22 Banking, Other Commercial Finance Other... · 22 Banking, Other Commercial Finance and Insurance...

22 Banking, Other Commercial Finance and Insurance

Introduction

he International Monetary Fund (IMF) described the Philippine banking system as a well-capitalized and generally with a high asset quality in 2010. Accordingly, the Bangko Sentral ng Pilipinas (BSP), in its Philippine Financial System Stability Assessment Update in January 2010, reported that the Philippine financial system remained fundamentally sound and stable. The Bank’s capital adequacy ratio stood at 15 percent, comfortably above the 10 percent prescribed by the BSP and the 8 percent set by international standards. According to the BSP, the strength of the banking system was boosted by its sustained efforts to enhance the delivery of financial services in the economy by opening further doors to financial innovation, and by promoting market discipline and more competition.

The BSP’s continued advocacy in promoting inclusive growth and alleviating poverty goes beyond the preservation of monetary and financial stability. Implementation of various initiatives to support the development of sustainable microfinance business environment in the country is a product of the BSP’s proactive stance in microfinance. It expanded further the access to mainstream financial products and services by the unbanked and underserved population. As reported, the Philippines moved up to number two position in 2010 from the number three slot in 2009 in terms of the overall microfinance business standing.

Greater public awareness of economic and financial issues is being promoted by the BSP through its Economic and Financial Learning Program (EFLP) to enable households and businesses to make well-informed economic and financial decisions. The BSP also extended its campaign effort in promoting a culture of saving among overseas Filipinos and enable them to use these savings in productive investments.

22.1 The Philippine Financial System

A vital element in securing sustained economic growth and stability is a strong and progressive financial system. Such a system stimulates the effective transformation of savings into investments and serves as a financial intermediary between savers and spenders. It likewise facilitates the channeling of loanable funds from surplus spending units to deficit spending units to fuel production and boost economic growth.

As of 2010, the Philippine financial system is composed of 8,869 banks, 4,679 of which were commercial banks, 1,419 thrift banks and 2,771 rural banks. The banking industry runs 35.7 percent of the 24,874 total number of financial institutions.

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Banking, Other Commercial Finance and Insurance

Nonbank institutions were a total of 16,005 that includes investment houses, finance companies, investment companies, securities dealers and brokers, pawnshops, lending investors, non-stock savings and loan associations, mutual building and loan associations, venture capital corporations, and others like private and government insurance companies (SSS and GSIS). Nonbank institutions comprised 64.3 percent of the number of financial institutions operating in the country. (See Table 22.1)

The banking institution dominates when it comes to resources. They owned PhP7.23 trillion or 80 percent of the PhP9.04 trillion total financial resources. Commercial banks have PhP6.42 trillion shares or 88.9 percent of the total banking resources while thrift and rural banks have 8.7 percent and 2.5 percent, respectively. (See Table 22.2)

The Philippine financial resources have grown significantly over the past nine years averaging an annual growth rate of 9.1 percent. The remarkable 13.4 percent increase posted in 2010 was second highest to the 20.7 percent recorded in 2006. It can be recalled that in 2001, the financial system had experienced global slowdown registering only 2.0 percent growth rate. It showed abrupt recovery however, in 2002 with 6.1 percent growth rate. From its highest peak in 2006, its growth slid down to negative 0.6 percent in 2007 as perceived due to the political turmoil. However, it dramatically bounced back to 10.0 percent growth in 2008. These growths were attributed to the increase in deposit mobilization and build-up of the capital base of the banking system. (See Table 22.2)

Resources of the Philippine financial system refer to the total assets of commercial banks, thrift banks, specialized government banks, rural banks and nonbanks financial intermediaries, net of interbank transactions but gross of provision for probable losses, accumulated market gains and losses.

22.2 Philippine Banking Institutions

The history of the Philippine banking system spans nearly five centuries. Its history and evolution can be generally divided into epochs: the Spanish Period (1594-1900), American Period (1900-1941), Japanese Period (1942-1945), Postwar Period (1946-1948), and the Central Bank Era (1949 to present).

