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B&FI Lesson1.1

The document provides an overview of the Philippine financial system, highlighting its bank-based nature and the significant role of the banking sector in financial intermediation. It outlines the main functions of the financial system, including resource allocation, risk transformation, and price discovery, as well as the historical development and structure of the system. Key elements discussed include various types of banking institutions and the establishment of the Bangko Sentral ng Pilipinas as the central monetary authority.

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4 views

B&FI Lesson1.1

The document provides an overview of the Philippine financial system, highlighting its bank-based nature and the significant role of the banking sector in financial intermediation. It outlines the main functions of the financial system, including resource allocation, risk transformation, and price discovery, as well as the historical development and structure of the system. Key elements discussed include various types of banking institutions and the establishment of the Bangko Sentral ng Pilipinas as the central monetary authority.

Uploaded by

kjhugno
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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BANKING

AND
FINANCIAL INSTITUTION
Learning Outcomes:

 Identify the nature of the Philippine financial system


 Classify the elementsand functions of the financial syste
 Identify the development and structure of the Philippine
financial system
PHILIPPINE FINANCIAL
SYSTEM:
An Overview
Financial System
The 'financial system' is a term used in
finance to describe the system that allows
money to go between savers and borrowers.
Philippine Financial
System
The Philippine financial system is primarily bank based rather
than capital based.
The banking sector, whose whole assets accounted for more
than 80 percent of the total
resources of the financial system and of GDP in 2010, plays the
primary role in financial
intermediation and is main source of credit in the economy
Six Elements of Financial System

1. Ultimate Lenders and Borrowers


2. Financial Intermediaries
3. Financial Instrument
4. Creation of Money
5. Financial Market
6. Price Discovery
MAIN FUNCTIONS
OF
FINANCIAL SYSTEM
MAIN FUNCTIONS OF FINANCIAL SYSTEM
1.Financial system works as an effective conduit for optimum
allocation of financial resources in an economy.
2.Establishing a link between the savers and the investors
3.Financial system allows ‘asset-liability transformation’. Banks create
claims (liabilities) against themselves when they accept deposits
from customers but also create assets when they provide loans to
clients.
4.Transfers economic resources from one party to another.
5.The financial system ensures the efficient functioning of the
payment mechanism an economy. All transactions between the
buyers and sellers of goods and services are effected smoothly
MAIN FUNCTIONS OF FINANCIAL SYSTEM

7. Financial system helps in risk transformation by diversification, as


in case of mutual funds.
8. Financial system enhances liquidity of financial claims.
9. Financial system helps price discovery of financial assets resulting
from the interaction of buyers and sellers. For example, the prices of
securities are determined by demand and supply forces in the capital
market.
10. Financial system helps reducing the cost of transactions.
Development
of the
Philippine Financial
System
Evolution of Financial System

1) Spanish period
2) American period
3) Japanese Occupation
4) Post-War and Independence period
5) New Society period
THE SPANISH PERIOD

✓ The established in 1594, represented the first organized financial


institution in the Philippines.
✓ On August 2, 1882, the first savings bank in the country was founded by Father
Felix Huertas and named
✓ A branch of was also opened within a short
span of four years.
✓ At the end of the Spanish regime in 1898, four banks- three commercial and one
savings- were doing business in the Philippines.
THE AMERICAN PERIOD
✓ Postal Savings Bank was created as a division of the Bureau of
posts to promote the habit of the thrift among the people and to
bring banking to the Rural Areas.

✓ During the American Era included the American bank in 1901


which operated for four years.
THE JAPANESE OCCUPATION
✓ The entry of the Japanese Imperial Forces in Manila on January 2,
1942.

✓ The Southern Development Bank (Nampo Kaihatsu Kindo)


opened a branch in manila in 1942 and acted as fiscal agent of
the Japanese government in the Philippines.
POSTWAR AND INDEPENDENCE PERIOD
✓ RCF ( ) which was organized
primarily to provide financial and in the rehabilitation of the country.

✓ the
central bank of the Philippine created under R.A No.265 was inaugurated
in 1949 to administer both the monetary and the banking system of the
republic.
THE SEVENTIES: THE NEW SOCIETY PERIOD
✓ The latter part of 1972 highlighted the growing demands upon the
banking system when the constitution of the New Society called for
constructive reforms and a reorientation of the Philippine political.

✓ The foundation of
the financial system were strengthened with a series of presidential
Decrees and implementing circulars of the central bank.
Structure
of
Philippine Financial
System
Central Bank
▶ BANGKO SENTRAL NG PILIPINAS (BSP) is the Central bank of the
Republic of the Philippines

□ Bangko Sentral ng Pilipinas


o established on 3 July 1993 pursuant to the provisions of the1987
Philippines Constitution and the New Central Bank Act of 1993
o country's central monetary authority, which Central Bank of
Philippines (January 3, 1949) have this before.
o enjoys fiscal and administrative autonomy from the National
Government in the pursuit of its mandated responsibilities
BANKING INSTITUTIONS: Private Banking;
Commercial Banks
▶ institution which accepts deposits, makes business loans, and offers
related services
▶ allow for a variety of deposit accounts, such as checking, savings,
and time deposit
▶ run to make a profit and owned by a group of individuals, yet some
may be members of the Federal Reserve System
▶ primarily concerned with receiving deposits and lending to
businesses
BANKING INSTITUTIONS: Private Banking;
Universal Banks
▶ refers to those banks that offer a wide range of financial services,
beyond commercial banking and investment banking, insurance etc.

▶ a combination of commercial banking, investment banking and


various other activities including insurance
Thrift Banks
▶ Mobilization of small savings, provide loans generally longer and
easier terms.

Rural Banks
▶ Banks entrenched to ensure sufficient institutional credit for
agriculture and other rural sectors. A mobilize financial resources
from rural / semi-urban areas, grant loans small farmers.
Cooperative Banks
▶ a business organization owned and operated by a group of
individuals for their mutual benefit
▶ cooperative may also be defined as a business owned and
controlled equally by the people who use its services or by the
people who work there
▶ focus of study in the field of cooperative economics.
Central Bank
▶ BANGKO SENTRAL NG PILIPINAS (BSP) is the Central bank of the
Republic of the Philippines

□ Bangko Sentral ng Pilipinas


o established on 3 July 1993 pursuant to the provisions of the1987
Philippines Constitution and the New Central Bank Act of 1993
o country's central monetary authority, which Central Bank of
Philippines (January 3, 1949) have this before.
o enjoys fiscal and administrative autonomy from the National
Government in the pursuit of its mandated responsibilities
Other Structure of Philippine Financial
System
▶ External Sector
▶ Nonbank Thrift Institutions
▶ Government Specialized Nonbank Financial Intermediaries
▶ Private Nonbank Financial Intermediaries
▶ Specialized Government Banks
Thank You

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