Article VIII- SELECTIVE REGULATION

OF BANK OPERATIONS
SECTION 104- GUIDING PRINCIPLE- the
monetary board shall use the powers
granted to it under this act to ensure that
the supply, availability and cost of money
are in accord with the needs of the
Philippine economy.
- Bank credit is not granted for
speculative or factual purposes prejudicial
to the national interests. The regulations
on bank operations shall be applied to all
banks of the same category uniformly and
without discrimination.
SECTION 105. MARGIN
REQUIRMENTS AGAINST
LETTERS OF CREDIT.
- The monetary board may at any time
to prescribe minimum cash margins
for the opening of letters of credit,
and may relate the size of the
required margin to the nature of the
transaction to be financed.
- The specific requirements for margin are based
on the two types of accounts which results a
hundred possible combinations .
 The rule- based margin- your margin obligations
are calculated by a defined formula and applied
to each marginable product. This is more
common type of margin strategy used by
security traders.
 The risk- based margin-your margin
calculations are based on the risk inherent in
your trading portfolio. The position in your
account are evaluated, including any hedged
positions that decrease potential risk, and based
on the risk profile , used to create margin
requirements.
 SECTION 106. REQUIRED
SECURITY AGAINST BANK LOANS.
In order to promote liquidity and solvency
of banking system, the monetary board
may issue such regulations as it may deem
necessary with respect to the maximum
permissible maturities of the loans and
investments which the banks may make,
and the kind and the amount of the
security to be required against the various
types of credit operations of the banks.
- A secured loan in which the borrower
pledges some assets for example a car
or a property as a collateral for the
loan which the become a secured debt
owed to the creditor who gives the
loan. The debt is thus secured against
the collateral and if the borrower
defaults , the creditor takes permission
of the asset used as collateral and may
sell to it regain some or all of the
amount originally loaned to the
borrower.
SECTION 107. PORTFOLIO CEILINGS
-Whenever the Monetary Board considers it
advisable to prevent or check an expansion of
bank credit, the Board may place an upper limit
on the amount of loans and investments which
the banks may hold, or may place a limit on the
rate of increase of such assets within specified
periods of time. The Monetary Board may apply
such limits to the loans and investments of each
bank or to specific categories thereof.
-In no case shall the Monetary Board establish
limits which are below the value of the loans or
investments of the banks on the date on which
they are notified of such restrictions. The
restrictions shall be applied to all banks
uniformly and without discrimination.
 SECTION 108.MINIMUM CAPITAL RATIOS

-The Monetary Board may prescribe

minimum ratios which the capital and
surplus of the banks must bear to the
volume of their assets, or to specific
categories thereof, and may alter said
ratios whenever it deems necessary.
ARTICLE IX - COORDINATION OF
CREDIT POLICIES BY GOVERNMENT
INSTITUTIONS

SECTION 109. Coordination of Credit

Policies.
-Government-owned corporations which
perform banking or credit functions shall
coordinate their general credit policies with
those of the Monetary Board.
 CHAPTER V

FUNCTIONS AS BANKER AND

FINANCIAL ADVISOR OF THE
GOVERNMENT
This chapter focuses on the functions of the
banker in the Government.
If we say BANKER, it is a person who engages
in the business of banking. In short, in the BSP
or the Bangko Sentral of the Philippines, it is
simply stated that the Monetary Board is the
one who runs it.
If we say FINANCIAL ADVISER OR ADVISOR,
they are the one who suggest and renders
financial services to clients based on their
financial situation. In other word, they are the
one who answer clients questions about
financial plans and strategies and giving
financial advice.
 OVERVIEW OF FUNCTIONS
AND OPERATIONS OF THE
BSP.
-TheBSP has the authority over banks and regulates
non- banks financial institutions. Its primary objectives
was maintaining price stability. It also aims to promote
and preserve the convertibility of the national currency.
-Its functions includes liquidity management,
currency issue, lender of last resorts, financial
supervisions, management of foreign currency reserves
determination of foreign exchange rate policy and other
activities ( e.g. banker, financial advisor and official
depository of the government).
 ARTICLE I- FUNCTIONS AS
BANKER OF THE
GOVERNMENT

