NEW CENTRAL BANK ACT

9/18/19

⚫ Before the enactment of the New Central Bank Act, what do you call the predecessor
of the Bangko Sentral ng Pilipinas?

Answer: Central Bank of the Philippines/Bangko Sentral ng Pilipinas.

One of the objectives of the Bangko Sentral ng Pilipinas is to promote and maintain
price stability conducive to a balance and sustainable economic growth.

What is price stability?

If you have a stable price, that means the purchasing power of the Philippines peso is
protected. You avoid extra ordinary inflation. When the inflation is ordinary as the years go
by, you will experience “appreciation” in the values of properties. And as the properties
increase in its value, it necessarily carries a consequent change in prices.

A stable price is something you can foresee. Therefore, you don’t need to buy in big
volume now because you know, you can buy it at the same price in the next months/years.

The danger of not having a stable prices, triggers shopping spree.

What is the best indicator of price stability?

Answer: The consumer price index.

(What does it refer?) “Consumer price index refers to goods and services which can be
found in a basket. Para bang pag ikaw ay namimili, sabi nga kanina, meron kang 1
thousand, kapag namili ka, anong value ng 1k mo, tig iisang kilong ng asukal, bigas,
kasama na yung pampa-spa.”

When the price index can no longer refer to same quantity of goods and services that it
represents in a particular year, the price index is now suffering from what you call as
inflation. When there is inflation the purchasing power of the currency of the legal tender
suffers.

How do you think the Bangko Sentral can address the Inflation?

- through Monetary Policy.

⚫ Monetary Policy as the word suggests, refers to money. So any policy that deals with
the stability of the Philippines peso, that deals with inflation and deflation and
interest rate.
 ◼ Any policy devoted to money, interests for the use or proverance of money, supply of
money.

When you allow the supply of money to become excessive more than the economy
needs, there will be inflation.

⚫ Fiscal Policy refers to budgeting, spending, revenues and

taxation.
(Spending/borrowing.)
Fiscal Policy is not a so function of the Bangko Sentral.

What is revenue?

Answer: Anything paid to the government is revenue. Can be in the form of taxes, in
form of price and penalties.

Bangko Sentral is the one that maintains the stability not only of the price, but the
stability of money and its convertibility.

(What do you mean by convertibility?) “convertibility simply means the conversion or

power of the Philippines peso to become attractive and acceptable to other currency in the
International Monetary Market.”

International Currency (US Dollars, Euro Dollars)

- When you say international currency, the convertibility of the currency is

accessible to almost all countries.

In what stage of the

business cycle do
you expect inflation?

◆ During the stage of Prosperity.

⚫ When the economy is at its peak, it has no direction but to go down.

⚫ When the Recession cannot be aborted or controlled, it will go to drought.

⚫ From that drought, you have no other way but to go up/move up to Recovery.

For you to appreciate stable price, when you are in a period of recession (bumababa), that is
when the Bangko Sentral performs its objective. It will come up with a Monetary Policy.

The responsibility of Bangko Sentral is to provide policy direction in the areas of money,
banking, and credit.

- The job of the Bangko Sentral is very technical one, that is why the law empowers the
Monetary Board to become the policy maker of the reporting in the area of money,
banking and credit.

- Policy pertains of set of standards that needs to be followed.

- Under the law, the Bangko Sentral ng Pilipinas shall have Fiscal and Administrative
Autonomy.

⚫ If you allow the Congress or even the President to interfere with the operations of the
Bangko Sentral, it will be politicized. (Politics will come into play.)

⚫ The highest paid public officials are the employees of Bangko Sentral.

What is money?

◆ Money refers to anything that can be used as a medium of payment.

Example: If a chalk is accepted as a medium of payment, chalk is the medium

of payment, which is money. But in layman’s language, when you talk about a
money, it is the currency.

What is banking?

◆ Banking refers not only to financial institutions. When you are authorized to
received deposit and lend that deposit to the public, then you a become a bank.

