Llanos, Aliya Cassandra L.

FM 2 - 3096
BSBA – FM 1 February 9, 2023

ASSIGNMENT 2: CLASSIFICATIONS OF BANKS

The evolution of the global banking industry has led to the creation of distinct bank types to offer a
broader variety of products and services and address the changing and numerous needs of clients.
Although the rise of different bank types may raise competition between established banks, it diminishes
social class disparity within a country, promoting public confidence to avail banking services. Bank types
may vary from one nation to another; Philippines classifies its banks into: (1) Universal Banks, (2)
Commercial Banks, (3) Thrift Banks, (4) Rural Banks, (5) Cooperative Banks, (6) Islamic Banks, (7)
Government-owned Banks, and (8) Other Banks which are classified by the Bangko Sentral ng Pilipinas.

1. Universal Banks
The Financial Times magazine described Universal Banks as a ‘financial service conglomerate’
that incorporates and simultaneously offers the 3 (three) main banking services namely: (1)
wholesale banking, (2) retail banking, and (3) investment banking, and all other services typical
in the banking business, indicating that Universal Banks offer a wide range of banking services,
emphasizing insurance services, under one entity which serves both retail and corporate clients.
Although they are characterized as a “one-stop” bank, they are not required to engage, exercise,
or participate in all of the permitted banking services, rather, they may choose to specialize
selected banking services to competently meet the needs of their clients. Universal Banks are
expected to abide to the laws and regulations that govern the banking services they choose to
partake in, in this case, banks must abide to the regulations of the Civil Code, Monetary Board,
and SEC.
General Banking Law of 2000 emphasizes that Universal Banks characterizes the foundations and
authority of a commercial bank with the supplemental privilege to:
a. Exercise the powers of an investment house (licensed enterprises authorized to provide
financial advisory services) either directly or indirectly through a subsidiary entity. The law
explicitly stipulates that the utilization of this power must still abide to the laws and
regulations of the Securities and Exchange Commission. It is also not permissible by law for
Universal Banks to engage in this power both directly and indirectly.
b. Invest in Non-Allied Enterprises (enterprises that do not engage or provide services that
involve monetary resources)
c. Possess up to 100% of a Thrift Bank’s equity, a Rural Bank, a financial allied or non-allied
enterprise; and
d. Possess up to 100% of the voting stock of one other Universal Bank or Commercial Banks
when the Universal Bank is publicly-listed.
Some of the Universal Banks with active operations in the Philippines as of March 2018 are:
1. Land Bank of the Philippines 5. Asia United Bank Corporation
2. Bank of the Philippine Islands 6. The Hongkong & Shanghai Banking
3. Union Bank of the Philippines Corporation
4. Development Bank of the Philippines 7. Security Bank Corporation
2. Commercial Banks
These for-profit institutions offer basic banking services, products, and necessities particularly to
the clients that comprises of individuals and SME’s. They accept drafts, negotiate promissory
notes, offer various loans and mortgages, offer checking account and savings account services,
determine debt securities for investment, and offers financial products like certificates of
deposits, allowing users to easily save money, earn interest, and make payments online and by
check. General Banking Law stipulates explicit privileges Commercial Banks can carry out:

a. Invest in the equities of an allied enterprise.

b. Purchase, hold, transfer properties.
c. Receive custody funds, documents, and valuable objects.
d. Perform as financial agent on the account of their clients (mutual agreement)
e. Make collections and payments on the account of their clients (mutual agreement)
f. Perform as a managing agent and offer consultancy services, upon the approval of the
Monetary Board.
g. Rent out safety deposit boxes.
h. Engage in quasi-banking functions.

Through these banking services, Commercial Banks earn profit from interest charges and service
fees based on the client’s region, membership type, and banking products and services availed by
their clients which includes but not limited to:
a. Account Maintenance Fees
b. Overdraft Fees
c. Non-Sufficient Funds or Insufficient Fund Fee
d. Out-of-network ATM Fee
e. Late fees
The essentiality of Commercial Banks lies within their role in the fractional reserve banking
system and economy through ensuring liquidity and circulation of financial resources in the
market. When a client deposits their money, the money is lent by the bank allowing clients to
acquire interest, on the other hand, when the bank disperses its money, the money is lent by the
client allowing banks to acquire interest, and this circulation leads to the creation of credit and
capital leading to increase in production, employment, and consumer spending which boosts the
economy at large.
Some of the Commercial Banks with active operations in the Philippines as of March 2018 are:
1. BDO Private Inc. 5. Maybank Philippines, Incorporated
2. Philippine Bank of Communications 6. Bank of China Limited – Manila Branch
3. Robinsons Bank Corporation 7. Philippine Veterans Bank
4. CTBC Bank (Philippines) Corporation 8. Citibank

