HISTORY OF
PHILIPPINE
BANKING
16TH CENTURY- banking started here in
the Philippines with the establishment
of OBRAS PIAS which means pious work
(good work) by laymen associated with
religious orders
-funded by the legacies and donations
of wealthy individuals
-sole source of commercial credit
EARLY 19th CENTURY-
RODRIGUEZ BANK started its
operations
-it was more of a loan association
than a regular bank
AUGUST 1, 1851- the Banco Espanol-
Filipino de Isabel 2 was established
-obras pias provided 50% of the bank's
capital
1872- Monte de Piedad y Caja de
Ahorros opened
-it was the first mutual savings bank in
the country
-it was a combination of savings bank
and pawnshop
-initial capital was provided by the obras
pias
-was later renamed as Monte de Piedad
and Savings Bank
1875- Hongkong and Shanghai
Banking Corporation established its
Manila branch
JANUARY 1, 1912- Banco Espanol-
Filipino de Isabel 2 changed its name
to Bank of the Philippine Islands
AMERICAN OCCUPATION
-seven private banks were opened
-branches of chinese and japanese banks were
also established
1906- Postal Savings Bank was established
1908- the first agricultural bank was
established
1916-assets and liabilities of the agricultural
bang was transferred to Philippine National
Bank
3 YEARS AFTER THE AMERICAN
REGIME- Central Bank of the
Philippines (CBP) was created , who
manages the monetary system in the
country
POLICY AND LEGAL FRAMEWORK
OF THE FINANCIAL SYSTEM
THE CENTRAL BANK ACT OF 1949
-the legal basis of the banking system
until 1993
THROUGH THE CENTRAL BANK
-the government assumed a substantial
role on bank supervision and regulation
of various financial institution
-participation of government policy of
developing the financial systems
involved the restriction of competition
GOVERNMENT
wanted specialized financial intermediaries to
achieve economies of scale and develop the
financial markets
1980 demonstrated the weakness of this
policy, and adopted financial reforms toward
gradual liberalization of the financial system
1980, the idea of universal banking was
introduced
1980, major event which was the political
upheaval shaped the financial system reform
was the EDSA REVOLUTION which ended in
1986
CENTRAL BANK ROLES
BEFORE-used to cover central banking,
wholesale banking, and policy making functions
were reshaped
AFTER- relinquished its banking functions to the
Development Bank of the Philippines
-and focused on central banking functions
-its monetary policy making function was
transformed to an independent Central
Monetary Authority (CMA)
-1994, new Central Bank was passed and
implemented the changes
BSP AS THE CENTRAL MONETARY
AUTHORITY
BANGKO SENTRAL NG PILIPINAS
-under the laws of the Philippines
-it is defined as the Central Monetary
Authority (CMA) which provides policy
direction in the areas of money,
credit, and banking.
3 major functions of BSP
- policy-making (it formulates various
monetary policies for different financial
institutions
- supervision (it has control over banking
systems)
- regulatory function (it regulates the
activities of non-banking financial
institutions)
OBJECTIVES OF BSP
-monetary stability both internal and
external stability as well as economic
growth of the country
-organized precisely to pursue certain
socioeconomic goals which concern
national interest or public welfare
BSP
-the only bank authorized to manufacture
and issue money
-monopolizes the money supply to control
inflation and deflation order to stabilize
prices of basic goods and services
-charged with a responsibility of the
highest importance which is to formulate
and implement monetary policies
designed to control and regulate money
supply and the volume of the credit.