SECTION 110. DESIGNATION OF BANKO SENTRAL AS

BANKER OF THE GOVERNMENT- The Bangko Sentral
shall act as a banker of the government, its political
subdivisions and instrumentalities.
SECTION 111. REPRESENTATION WITH THE
INTERNATIONAL MONETARY FUND – The Bangko
Sentral shall represent the Government in all dealings,
negotiations and transactions with the international
Monetary Fund and shall carry such accounts as may
result from Philippine membership in, or operation
with, said Fund.
SECTION 112. REPRESENTATION WITH OTHER
FINANCIAL INSTITUTIONS – The Bangko Sentral may
be authorized by the Government to represent it in
dealings, negotiations or transactions with
International Bank for Reconstruction and
Development and with other foreign or International
financial institutions or agencies. The President may,
however, designate any of his other financial advisors
to jointly represent the Government in such dealings,
negotiations or transactions.
SECTION 113. OFFICIAL DEPOSITS- The Bangko Sentral
shall be the official depository of the Government, its
political subdivisions and instrumentalities as well as of
government-owned or controlled corporations and, as
general policy, their cash balances should be deposited
with the Bangko Sentral, with only minimum working
balances to be held by government-owned banks and such
other banks incorporated in the Philippines as the Monetary
Board may designated, subject to such rules and
regulations as the Board may prescribe: Provided, That
such banks may hold deposits of the political subdivisions
and instrumentalities of the Government beyond their
minimum working balances whenever such subdivisions or
instrumentalities have outstanding loans with said banks.

-The Bangko Sentral my pay interest on deposits of the

Government or of its political subdivisions and
instrumentalities, as well as on deposits of the banks with
the Bangko Sentral.
 PDIC( Philippine Deposit
Insurance Corporation)

PDIC is a government instrumentality created in

1963 by virtue of Republic Act 3591 to ensure the
deposits of all banks. It is exist to protect depositors
by providing deposit insurance coverage for the
depositing public and help promote financial stability.
It provides a maximum deposit insurance coverage
of Ph500,000 per depositor per bank. It covers all
types of bank deposits in banks whether
denominated in local and foreign currencies.
SECTION 114. FISCAL OPERATION – The Bangko
Sentral shall open a general cash account Treasurer of
the Philippines, in which the liquid funds of the
Government shall be deposited.

-Transfer of funds from this account to other

accounts shall be made only upon order of the
Treasurer of the Philippines.
What is fiscal operations?

FISCAL OPERATIONS- this are actions

taken by the government to
implement budgetary policies, such as
revenues and expenditure measures.
SECTION 115 .OTHER BANKS AS AGENTS OF THE
BANGKO SENTRAL- In the performance of its functions
as fiscal agent, the Bangko Sentral may engage the
services of other government-owned and controlled
banks and of other domestics banks for operations in
localities at home or abroad in which the Bangko
Sentral does not have offices or agencies adequately
equipped to perform said Operations: Provided,
however, That for fiscal operations in foreign countries,
the Bangko Sentral may engage the services of foreign
banking and financial institutions.
SECTION 116. REMUNERATION OF SERVICES – The
Bangko Sentral may charge equitable rates,
commisions or fees for services which it renders to
the Government, its political subdivisions and
instrumentalities.

-If we say RENUMERATION, it is a payment or

compensations received for services or employment.
This includes base salary and any bonuses or other
economic benefits that an employee or executive
receives during employment.
 ARTICLE II- THE MARKETING
AND STABILIZATION OF
SECURITIES FOR THE
ACCOUNT OF THE
GOVERNMENT

A. THE ISSUE AND PLACING

OF GOVERNMENT
SECURITIES
SECTION 117. ISSUE OF GOVERNMENT
OBLIGATIONS ( means a public debt
obligations)- The issue of securities
representing obligations of the Government,
its political subdivisions or instrumentalities,
may be made through the Bangko Sentral,
which may act as agent of, and for the
account of, the Government or its respective
subdivisions or instrumentality, as the case
may be: Provided, however, That the Bangko
Sentral shall not guarantee the placement of
said securities , and shall not subscribe to
their issue except to replace its maturing
holdings with the same type as the maturing
securities.
SECTION 118. METHODS OF PLACING GOVERNMENT
SECURITIES
- The Banko Sentral may place the securities to which
the preceding sections refers through direct sale to
financial institutions and the public.
- The Bangko Sentral shall not be a member of any
stock exchange or syndicate, but may intervene
therein for the sole purpose of regulating their
operations in the placing of government securities.
- The Government, or its political subdivisions or
instrumentalities, shall reimburse the Bangko
Sentral for the expenses incurred in the placing of
the aforesaid securities.
 What is Government Securities?