To make the monetary and banking system responsive to the rehabilitation and development of the economy, the Central Bank of the Philippines (CBP), now the Bangko Sentral ng Pilipinas (BSP) was established in 1949. At that time, there were only 11 head offices and 75 branches of commercial banks in operation. Faith in the banking system perked up in the 1950s. Suddenly, seven commercial banks were organized and 44 branches were established, making a total of 137 commercial banking offices operating at the end of 1959. Even more rapid expansion took place the decade after, with 24 commercial banks and 483 branches added to the system. The same was true with savings, development and rural banks, and savings and loan associations.

Under Republic Act (RA) 337 or the General Banking Act, as amended by Presidential Decree (PD) 71, banking institutions are classified into three general categories: commercial banks, thrift banks (composed of savings and mortgage banks, private development banks, and stock savings and loan associations), and

NSO 2010 Philippine Yearbook

regional unit banks composed of rural banks. Specialized government banks, such as the Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LBP), are not covered by this classification but are subject to the supervision of the CBP, which is the nucleus of the country’s banking system.

In the early 1970s, nonbank financial institutions, such as investment houses and finance companies, began their operations. European currency banking started in the Philippines when the CBP launched a program to establish foreign currency deposit units (FCDUs) of local commercial banks and accept foreign currency holdings of Filipinos abroad. The FCDUs became the forerunner of offshore banking units (OBUs) appearing by mid-1977.

As the 1980s ushered in a new era, financial reforms were adopted. Among them were the introduction of expanded commercial banking, reduction in differentiation among categories of banks and nonbank financial intermediaries authorized to perform quasi-banking, elimination of all functional distinctions among thrift banks, and increase in the powers and functions of nonbank financial intermediaries authorized to perform quasi-banking functions.

In the early 1990s, significant change included the loosening up of bank-branching policies, reduction of reserve requirements on bank deposit substitute liabilities, and liberalization of rules on domestic commercial banks’ net foreign exchange positions. These reforms enhanced efficiency and competition among financial intermediaries and attracted numerous investments.

Banking reforms are still being pursued to keep the system finely tuned and competitive given the demands of the new millennium. The BSP advocates a policy that encourages mergers and consolidations heading toward the vision of several major local banks and foreign banks accounting for the major portion of the banking system. A package of short-term incentives is being offered by the BSP to consolidating banks. As of mid-2000, there were nine mergers and consolidations involving 16 commercial banks, a thrift bank, and two rural banks.

Another recent reform is the passing of the General Banking Law 2000, which supersedes the half-century old General Banking Act of 1949. This basic legal fabric governing the banking system, in essence, works to improve transparency by putting in place internationally accepted standards relating to risk-based capital adequacy, and enhancing competition by allowing foreign banks to acquire up to 100 percent of the voting stock of an existing bank within seven years from the effectivity of the law.

Other continuing reforms are the amendments to the New Central Bank Act being pushed by the BSP and the development of a system and guidelines for improved regulatory oversight and bank compliance. Broadly speaking, these legislative measures aim to enhance the supervisory and enforcement powers of the BSP while further improving prudential standards for the banking system, intensifying competition in the banking sector, and enhancing the BSP’s independence. The Central Bank of the Philippines: Then and Now

Under its original charter, the CBP--now known as Bangko Sentral ng

Pilipinas (BSP)--was called upon to maintain monetary stability by promoting a low and stable inflation conducive to a balanced and sustainable economic growth; ensure the preservation of the international value and convertibility of the peso into other freely


convertible currencies; and, promote an increasing level of production, employment, and real income.

PD 72, upon the recommendation of the Joint International Monetary Fund (IMF)-CBP Banking Survey Commission, amended the charter by redirecting the CBP’s primary objectives. Maintaining the internal and external stability of the peso, and fostering monetary, credit, and exchange conditions conducive to a balanced and sustainable growth of the economy became the thrusts of CBP.

Besides credit control, monopoly of currency issue and custody, and management of foreign exchange reserves, the CBP now regulates and supervises the banking system and exercises regulatory power over the operations of nonbank financial institutions. The CBP simplifies banking classification by performing clearing functions and exercising custody of commercial banks’ reserves. It also has the power to take preventive action against insufficiently funded financial institutions and may impose a legal structure for banks, minimum paid-up capital requirements, and guidelines for management qualifications of personnel of the applicant institution. It provides monetary and credit regulations to control the solvency and liquidity of banks, restricts the types of business that they may engage in, and limits the exposure that banks may take according to perceived risks relative to such exposures.