The Bangko Sentral does not only control money, and not only banking activities. It also
controls the banking activities and credit transactions. What is credit?

◆ Credit is the ability/capacity of a person to acquire goods and services without

immediate payment but with a promised payment at a determinable future time.

◼ Why credit?

You may not have money and still you can venture into a business if you have a good
credit standing.

Clean loan - obtain loan from a bank without collateral.

Secured loan - obtain loan from a bank with collateral.

 Banks are not allowed to grant loans to the public exceeding 75% of the assessed
value of the collateral and 60% of the improvement.

(The law set the policy and the Bangko Sentral is the one who implements it.)

Behest loans - is when bank grants loan beyond what the law allows.

When behest loans are allowed to proliferate, what do you think will happen to the
banking industries? It will collapse.

When the banking industry in any economy collapses, the government will also
collapse.

“When the government loans treasury bills, they are very careful in the interest payments of
the bills.”

Example: Safest investment to make for your 1Million is to invest in Treasury Bills
because T-bills is the liability of Republic of the Philippines through BSP.

T BILLS IS AS GOOD AS CASH.

9/20/19 What

is the policy direction of BSP?

❖ Monetary policy
➢ it deals with the flow and control of money
➢ simply determines on the part of the BSP whether they will raise it or just keep it is

There are 3 monetary instruments that the BSP can effectively use in order to attain its
objective of maintaining price stability which is conducive to sustainable and balance
economic growth:

A. Open market operation

➢ refers to the buying by BSP of commercial instruments or money market instruments
issued by government of the Philippines or the private commercial banks
➢ the purpose of it is to restrict the volume of money that can be done when you buy
government bonds and when you buy securities issued by LGU’s
➢ when the money has been spent to the purpose those benefits will stay with the BSP and
control of its asset

B. Discount rate
❖ refers to the rate of interest which the BSP charges to the banking institution of debt
advances to correct the liquidity problems of banking industry.

Liquidity problems
 ❖ you must assist, you must support, and you must help the banking industry to abort
panic withdrawals of depositing public

When a banking institution can’t meet its liabilities as it matures in a normal course of
business, it can be placed under receivership but if the reason why the bank is unable to
respond to the withdrawals of its depositors that will result in panic withdrawals then, and
it can’t be placed under receivership

To prevent panic withdrawals, the BSP opens the functions of lenders of bank Who

can lend money to the banks?

❖ BSP

Where did the BSP can get that money that lends to the bank?

❖ Reserve requirements

C. Reserve requirements
➢ it represents the ratio of deposits and certain amount to be deposited with the BSP
➢ when u raise the reserve requirements, it makes the banks need to deposit more money
to the BSP interest free and when the banks need money to solve liquidity their
problem the BSP will lend portion of legal reserve that the banking industry and on
that basis it will now be determined the current rate of interest
➢ pag pinauatang ng BSP ang bangko mula sa deposito ng lahat ng mga bangko na
tinatawag na legal reserve bababa ang legal reserve ng BSP
➢ determines by daily deposit balance and therefore as u increase your balance you will
also increase the balance of BSP and it will result to ideal reserve
➢ simply refers to the ratio between ratio or reserve in the bank get by the BSP
➢ Unless you control money supply, control interest rate, ideal reserve from, you will
never attain stable prices and economic growth.
➢ When you don’t have stable price and economic growth, the economy becomes
stagnant. And when the economy remains stagnant, those who are unemployed will
remain unemployed forever
➢ when you achieve stable pricing, you achieve economic growth necessarily that will
result to low unemployment or full employment

Who is a part of labor force?