FINANCIAL SYSTEM
BSP POLICY MAKING
SUPERVISES BANKING REGULATES NON-BANK
INSTITUTION FINANCIAL INSTITUTION
*UNIVERSAL BANKS *PAWNSHOP
*ORDINARY COMMERCIAL
BANKS *INVESTMENT HOUSES
*PRIVATE DEVELOPMENT
BANKS *INVESTMENT COMPANIES
*SAVINGS AND LOAN
ASSOCIATION (STOCK) *FINANCING COMPANIES
*SECURITIES DEALERS AND
*RURAL BANKS BROKERS
*GOVERNMENT BANKS
(DBP, LBP, PHIL. AMANAH
BANK- a muslim bank) *LENDING INVESTORS
*SAVINGS AND LOAN
ASSOCIATION (NON-STOCK)
*FUND MANAGERS- for
retirement, provident and
Pension Funds
SUPERVISION- includes not only the
issuance of rules and regulations but also
the overseeing of operations of a financial
institution
REGULATION- is basically undertaken by
the BSP through review and analysis of
reports submitted by a financial
institution to a government agency
concerned
ROLE OF FINANCIAL INSTITUTION
-generate and circulate money and credit
-provides intermediation between the suppliers and the
users of money and credit
-an integral part of the economic system
-provides loans to poor families, small producers, big
businessmen and industrialists
-stimulates the social and the economic development of
the country
CLASSIFICATION OF FINANCIAL INSTITUTIONS
*BANKING FINANCIAL INSTITUTION
*NON-BANK FINANCIAL INSTITUTION
BANK
-is an entity duly authorized by the MONETARY
BOARD (MB) of the Bangko Sentral ng Pilipinas
that may engage in the lending of funds obtained
from the public through the receipts of deposits
of any fund and all entities regularly conducting
such operations
-serves as a depository of idle funds and serves
as major sources of loanable funds
-makes money out of other people's money
FUNCTIONS OF THE
BANKS
*Depository Function
*Trust Function
*Collection and
Remittance Function
*Loans and Discount
Function
DEPOSITORY FUNCTION
*SAVINGS DEPOSIT
-are accepted for safekeeping in anticipation for future or emergency needs
-evidenced by a passbook and ATM card
-earns interest depending on the required minimum balance of the bank
-it can be withdrawn through the use of ATM machines of bancnet, megalink,
express net, cirrus
*DEMAND DEPOSIT
-(current or checking account deposit or commercial account deposit)
-does not earn interest because of the funds mobility and it can be withdrawn
anytime by presenting a check
*TIME CERTIFICATE OF DEPOSIT
-evidenced by a certificate maturing at a definite future time
-has a term of 1month, 2months, 3months, 6months and 1 year
-considered as short-tem investment
-the higher the term the higher the interest rate
-interest rate will also vary depending on the amount deposited
TRUST FUNCTION
-administers the funds properly under the
custody with skill, care, prudence and diligence
necessary under the circumstance
COLLECTION AND REMITTANCE FUNCTION
- a bank can act as a collection agent
LOANS AND DISCOUNT FUNCTION
- the bank extends loans to the prospective loan
applicants
CLASSIFICATION OF BANKING
FINANCIAL INSTITUTIONS
-Expanded Commercial Banks
-Ordinary Commercial Banks
-Thrift Banks
-Rural Banks
-Cooperative Banks
-Offshore Banks
EXPANDED COMMERCIAL BANKS
- shall have the authority in addition to
ordinary commercial banking powers, to invest
in the equity of non-allied undertakings (not
related to banking) and to own up to 100% of
the equity of a financial intermediary other than
a commercial bank authorized to provide
commercial banking services, in accordance
with the applicable laws and regulations
-minimum capitalization is PHP 5.4 BILLION
EXAMPLES OF EXPANDED COMMERCIAL BANKS
NAME OF BANKS EQUITY HOLDING
ALLIED BANKING CORP. - virgo holdings and development corporation (15.7%)
- jewel holdings inc. (15.6%)
- iris holdings and development corp. (14.5%)
- lucio Tan (13.4%)
ASIAN BANK - phil. Investment mgt consultants, Inc
- a. soriano corp. (phinma)
BANCO DE ORO - sm investment corp., sm inc., sm fund inc.