Further, the CBP has the authority to revoke licenses and take necessary action to straighten out banks’ affairs, which may include any combination of actions, such as rehabilitation, merger, or closure. To the government, it acts as a fiscal agent and financial adviser. In addition, the CBP has been authorized to collect, through the banking system, national revenue taxes, customs duties, and other levies, including stabilization taxes.

The strategy of the CBP in pursuing its objectives took the forms of exchange and trade controls in the 1950s; monetary and credit regulation in a free economy with an adjusted but fixed exchange rate in the 1960s; and monetary and credit management, external debt management, and regulation of certain exchange transactions under a “floating currency” in the 1970s.

In 1972, the CBP initiated measures to encourage economies-of-scale in banking and improve its supervision over the financial sector. It organized foreign savings through the introduction of a foreign currency system for domestic banks in 1972 and an offshore banking system for foreign banks in 1976. In 1980, a new set of multipurpose institutions called unibanks, in which the resources of commercial banks are coupled with those of investment house or merchant was developed with greater capacity to generate long-term investment capital.

When the foreign exchange and financial crises erupted in 1983, the CBP closed down several institutions, and bailed out others. In effect, it reformed the banking sector, expanded the capital base of banks, and exercised stricter control over all aspects of the financial system. It raised the reserve requirement from 18.0 percent in 1982 to 24.0 percent in 1984, and introduced Central Bank bills, which yielded high interest.

In 1993, RA 7653 reorganized the CBP into the current BSP, arming the latter with greater flexibility in the execution of monetary policies. The Monetary Board approved on January 18, 1994 the new organizational structure of the BSP.

The BSP was established as an independent central monetary authority pursuant to the constitution and the New Central Bank Act of 1993 as part of the restructuring of the old Central Bank of the Philippines, which was originally


established in 1949. Substantial deficits in CBP’s operations led to its restructuring into the BSP. Under the New Central Bank Act, the BSP was granted increased fiscal and administrative autonomy from other government sectors. As such, the BSP no longer undertakes certain quasi-fiscal activities and is not permitted to engage in development banking or financing.

On July 3, 1998, BSP’s supervision and regulation of non-banking entities were turned over to the Securities and Exchange Commission (SEC) for corporations and partnerships and to the Department of Trade and Industry (DTI) for single proprietorships in accordance with Section 30 of R.A. No. 7653. However, the non-banks with quasibanking functions and/or with trust or Investment Management Activities (IMA) license, nonbanks which are subsidiaries/affiliates or banks and quasi-banks, non-stock savings and loan associations, pawnshops and venture capital corporations were retained under the BSP’s supervision.

In the year 2003, the BSP continued instituting several policy measures for a well-functioning banking system. These measures were on strengthening the BSP's regulatory and supervisory functions; strengthening further the banking system; improving banking services and banking profitability; enhancing transparency; and, supporting the global fight against money laundering.

In the pursuit to preserve and maintain the integrity of the currency, the BSP launched the Revised Reward System in 2004 to encourage more public support and participation and ensure better chances for successful operations. It aimed at giving higher financial rewards to persons who give information on counterfeiting activities leading to the arrest of suspects, seizure/confiscation of counterfeit currencies and paraphernalia and the filing of appropriate charges in court to counterfeiters. The BSP’s Currency Analysis and Redemption Division, on the other hand, conducts information campaigns on familiarization of genuine Philippine and acceptable foreign currencies, counterfeit detection, BSP advocacies on the Clean Note Policy, Revised Reward System, Coin-Recirculation Campaign and other related issues.

The BSP began to realign local regulations and adopted the international standards to make them more responsive to the growing competitiveness and sophistication of modern financial services industry. Towards the end of 2005, the BSP have issued major regulations in the guidelines of new financial reporting package (FRP), supervision by risk, information technology and risk management, amendments to the Fit and Proper Rule and the prompt corrective action (PCA).