• those persons who are qualified to work and willing to work

Full employment

➢ it doesn’t mean that every member of labor force is employed

➢ Those who are qualified to work and need to work can find a job if they want to.
➢ at state of prosperity

Unemployed
 ➢ refers to persons who have a qualifications to work and willing to work and when they
find a job they can’t find one
➢ not included those who are qualified to work but don’t want to work
➢ at state of drought or depression you will experience severe or serious unemployment

Additional notes:

• You cannot attain variant and sustainable economic growth unless you keep prices
stable. if the prices are not stable, people will spend more. and there will be shortage
• OPEC headed by Saudi Arabia when they want to raise prices, they cut down their
volume of production
• When a bank gives all of its money to the public, it will collapse. And when the banking
institution collapses the economy will collapse.
• BSP is empowered to control economic activities
• BSP has fiscal and administrative

Fiscal

➢ I will give you the budget and you are the one who will manage it in any ways you
want to spend it

Administrative

➢ the congress and president can’t interfere or intervene

Balance of payment

➢ summary of all transactions in a country against other countries

➢ BSP is the who are making this
➢ includes the revenue

Law of supply and demand

➢ when the volume of supply exceed the volume of demand the tendency of the price is
to go down
➢ when the volume of demand exceeds the volume of supply the tendency of the price
is to move up

3 ultimate objectives of BSP

A. Price stability
B. Low unemployment
C. Growth in real GDP (gross domestic product)
➢ Actual economic improvement of economic activity year to year or period to period.

Sustainable

➢ means that you can maintain growth year to year and it should not be stagnant.
➢ You maintain economic growth and when the growth of an economy is continuing
which means those who are unemployed is easily gets employed.
3 intermediate goals of BSP
 A. Money supply
B. control interest rates
C. reserve legal requirements

9/27/19

Open Market Operation – activities of Bangko Central on buying and selling government
securities

When do you think the Bangko Sentral will buy and sell? When the volume of money in the
economy is exceeding the desirable volume, then Bangko Sentral must result to what? Buying
or selling government securities?

• You cannot maintain stable prices unless you control the flow of money because when
there is an oversupply of money, the tendency is, for the Purchasing Power, the
currency to depreciate. Why? Maraming pera eh. So, to contract/to reduce/ to regulate
the volume of money in the market. What will be the appropriate act to be done in the
Open Market Operation? To buy or Sell?

• When Bangko Sentral buys, that i means money close into the economy, when
Bangko Sentral sell that means money close to the Bangko Sentral.

How does the money market operation work?

➢ Diba kapag ikaw ay nagbenta, ano tinatanggap mo? Bayad. Pag tumaggap ng bayad,
magkakaron ka ng pera. Kung marami ka namang pera, bumibili ka naman. Kapag
bumili ka, mababawasan ang pera mo.

When the money become excessive/ the volume of money become excessive the Bangko
Sentral will sell or will buy?

If the Bangko Sentral buys, sino ang tatanggap ng pera?

➢ Financial Institutions, because they are the ones that underwrite the transactions.

When the government sells securities, sino ang bibili?

➢ Banks, through their clients

◼ Example: Treasury Bills, magbebenta ang government, that is government security.
It will now be underwritten by almost all of the commercial banks.

Situation: You are a client, you have a checking account with PNB, you will draw a check in
the amount of the value of the securities you want to purchase, so your deposit with the bank
will be depleted. Where will it go? To the Bangko Sentral.

In the reverse manner the flow of money is below of the standard level.

How do you think the Bangko Sentral will increase?

➢ It will not just print money, it will not just mint coins. This time they will be the one
who will buy. So that the money in Bank reserve,
 ▪ Bank reserves- portion of the deposits by the public with all banks, which the
banks deposits to the Bangko Sentral with no interest. The purpose of that is
to avoid a situation where the banks could no longer meet its liabilities as it
matures in the normal course of business.

Ang bangko sentral hindi naman agad magpprint ng pera, dahil ang mga bangko it changes
depending on the average daily deposit balance. Let’s say kapag nagdeposit ka sa bangko.
That money is recorded in the balance sheet under liabilities, why?

➢ It is the liability of the Bangko Sentral to pay to the bank in the form of withdrawal,
but actually the bank will not withdraw, the bank will borrow.