3. Thrift Banks or Savings Bank

Thrift banks, also called a Savings and Loan Association, offer specialized banking services in
opening savings accounts and originating loans and mortgages for clients and are funded by deposits.
Unlike commercial banks, thrift banks are not for-profit as it concerns itself with providing housing
needs. By providing savings and loan facilities, the banks ensure that the economy is not affected by
the monopoly of the national and foreign banks. A distinct characteristic of this type of bank is that
they offer mortgages at low cost and offer saving account opening with high rate of interest, this goes
to show that their intention is purely to serve at the best interest of the general public.
Slowly, as the world progresses and as demand for service increases, Thrift banks engage themselves
in offering products and services usually provided by the Commercial Banks; the line differentiating
Thrift Banks from Commercial Banks today have blurred and collided with one another.
Thrift bank is further classified into 3 (three) different types namely:
a. Savings Bank
b. Private Development Bank
c. Stock Savings and Loan Associations
The General Banking Law bestows privileges and authorization to perform these services:
a. Grant loans
b. Invest in readily marketable bonds and securities.
c. Issue domestic letters of credit.
d. Extend credit facilities to private and government employees.
e. Extend credit against jewelry, precious stones, and other articles of the same nature.
f. Accept savings and time deposits.
g. Rediscount paper
h. Accept foreign currency deposits.
i. Act as financial agent to financial institutions
j. Purchase, hold, and convey real estate
k. Buy and sell foreign exchange.
Some of the Thrift Banks in the Philippines are:
1. Allied Savings Bank 5. Metro-Cebu Public Savings Bank
2. BPI Family Savings Bank 6. Village Bank, Inc.
3. Citibank Savings, Inc. 7. Malayan Bank Savings and Mortgage
4. Bataan Savings and Loan Association, Bank
Inc.

4. Rural Banks
Patterning its operations with those embedded in banks offering standard banking services, Rural
banks offer tailored financial services to rural communities to meet the needs of these residents and
slowly eliminating the societal disparity in a region. The bank’s financial system was designed to
cater the farmers, fishermen, merchants, cooperatives, small business enterprise and the general rural
community strengthened and solidified by the Republic Act 7353 ‘Rural Banks Act’. This intention
of Rural Bank goes to show that one of their goals is to expand the rural economy and provide
financial assistance to those that serve as the backbone of the nation’s agricultural sector.
Partnered with RA 7353, the General Banking Law also stipulates the powers and authority that Rural
Banks may exercise:
a. Extend loans and advances to meet the normal credit needs of clients.
 b. Accept savings and time deposits.
c. Act as financial agent to financial institutions
d. Rediscount paper
e. Act as collection agent
f. Acquire readily marketable bonds and securities.
g. Buy and sell foreign exchange.
Some of the Rural Banks in the Philippines are:
1. Bolinao Bank (Rural Bank of Bolinao, 3. Quezon Capital Rural Bank (QCRB)
Inc.) 4. Lifebank (Rural Bank of Maasin)
2. Green Bank, Inc. (Rural Green Bank of 5. Pensisula Rank Bank, Inc. (RB of Tupi)
Caraga) 6. New Rural Bank of San Leonardo

5. Cooperative Banks
Cooperative banks are consistent in the form and nature of cooperatives as the members of the small-
sized bank are also the clients of it. One of the primary purposes of Cooperative Banks is to create
and offer a wide range of above-average financial services with competitive rates directly to the
cooperatives and their members, these products and services are similar to those offered by the major
diversified banks. Contrary to banks, financial cooperatives may be more concerned with the
financial well-being of their members rather than turning a profit.
Organizing Cooperative Banks patterns, the nation’s democracy as the form of control in a
cooperative must always follow the “one vote each member” rule; the organization of these banks
shall only be possible by cooperatives who are duly registered and established under the Philippine
Cooperative Code of 2008 (R.A. No. 9520).
The GBL stipulates that Cooperative Banks, apart from their authority to exercise powers granted to
them under existing laws, the bank may also perform any or all of the banking services offered by
Rural Banks.
Some of the Cooperative Banks in the Philippines are:
1. Banco Cooperative de Zamboanga 6. National Teachers & Employees
2. Consolidated Cooperative Bank Cooperative Bank
3. Cooperative Bank of Cebu 7. Network Consolidated Cooperative
4. First Isabela Cooperative Bank, Inc. – Bank
FICOBANK 8. Occidental Mindoro Cooperative Bank -
5. Ilocos Consolidated Cooperative Bank OMCB

6. Islamic Banks
Providing Muslims with access to financial services and providing non-Muslims with alternative
banking and finance options, Islamic banking and finance caters to the needs of everyone and ensures
financial inclusion. In order to ensure that Islamic banks thrive, the BSP applies the same regulations
to conventional and Islamic banks. Additionally, there are guidelines which address the unique
characteristics of Islamic banks in relation to their culture, practices, principles, and religion, as well
as being governed by Islamic or Sharia law. There are 2 (two) fundamental concepts of Islamic
 banking that is unique to this bank is the prohibition of interest (riba) collection and payment, and the
profit and loss sharing. It also explicitly disallows the monetary investment in gambling, alcohol,
pork, and other forbidden (haram) items.
Recognition and realization of a need for these kinds of banks are a breakthrough in society as
everyone can access affordable and useful financial services to cater for their financial needs.
The first and only Islamic Banks in the Philippines is:
1. Al-Amanah Islamic Investment Bank of the Philippines
Some Islamic Banks in the world are:
1. Al Shamal Islamic Bank (Sudan) 6. Islamic International Arab Bank
2. DMI Trust (Switzerland) (Jordan)
3. Al-Aqsah Islamic Bank (Palestine) 7. Islamic Bank of Asia – IB Asia
4. UIF Corporation (United States) (Singapore)
5. I Monetary Advisory – IMA (India) 8. Cham Bank (Syria)

https://morb.bsp.gov.ph/101-classifications-powers-and-scope-of-authorities-of-banks/