A revised risk-based capital adequacy framework which include major methodological revisions in the calculation of minimum capital that universal banks, commercial banks and their subsidiary banks and quasibanks was introduced as per BSP Circular No. 538 dated August 2006. The revised framework also introduces amendments to capital requirements for market risk so as to align specific market risk charges on trading book assets with the enhanced credit risk exposure guidelines.

Despite the financial headwinds of rising world oil and commodity prices, subprime credit crisis and impending US recession in 2007, the Philippine financial system stayed on track towards sustainable growth. In its bid to develop a more robust financial landscape defined by stronger financial institutions and effective market competition, the BSP remained steadfast in encouraging banks to strengthen their balance sheets through asset cleanup, capital buildup or industry consolidation, improve their risk management framework and ascribe to the highest ideals of corporate governance. In this regard, the BSP issued regulations on the enhancement


of Financial Reporting Package or FRP (BSP Circular No. 568), on the procedures of disqualification of bank directors and officers (BSP Circular No. 584), and on the imposition of monetary penalties for erring bank directors and officers of BSP supervised financial institutions (BSP Circular No. 582).

Amidst the global financial storm in 2008, the Philippine financial system and the banking industry managed to stay afloat. The continued volatility in commodity and consumer prices, rising interest rates, depreciation of the peso against the US dollar, contraction in exports, foreign direct investments and hot money outflows were among the crisis that rippled the Philippine economy. Consequently, the BSP conducted a preliminary cabin work to mitigate any potential impact of the current crisis. The BSP likewise enabled to ensure liquidity in the system by shortening its monetary tightening cycle, reducing the reserve requirement, and opening the dollar repurchase window. The BSP further enhanced its derivative rules (BSP Circular No. 594) by allowing banks to explore opportunities for financial risk management and investment diversification through prudent use of derivatives.

The BSP Circular No. 649 issued in 2009 provided the regulatory framework for e-money issuance and governed the operations of e-money issuers (EMIs). The use of e-money as an innovative solution for low value payments enabled banks to effectively lower transactions costs, decrease cash-on-hand risk and increase accessibility to a broad range of financial services, including loans.

In 2010, the BSP approved regulations aimed at promoting a stronger, more efficient, and more competitive rural banking system. This is in line with the BSP’S policy to foster healthy competition within the rural banking system and enable rural banks (RBs) to maximize their potential as catalyst of economic expansion. As per BSP Circular No. 696 dated 29 October 2010, the new minimum capital requirement for rural banks was PhP100 million for RBs with head office in Metro Manila while the least PhP5 million was for RBs belonging to 5th to 6th class municipalities. On the other hand, the BSP also issued new regulations that seek to broaden access to financial products and services, particularly by the low-income and underserved and unbanked sectors. This is consistent with BSP’s continuing thrust to promote a more inclusive financial system by fostering an enabling and responsive policy and regulatory environment. In this connection, the BSP Circular No. 694 sets out the guidelines for the establishment of Other Banking Offices (OBOs) and Micro-Banking Offices (MBOs) specifically intended to cater to underserved/unbanked populations, as well as microfinance and overseas Filipinos (OFs) and their beneficiaries.

In view of the forgoing, the BSP remained its advocacy to be deeply involved in various projects and activities to support the economic and social development objectives of the government through advocacy programs in microfinance, financial education and consumer protection, economic information, and overseas Filipinos' remittances environment. Broad-Money Liabilities. It include national currency outside Depository Corporations (DCs), transferable deposits (narrow money), which consists of currency circulation and peso deposits, and other deposits denominated in foreign currency of residents.

The total broad money liabilities and its origin in 2010 was valued at PhP4.40 trillion, a 10.7 percent increase from PhP3.97 trillion in 2009. (See Table 22.4) In its composition, the total broad money was dominated by savings and time deposits


comprising to about 40.9 percent and 26.5 percent, respectively of the total. Transferrable deposits have a share of 19.7 percent, currency outside depository corporations with 10.9 percent and securities other than shares with 2.1 percent.

Since 2002, the average annual growth rate level was at 11.6 percent. The highest was in 2006 when it registered 22.7 percent growth rate followed by 15.6 percent in 2007 and 10.7 percent in 2010. (Refer to Table 22.4a for details.)