Discount Rate- lending of money by BSP to the banks.

➢ The rate of interest is usually determine by the rates BSP charge the Banks whenever
the banks make cash advance to the bank

Ano yung money na pinapahiram ng Bangko Sentral?

➢ Yung pera ng commercial banks. So yung perang nasa bangko sentral, ilalabas. Pag
sila bumili ng securities, naglalabas sila ng pera. Pag nagpahiram ng pera sa mga
bangko under discount rate monetary instrument, naglalabas din ng pera.

So yung discount rate and money market operations, ang Intermediate result

➢ They regulate the volume of money

➢ They control interest rate

• Dahil kapag ang mga bangko nagdedeposit sa bangko sentral by virtue of Legal reserve
requirements…
Legal reserve requirements – refers to certain percentage of deposits which must be
deposited by the banks with the Bangko Sentral.

3 INSTRUMENT TOOLS wc the Bangko Sentral can pursue to be able to maintain

stable prices;

➢ Open market Operation

➢ Discount Rate
➢ Legal reserve requirements

So the Intermediate Result;

➢ Control of money supply

➢ Control of interest rate
➢ Control/ Maintenance of desire reserve requirements

If nakuha mo na lahat, it can lead to stable prices, low unemployment and rapid growth of
real GDP.

➢ Real GDP – Actual improvement Situation:

If the Philippine Economy Generated REVENUE 1000 in 2018 then 2019 increased to 1500,
you have 50% growth and that’s what you called the Real GDP, tatawagin yang nominal.

Nominal – basehan is revenue

Economic Growth - refers to GDP that means volume of goods and services produced by a
country

• In computing GDP growth , we include not only good and services produced by
Filipinos but also we include produced by foreigners.

You cannot say that the best base of Economic Growth is GDP, not GNP.

Gross National Product – what you record is the volume of goods and services produced by
the citizens of the country

• When we compute our GNP, it is not realistic dahil maraming foreign investors sa
pilipinas. Dahil di mo yun sasama sa computation ng GNP Mga isasama sa GNP (Do
not forget!!)

➢ Services paid to universities

➢ All other private citizens
➢ Juridical persons own 100% by Filipino

Reason why the Bangko sentral determines the ratio of Legal Reserve

➢ Kapag hindi ka nag maintain ng legal reserve, ang gagawin ng bangko , lahat ng
deposited money ay ipapautang niya. So ang mangyayari mawawalan sila ng
ipangsasagot sa withdrawals. Kapag hindi na na honor ng Bangko yung liabilities sa
depositing public magkakaroon ng panic withdrawal.

Panic withdrawal (bank cram) – refers to simultaneous withdrawal by all the depositors and
no bank in the whole world can meet simultaneous withdrawals by its depositors.

The ratio of Legal reserves changes day to day, ang basehan is AVERAGE DAILY
DEPOSIT BALANCE

San kumukuha ang bangko sentral ng advances?

➢ sa reserves ng malalaking bangko.

If your ADB ay laging mataas, it means you are doing well

Receivership

• If the bank is placed under Receivership, the Central Bank Acts provides, you cannot
appoint any person as a conservator unless that person has competence in the field of
banking and finance.
• In receivership , the PDIC (Philippine Insurance Deposit Corporation) is always the
receiver of Banks under Receivership
 Receiver – receives asset
▪ A receiver makes a report, within 3 months the receiver determine if the bank
has the chance of revival, if there is no chance of revival, it will proceed to
liquidation.

DOSRI ACCOUNT OF BANGKO SENTRAL

DIRECTOR – members of the board

OFFICERS – executive, branch manager, president, vice president, assistant

STOCKHOLDER – owns shares of company's stocks

RELATED INTEREST – asawa ng director, manager, officer, stockholder, common law

partner. Usually up to 4th civil degree.

➢ When a bank transacts with DOSRI hindi pinagbabawal but what the Central Bank
Acts requires, such situation must be disclose to avoid conflict of interest.