Government Securities are type of debt obligations,

such as bonds that is issued by a government to the
investors. (e.g. of Government Securities includes
treasury bills, treasury notes and treasury bonds.)
SECTION 119. SERVICING AND REDEMPTION OF
THE PUBLIC DEBT- The servicing and redemption of
the public debt shall also be effected through the
Bangko Sentral.
 WHAT IS MEANT BY
REDEMPTION OF PUBLIC
DEBT?

-Redemption of debt refers to the repayment of a

public loan. Although public debt should be paid, debt
redemption is desirable too. In order to save the
government from bankruptcy and to raise the
confidence of lenders the government has to redeem
its debts from time to time.
B. BANGKO SENTRAL SUPPORT
OF THE GOVERNMENT
SECURITIES MARKET
SECTION 120. THE SECURITIES STABILIZATION
FUND-There shall be established a “Securities
Stabilization Fund” which shall be administered by
the Bangko Sentral for the account of the
government.
- The operations of the Securities Stabilization Fund
shall consist of purchases and sales, in the open
market, of bonds and other evidences of
indebtedness issued or fully guaranteed by the
Government. The purpose of this operations shall be
to increase the liquidity and stabilize the value of
said securities in order thereby to promote
investment in government obligations.
STABILIZATION FUND

-It is a mechanism set up by a

government or the central bank to insulate
the domestic economy from large influxes
of revenues. This generally involves the
purchase of foreign denominated debt.
The Monetary Board shall use the resources of the
fund to prevent, or moderate, sharp fluctuations in
the quotations of said government obligations, but
shall nit endeavor to alter movements of the market
resulting from basic changes in the pattern or level of
interest rates.
The monetary Board shall issue such regulations as
my be necessary to implement the provisions of this
section.
SECTION 121. RESOURCES OF THE SECURITIES
STABILIZATION FUND- Subject to Section 132 of
this Act, the resources of the Securities Stabilization
Fund shall come from the balance of the fund as held
by the Central Bank under Republic Act No. 265 as of
the effective date of this Act.
Section 122. PROFITS AND LOSSES OF THE
FUND- The Stabilization Fund shall retain net profits
which it may make on its operations, regardless of
whether said profits arise from capital gains or from
interest earnings. The Fund shall correspondingly
bear any net losses which it may incur.
 ARTICLE III- FUNCTIONS AS
FINANCIAL ADVISOR OF THE
GOVERNMENT
SECTION 123. FINANCIAL ADVICE ON OFFICIAL
CREDIT OPERATIONS- Before undertaking any
credit operation abroad, the Government, through the
Secretary of Finance, shall request the opinion, in
writing, of the Monetary Board on the monetary
implications of the contemplated action. Such
opinions must similarly by all political subdivisions
and instrumentalities of the Government before any
credit operation abroad is undertaken by them.
-The opinion of the Monetary Board shall be based
on the gold and foreign exchange resources and
obligations of the nation and on the effects of the
proposed operations on the balance of payments and
on monetary aggregates .
Whenever the Government, or any of its political
subdivisions or instrumentalities, contemplates
borrowing within the Philippines, the prior opinion of
the Monetary Board shall likewise be requested in
order that the Board may render an opinion on the
probable effects of the proposed operation on
monetary aggregates, the price level, and the
balance of payments.
SECTTION 124. REPRESENTATION ON THE
NATIONAL ECONOMIC AND DEVELOPMENT
AUTHORITY.
- in order to assure effective coordination between
the economic , financial an fiscal policies of the
government and the monetary, credit and exchange
policies of the Bangko Sentral, the Deputy Governor
designated by the governor of the Bangko Sentral
shall be an ex officio member of the national
Economic and Development Authority Board.
 NEDA( National Economic and
Development Authority

-It is an independent cabinet-level agency of the

Philippine government responsible for economic
development and planning.
- It is headed by the president of the Philippines as
a Chairman of the NEDA board, with the secretary of
socioeconomic Planning , concurrently NEDA Director-
General as vice chairman and other members of the
NEDA board.