until 1914), a central bank had to keep sufficient gold to be
able to pay its notes (paper money)which would be presented by money.
* In the Philippines, the acceptable foreign exchange are the US dollars, the Swiss francs, the
Japanese yen, the German mark, and the British pound.

5. It is a bank of rediscount and lender of last resort.

* Rediscounting- the central bank charges interest on its loans to the banks.

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Functions of the Central Bank

6. It is a bank of central clearance and settlement.

*Settlements among banks is easier and more convenient if these are performed by a central
bank.
*In case the checks issued and cashed by banks within Metro Manila, clearing of checks is
conducted by the Philippine Clearing House Corporation.
7. It controls credit.
*The Bangkok Sentral can control credit by:

1. increasing or decreasing interest rates

2. increasing or decreasing the legal reserves requirements
3. regulating the margin requirements of stock exchange securities
4. rationing central bank credit or imposing ceilings on the bank lending
5. buying or selling government bonds
6. restricting imports
7. selecting projects for funding
8. persuading all parties concerned to support and cooperate with the monetary Policies

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MONETARY POLICIES

The most important element of a good monetary

policy is its sincere and deep concern for the welfare of
the people. In this connection, the Philippine
government has been stressing that its main program is
to improve the quality of life of the people.

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Limitations of
the Monetary
If the monetary policy is a tight credit policy in order to
Policies
reduce inflation, the national government should then be
Monetary policy, as defined by Prof.
James Boughton, is the process rational to it’s expenditures.
whereby the monetary authority
Tight credit policy means enforcing tight limits on the
attempts to achieve a desired set of
economic goals by controlling amount of time a buyer can pay a debt.
neither money supply, the cost and Widespread of unemployment due to very low production.
availability of credit, or the
allocation of credit to it’s various
Those who formulate monetary policies are human beings.
uses. Our monetary policies are dictated by the IMF.

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BS Supervises the

Banking Institutions Universal bank/expanded commercial bank

Ordinary commercial banks
Savings and mortgage banks
Private development banks
Stock savings and loan association
Rural banks
Government banks such as PNB, DBP, LBP,
and Philippine Amanah Bank

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BS REGULATES THE NON-

BANK FINANCIAL
INSTITUTIONS Investment Houses

Investment Companies
Financing Companies
Securities dealers and brokes
Non-stock savings and loan associations
Lending investors
Pawnshops
Building and loan associations
Fund managers for retirement,provident and
pension funds

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1. To ensure full compliance with laws, rules, and regulations .

2. To ensure that the financial institutions being supervised and
Purposes of regulated are operating on a sound financial basis .
Supervision 3. To act as guardian of depositors and money market investors .
and Regulation 4. To protect the interests of teh government's investments.
5. To protect the interet of other creditors of financial insttitutions.
6. To ensure the stability, stability, solvency, and safety of our
financial system.

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TYPES OF EXAMINATION
1. GENERAL OR REGULAR EXAMINATION
This is undertaken once a year. Such examination covers the verification
of assets, liabilities and capital accounts to determine the stability and
solvency of the financial institutions.

2. SPECIAL OR INTERN EXAMINATION

This is conducted as often as necessary. It includes a review of a special
account or groups of accounts such as loans or deposits.

3. SPECIAL INVESTIGATION
Such investigation is conducted when a compliant is received by the
Bangko Sentral from a borrower , a depositor, a stockholder, or an
employee, or even from anybody regarding the operation of a financial
institution.

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Benefits of Bank Supervision

The Supervision of the banking System by the Banko Sentral is intended to protect public interests as
well as the banking system. The benefits of the bank supervision to the publc must surpass the cost of
controls. The principal benefits of bank control are:

1. Prevention of over-expansion or under-expansion of money and credit through a system-wide

monoply or through excessive competition.

2. Elimination of local monopoly
3. Protection of deposits against the consequences of bank failures.

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1. To ensure full compliance with laws, rules, and regulations .

2. To ensure that the financial institutions being supervised and
Purposes of regulated are operating on a sound financial basis .
Supervision 3. To act as guardian of depositors and money market investors .
and Regulation 4. To protect the interests of teh government's investments.
5. To protect the interet of other creditors of financial insttitutions.
6. To ensure the stability, stability, solvency, and safety of our
financial system.

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The Effectiveness of Supervision and Regulation

The supervisory and regulatory agencies of the government, like the Bangko Sentral, Securities and
Exchange Commission (SEC) , and other offices , are putting into gear time and effort in order to
ensure the effectiveness of supervision and regulation of financial institutions on a continuing basis.

BS did not hesitate to place under close supervision or controllership banks which have committed,
even at the slightest indication, mismanagement and fraud in their operations.

In the case of financing companies under the supervision and regulation of the Securities and

Exchange Commission, the latter issues cease and desist order which, in effect, stops the lending
operation of the financial institution concerned. Like the Bangko Sentral, the SEC has also the power
to place a financial institution under receivership as a means of protecting the interest of creditors
and stockholders.

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Philippines 2000 Strategies that have been adopted ;

commitment to a planned free market
economy;
The Philippines 2000 has become the
giving the people a stake in
central program of the Ramos
development;
government. President Fidel Ramos has industrializing from a base of agricultural
envisioned the Philippines - by the year productivity;
2000 - to attain its newly industrialized encouraging a high saving rate;
developing an educated work force;
country-status. By that year, the
fostering export industries; and
President believes that most Pilipinos
building a solid structure.
will have decent and dignified existence.

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Bangko Sentral and the Philippines 2000

The new central bank Act declares as a policy that the state shall maintain a central monetary authority
that shall function and operate as an independent and accountable body corporate in the discharge of its
mandated responsibilities in the areas of money, credit, and banking. the such rental monetary authority
shall enjoy fiscal and administrative independence. The name of the aforementioned central monetary
authority is Banko Sentral ng Pilipinas.

It shall have supervision over the operations of banks and exercise such regulatory powers over the
operations of finance companies and non bank financial institutions performing quasi-banking functions,
and other institutions performing similar functions.

The new Central bank Act also states that the primary objective of the Banko Sentral is to maintaine
price stability conducted to a balance and sustainable growth of the economy. it shall also promote and
maintain monetary stability and the convertability of the peso.

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CB Reorganization

To enhance the efficiency of the new Bangko Sentral, the

Central Bank has been restructured. Redundant positios
were abolished. Several operating departments were merged
into three. Several operating departments were merged.
Hierarchal levels of authority across all departments were
reduced from five to three.

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Thank You
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