Conflict of interest – there is a conflict of interest when you have a power over something
which involve your personal interest.

Liquid assets – Cash in bank

Solid assets – equipment, machineries; can be liquidated

Conservatorship – the bank or quasi-bank is in a state of continuing inability or

unwillingness to maintain a condition of liquidity.

➢ Ang isang bangko kapag ang balance sheet niyan ay puro solid assets, no liquid assets
at ayaw mag liquidate, when you liquidate solid assets it becomes money and it
becomes your liquid asset.

Current asset- cash in bank

Fixed asset – building , equipment

Liquidation- all asset converts into cash to pay liabilities ; last stage ; when the bank can no
longer maintain its liquidity, can no longer honor withdrawal. The banks can no longer meets
its liabilities

Dormant- becomes dormant when , no withdrawal and no deposit Dapat bank can always
honor withdrawal/ all the time.

10/2/19

Note: When the examining team can make a report of the monetary board that continuing
liability can no longer continue and unwilling to maintain conditional liquidity the monetary
board will assign a conservator.
CONSERVATORSHIP
Functions of the conservator
▪ The conservator will take charge to the entity’s asset liability and management.
 ▪ He can reorganize the management - reorganized means he can totally change the
management setup including the bod.
▪ Concept of conservatorship is like a takeover to another owner, but the conservator is
not an owner.
▪ He was assigned by the monetary board for the purpose of protecting the interest of the
investors and creditors.
▪ It can be done by introducing changes in the way the bank or the institution shall
conduct its day to day business operations.

How long will the conservatorship last?

▪ Not more than 1 yr.

Who can be assigned as conservator?

▪ Those competent and knowledgeable in bank operations and management.

Are they in title of renumeration?

▪ Yes, but it shall not exceed 2/3 of salary of the president of the institution.

Is the conservator entitled to the remaining renumeration?

▪ Yes, if he fulfilled his duty to bring back the institution to its normal condition(viable)
earlier than the 1 year, but if he declares that the institution has no longer chance of
viability, he is no entitled there to.

The purpose of conservatorship is what?

▪ to prevent the bank from going to receivership.

RECEIVERSHIP
A receiver performs what function?
▪ to gather earnings asap but not later than 90 days from the after the takeover.
▪ to determine whether it can no longer be rehabilitated then it will undergo liquidation.
Certain reasons why a bank will be place onto receivership?
▪ when the bank can no longer pay their liabilities as they mature.
▪ when the bank has insufficient realizable asset
▪ cannot continue in business without involving probable loss to its depositors or creditors
▪ has willfully violated to cease and desist order under section 37.
Who can be a receiver?
▪ preferably any person of recognized competence in banking and finance may be a
receiver.
Note: Asap, but not later than 90 days from the take over the receiver should made a report to
the whether the institution can still be rehabilitated. Receiver may be listed and a conservator
may be assigned.
It can be that straight to receivership skip conservatorship.
If under liquidation all the assets must be converted into cash.

Can we question the order by the word by court?

▪ Once the monetary board orders conservatorship, receivership, or liquidation it shall be
found final executory.
 ▪ Final means it cannot be protest and executory means it will be implemented.
▪ However, through petition a motion to give the order may be filed to the court, by
whom, by the owners made, the majority of the stockholders, percent of the majority of
the stockholders.

What is a legal tender?

▪ Type of money or currency which any debtor can compel their creditor to accept as
payment of a debt in money.
▪ Philippines coins and bills

What is a demand deposit?

▪ Is a substitute for legal tender
▪ It refers to all checks issued by a depositor against his checking account in a bank which
can be used as payment of a debt in money or an obligation to pay in money at the
option of the creditor.
▪ Is an instrument payable on demand

When the creditor accepts the demand deposit is the obligation extinguished?
▪ When the obligation is paid by an instrument of credit (promissory note, bill of
exchange, check), the obligation can only be considered extinguished upon conversion
into cash, unless the non-conversion in to cash can be attributed to default.

