Financial Sector at Work

Financial Sector

• Plays a vital role in the development of the economy.

• A category of stocks containing firms that provide financial services to commercial and retail customers. This sector includes banks, investment funds, insurance companies and real estate.

Monetary Policy

• The actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the vault (bank reserves).

Financial Institutions

• An establishment that focuses on dealing with financial transactions, such as investments, loans and deposits. Conventionally, financial institutions are composed of organizations such as banks, trust companies, insurance companies and investment dealers. Almost everyone has deal with a financial institution on a regular basis. Everything from depositing money to taking out loans and exchange currencies must be done through financial institutions.

Why do banks experience

bankruptcy?

Banks

• An institution for lending, borrowing, issuing, or managing money.

• A financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank links together customers that have capital deficits and customers with capital surpluses.

Commercial Banks• A financial institution that provides

services, such as accepting deposits, giving business loans and auto loans, mortgage lending, and basic investment products like savings accounts and certificates of deposit. The traditional commercial bank is a brick and mortar institution with tellers, safe deposit boxes, vaults and ATMs. However, some commercial banks do not have any physical branches and require consumers to complete all transactions by phone or Internet. In exchange, they generally pay higher interest rates on investments and deposits, and charge lower fees.

Commercial Banks

1. BDO2. Metrobank3. BPI4. Landbank5. RCBC

6. DBP7. PNB8. Union Bank9. Citibank10.China

Bank

Thrift Banks• A financial institution focusing on taking

deposits and originating home mortgages. Thrift banks often have access to low-cost funding from Federal Home Loan Banks, which allows for higher savings account yields to customers and increased liquidity for mortgage loans. 

• Also known as "savings and loan associations".

Savings and Loan Associations• Privately or locally managed financial

institutions• Uses individuals’ deposits to make long-

term amortized loans to home buyers.• Disperses loans for

home repairs, construction, and refinancing

Private Development Bank• Organized under the provisions of Republic

Act 4093 also known as Private Development Banks’ Act.Example: DBP

Savings and Mortgage Bank• Encourages people to save in the bank.• Accepts pawned items as collateral for

loans.

Rural Bank• Aims to help farmers to have capital.• Established through R.A. No. 720 also

known as Rural Banks Act.

Trust Companies• Banks that take care of the properties and

funds of people like minors who have no power to care for their properties.

• They also manage funds and properties of church and other charitable institutions.

Special Banks• Banks that were organized with specific

functions and objectives.

Land Bank of the Philippines• Main bank of the Philippines after the

Philippine National Bank was privatized.• Through R.A. 3844 with the specific aim of

enforcing land reform.

Al-Amanah Islamic Investment Bank of the Philippines (AAIIBP)• The only bank in the Philippines that is

authorized to offer Islamic banking.• Created through R.A. 6848 also known as

Charter of Al-Amanah Islamic Investment Bank of the Philippines.

Development Bank of the Philippines• Established to help the government in

improving our economy.• Gives financial help to promote the

different economic projects and programs in agriculture and industries.

International Banks

Asian Development Bank• Aims to provide economic and social

support to the developing member countries through loans and technical support.

• Asia, Far East Regions including South Pacific.

International Monetary Fund• Aims to provide economic and social

support to the developing member countries through loans and technical support.

• Asia, Far East Regions including South Pacific.

World Bank• Established in 1946 in Washington as the

International Bank for Reconstruction and Development (IBRD).

• Original Objective: Rebuild the economy of the countries that were destroyed during WW II.

• Current Objective: Lending countries needing financial assistance to rebuild their economies.

• Gives long-term loans.

Non-Banking Institutions

Government Service Insurance System (GSIS)• Insurances• Loans• Pension

Social Security System (SSS)

• Created through R.A. 1992• Aims to provide support to all members

that come from the private sectors.• Accepts voluntary members like farmers,

house helpers, and self-employed individuals.

Pag-IBIG (Pagtutlungan sa Kinabukasan – Ikaw, Bangko, at Gobyerno) Fund

• Established to help the members have their own houses.

• Receives contributions from its members from government, private employees, and OFWs.

National Home Mortgage Finance Corporation (NHMFC)• Created through P.D. 1267.• Aims to help individuals to own a house

and lot through modes of installment.

Pawnshop• Serves as middleman to all individuals who

need financial help.• Accepts anything of value as collateral to

their loan.

Central Bank

Central Bank• The Central Bank is the bank of

banks. It is a central institution designed to bring about unified control of the financial system of the country.

Central BankPrimary Objectives:1. To maintain internal and external

monetary stability;2. To preserve the international value

and convertibility of the peso, and3. To foster monetary credit and

exchange conducive to a balanced and sustainable growth of the economy.

Central Bank• The Central Bank of the Philippines

was created through R.A. No. 265 on June 3, 1949.

• Patterned after the Central Banks of Guatemala and Paraguay.

• Miguel Cuaderno, first governor.

Central Bank• 1993 – Central Bank was reported to

be losing 300 billion pesos, thus, the Central Monetary Authority (CMA) was created through RA 7653: Central Bank Act. Signed into law by President Fidel Ramos on June 14, 1993.

• The CMA is called Bangko Central ng Pilipinas (BSP).

Central Bank• The members have fixed terms

except for the cabinet secretary who represents the incumbent administration.

Central BankThe Bangko Sentral ng Pilipinas ahs several functions:

1. Safe keeper and controller of foreign currencies, gold, and payments for foreign and local debts;

2. Issues peso bills in exchange of foreign currencies and regulates the money supply in the economy;

3. Controls and decides whether to lend or not to lend money to other banks;

Central Bank4. Safe depository of public funds;5. Acts as clearinghouse that monitors if

checks issued by the banks with each other have funds;

6. Acts as rediscounting window by rediscounting the commercial papers of the banks and providing loans to them; and

7. Imposes the reserve requirement system among commercial banks.