BPI - ayala corp (14.6%)
- jp morgan overseas capital corp (12.6%)
METROBANK - george s.k. ty (21.33%)
- toyota motor phils. Corp
- phil. Savings bank
RCBC - house of investments
-ba savings bank, mla
- bukidnon resources co.,
- rcbc capital corp
- memorial park cemetery
ORDINARY COMMERCIAL BANKS
- have a minimum capitalization of PHP 2.8 BILLION for
an ordinary bank in addition to the general powers as
shall be necessary to carry on the business of commercial
banking
examples:
- asia united bank
- bank of commerce
- east-west banking corp
- global business bank
- export and industry bank
- phil. Trust company
- philippine veterans bank
THRIFT BANKS
- are established to encourage thriftiness,
industry, frugality and accumulation of savings
among the people
-minimum capitalization of PHP 400 MILLION
each with head offices within metro manila and
PHP 64 MILLION each with head offices outside
metro manila
sub classifications:
-Savings and Mortgage Banks
-Private Development Banks
- Stock Savings and Loan Association
Savings and Mortgage Banks
- organized for the purpose of accumulating
the savings of individuals and investing them
together with their capital in readily
marketable bonds and debt securities,
commercial papers and accounts receivables
examples:
- Philippine Savings Bank
- Postal Savings Bank
- BPI Family Savings Bank
- UCPB Savings Bank
Private Development Banks
- banks organized to expand, develop,
construct and rehabilitate our
agriculture and industry
examples:
- Private Development Bank
- BPI Agricultural Development Bank
- Planters Development Bank
Stock Savings and Loan Associations
- include any corporation which engaged in the business
of accumulating the savings of depositors together with its
accumulated capital and give these out for loans and for
investment in securities of the government and any of its
political subdivisions and instrumentality
examples:
- Comsavings Bank
- Life Savings and Loan Association, Inc.
- Metrobank Savings & Loan Association, Inc
- Merchant Savings & Loan Association, Inc
- Commonwelath SLB, Inc
- Hermosa LSB, Inc
RURAL BANKS
- they are organized to promote and expand the rural
economy in an orderly and effective manner by providing
farmers and small businessmen with means of facilitating
and improving their productive facilities
MINIMUM CAPITALIZATION
-FIRST, SECOND & THIRD CLASS CITIES IN FIRST
CLASS MUNICIPALITIES- PHP 8 million each
- IN FOURTH, FIFTH, AND SIXTH CLASS CITIES AND IN
SECOND THIRD AND FOURTH CLASS MUNICIPALITIES-
PHP 4.8 million each
- IN FIFTH AND SIXTH CLASS MUNICIPALITIES- PHP 3.2
million each
examples:
- One Network Bank
- Rural Bank of Digos, panabo, nabunturan, tagum
COOPERATIVE BANKS
- establishment of cooperative bank is in
line with the special provisions of the
Cooperative Code of the Philippines, RA
6938
-any registered cooperative may organize
themselves as a cooperative bank
example: Cooperative Bank of Davao City
OFFSHORE BANKS
-means doing business with non-resident, that is ,
the clients are not based in the Philippines
-our government allows the offshore banking units
to do business with the Philippine-based clients
examples:
- ABN Amno Bank. N.U.
- American Express Bank, Ltd.
- Bankers Trust Company
- Barclays Bank, PLC
- International Bank of Singapore
- Chase Manhattan Bank, N.A.
ECONOMIC SIGNIFICANCE OF BANKS
- facilitate trade transactions particularly credit transactions
-facilitate processes between debtor and creditors because they serve
as intermediaries in the flow of credit funds
-promote the use of idle funds deposited into individual and corporate
accounts for the use of productive enterprises
- has the capacity to create new money from loan proceeds
-contributes to national development through te financial returns of
commercial, industrial and agricultural activities
- provides technical assistance and express advice to investros,
thereby giving the country the leverage it needs to compete with other
economies of the world
-major links between international buyers and sellers, between
importers and exporters