How do you convert demand deposit into cash?

▪ Demand deposit is one, which is payable on demand, and when an instrument is payable
on demand it can be presented by the holder therefore at any time within reasonable
time.
▪ In the banking industry what observed as reasonable time is 6 months.
▪ Under the bouncing check law, it shall observe as reasonable time is 3 months.

Note: One of the functions of BSP is to print money and to mint coins. The printing of
Philippine bills and the minting of Philippine coins is a function given by the New Central
Bank only to the BSP (No one else).
▪ Money that is printed is, Bills.
▪ Money that is mint is, Coins.

What other functions/power in relative or connected to the function of printing money

and minting coins is given by the law to the BSP?
▪ To retire or replace Philippine money and coins.

Can Philippine money be retired or replaced by the BSP?

Retired means, it will be withdrawn from circulation. Therefore, if the money is within the
hands of the people you will withdraw it from the circulation.

How do you withdraw the money from circulation?

▪ BSP will demonetized it, if it’s demonetized therefore it has no value.
Why do the BSP retired or replaced money?

▪ Because it is no longer fit/unfit in the circulation.

▪ Money is replaced at par value. (e.g. 1000 is to 1000)

When does the BSP will not replace a money?

▪ When the signatures inscribed thereon can no longer be read. (e.g. President of the
Philippines and Governor of BSP)
▪ Even if it looks new and not defaced but if the signatures can no longer be read (e.g.
FAKE MONEY), it will not be replaced by the BSP.
▪ The signature is still intact but the money surfaced of the money is defaced at least 2/5
(40%).
▪ When the coins have holes.

Replacement period of money:

▪ For banks 1-yr period (for convenient purposes).
▪ Another 1-yr period for the BSP.
Difference between replacement and demonetized:
▪ Demonetized means, it will be withdrawn from the circulation not because it is old.
▪ Replacement is to change the damaged/defaced money is replaced.

10/4/19

WHERE CAN THE PHILIPPINE CURRENCY BE RECALLED BY THE BANGKO

CENTRAL?

➢ When the coins or the notes are already unfit for circulation, then the central bank
may replace it, may recall it at face value. (RECALLED – taken back or retired)

➢ However, when the coins or the notes are too unreadable, or the coins are cheapie, it
cannot be replaced because it is against the law, it shall be recalled. Philippine notes
when it has been defaced of more than 2/5 of its surface or the signatures inscribed
thereon can no longer be read, it means that it can also be RECALLED but it
CANNOT BE REPLACED.

WHICH ONE CAN BE REPLACED?

➢ The old coins or the old notes which you deposited on the bank, the bank will
surrender it to the BANKO SENTRAL, and the Banko Sentral will replaced as many
as the as it has surrendered based on its face value.

WHEN DO YOU THINK THE BANKO SENTRAL CAN DEMONETIZED

PHILIPPINE COINS OR PHILIPPINE NOTES?

➢ When it is UNFIT it will be withdrawn from the circulation, but it will be replaced
based on its PAR VALUE
DEMONETIZED – it is no longer fitted or no longer recognized as legal tender. This
BILLS at least 5 years in circulation or COINS at 10 years in circulation may be
demonetized, once it has been demonetized it can still be used as a legal tender for 1
YEAR.
AFTER 1 year it has NO LONGER VALUE, NO LONGER A LEGAL TENDER but it can
be replaced by the Banko Sentral for another 1 year, during this period you do not need to go
directly to the banko sentral, you can go to the bank and you can use it to pay your bills, it has
still a legal tender power, however, BEYOND that 1-year period, NO PERSON, NO
ESTABLISHMENT WILL ACCEPT IT AS PAYMENT, but it can be exchange for a NEW
set of BILLS directly to the BANKO SENTRAL.

WHAT ARE THE FUNCTIONS OF THE BANKO SENTRAL?

• Clearing house
• Only agency in the government which can make and print Philippine coins and
Philippine bills.
• Bank of banks
• Financial advisor
• Commission depository
WHAT DO YOU MEAN BY DEPOSIT SUBSTITUTE?

➢ ONE OF THE MONEY AGGREGATES (aside from coins, bills, demand deposits.)
MONEY AGGREGATES are used by the government to monetary policy for the
purpose of stabilizing prices conducive to a balance and sustainable growth.

VOLUME OF MONEY – IT TALKS ABOUT THE MONEY AGGREGATES.

DEMAND DEPOSIT – refers to check which is payable on demand

WHAT WOULD BE DEPOSIT SUBSTITUTE

➢ any instrument that has something to do with money but not a currency, not a demand
deposit

Note: EXCESSIVE VOLUME OF MONEY WILL GO INTO OPEN MARKET

OPERATION, IT WILL SELL SO THAT THE PUBLIC WHO HAS MONEY DEPOSIT
WILL DRAW CHECK OUT OF THAT DEPOSIT AND THAT CHECK WILL NOW
BE PAID TO THE BANKO SENTRAL, AND THE BANKO SENTRAL WILL NOW
PRESENT IT FOR PAYMENT, IT CAN ALSO ISSUE, PURCHASE PROMISSORY
NOTES, BANK ACCEPTANCES, LEARN ACCEPTANCE, FOR THE PURPOSE OF
REGULATING VOULUME OF MONEY.

DOMESTIC MONETARY STABLIZATION VS. INTERNATIONAL

MONETARY STABILIZATION

DOMESTIC means LOCAL.

INTERNATIONAL beyond PHILIPPINE SHORE
 MONETARY STABILITY

➢ stable currency, strong currency, convertible currency into a foreign currency.

DOMESTIC STABILIZATION

➢ DISCOUNT RATE
➢ OPEN MARKET OPERATION (excessive volume)
➢ RESERVED REQUIREMENTS

RESULTS OF STABLE CURRENCY

➢ LOW LEVEL OF UNEMPLOYMENT

➢ PROMOTES PRODUCTION AT IS OPTIMUM LEVEL.
➢ STABLE PRICES
➢ RAPID GROWTH IN REAL GDP
➢ INTERNATIONAL MONETARY STABILIZATION

BANKO SENTRAL achieves the regulating of the foreign reserves.

FOREIGN RESERVES – foreign unions and foreign currency and by fixing rate of
exchange, it is given power to the Banko Sentral to devalue the money.

DEVALUATION OF MONEY – the purchasing power of the currency will experience a

decrease.
**1 SCHEME THAT THE BANKO SENTRAL HAVE TO DO TO ENCOURAGE
FOREIGN COUNTRIES TO BUY MORE PRODUCT IN THE PHILIPPINES IS TO
DEVALUE PHILIPPINE CURRENCT (promote EXPORT).

BALANCE OF PAYMENT – purpose of international monetary stabilization, summary of

all the financial transaction of a country vis- a- vis of the world, used by the banko sentral
whether they adjust foreign reserves. Nirerecord lahat ng import and export, donation, loans,
dollar remittances.

EXCHANGE RATE – only banko sentral can regulate it.

EXCHANGE IN A SYSTEM – what is the system that the banko sentral is using to
control rate of exchange?

• FLOATING RATE OF EXCHANGE – BSP arouse on the demand and supply to

influence this rate.

IMF – organization of countries of the world; we deposited a certain sum of dollar depending
on our GDP.
PERIODIC REPORTS THAT REQUIRED TO THE BANKO SENTRAL

• CORE BODY CORPORATE – reports of the results of their operation banko sentral
must make a report to the president and to the congress no later than 90 days at the
end of each quarter about the financial and economic position of the country.
• publish, submit results of the operation highlighting budget for the preceding year and
actual reports of its operation, public and laws report. Done by the CPA.
• you need to make a report as soon as practicable whenever there is a fluctuation which
affect the stability of the economy.