International reserves. BSP's gross reserves consist of the BSP's holdings of gold, special drawing rights (SDRs), foreign investments, and foreign exchange. Gross international reserves (GIR) include the reserve position in the IMF.

Aside from the US dollar, the following currencies have been included in the country's international reserves by virtue of BSP Circular No. 100 series 1959; Circular No. 141 series 1962; and Circular No. 665 series of 1979: Japanese yen, pound (United Kingdom), Hong Kong dollar, Swiss franc (Switzerland), Canadian dollar, Singapore dollar, Australian dollar, Bahrain dinar, Saudi rial, Brunei dollar, Indonesian rupiah, Thai baht, UAE dirham (United Arab Emirates), and the European Monetary Union euro, consisting of the deutsche mark (Germany), French franc (France), Dutch guilder (Netherlands), Austrian schilling, Belgian franc, Italian lire, markka (Finland), escudo (Portugal), peseta (Spain), Luxemburg franc, drachma (Greece) and punt (Ireland).

The Philippine gold holding was valued at US$35 per fine troy ounce prior to April 1972 and US$38 per fine troy ounce up to January 1973. From 1973 to March 1978, gold holdings were valued at US$42 per fine troy ounce. Thereafter, gold acquired by the BSP has been valued at acquisition cost based on prevailing market rates.

Special drawing right is a reserve asset deliberately created by the decision of the IMF to supplement existing international reserve assets, while foreign investments consist of interest-earning deposits with foreign correspondent banks and foreign securities, with maturities not exceeding five years which are government-guarantee. Foreign assets, which consist of nonearning demand deposits and foreign currencies on hand, comprise the foreign exchange.

Net international reserves (NIR), on the other hand, refer to the difference between BSP's total foreign assets and its total foreign liabilities (short-term and use of fund credits).

Total foreign assets consist of BSP's gross reserves and reserve position in the Fund that are readily available to and controlled by a country's monetary authority for direct financing of payments imbalances and for managing the extent of such imbalances.

Reserve position in the fund refers to the country's claim in the IMF, which comprises reserve quota net of reserve tranche purchases.

Foreign liabilities include short-term liabilities and Use of Fund Credits (UFC) of the BSP. UFC refers to the sum of outstanding drawings from the Fund under various policies and facilities other than drawings under the reserve tranche.

The BSP's gross international reserves (GIR) exhibited an erratic trend from 1971 to 1997. The outbreak of global recession, which started in 1982, caused an abrupt decrease in GIR of 49.5 percent in 1983. It only increased by 2.5 percent in 1984 but gradually recovered beginning in 1985 with an 18.6 percent increase at US$1.06 billion GIR.


In 1996, the GIR showed 51.2 percent increase from US$7.78 billion in 1995 to US$11.77 billion. However, in 1997, 28.7-percent cutback on foreign investments stirred a 25.2 percent decrease in GIR, narrowing reserves to US$8.79 billion. In 1998, GIR bounced back with a 23.2 percent increase at US$10.84 billion. GIR leaped further by 38.9 percent in 1999, settling at US$15.06 billion. GIR rebounded from minimal loss in 2000 by 4.2 percent in 2001, reaching US$15.69 billion. It further increased by 4.3 percent the following year settling at US$16.36 billion. In 2003, international reserves ticked by 4.2 percent registering at US$17.06 billion.

In 2010, the BSP added US$18.15 billion more to its US$43.11 in 2009 translating to a total of US$61.26 billion GIR in custody. The 42.1 percent increase in GIR was the second most highest recorded since it soared 47 percent increase in 2007. Building up the bulk of BSP’s GIR were foreign investment with 87.2 percent valued at US$53.44 billion, gold reserves with 11.4 percent valued at US$7.01 billion and the remaining 1.4 percent were shared by foreign exchange, IMF reserve position and special drawing rights. (See Table 22.5) Financial Banking Institutions

The banking sector has grown in size, complexity, and sophistication since

1949, the CBP era. Banks now are categorized into universal or commercial banks, thrift banks, rural banks, and specialized government banks consolidated with commercial banks. In 2010, a total of 8,869 banking institutions were operating in the country. Commercial banks continued to dominate in number with 4,679 followed by rural banks and thrift banks, with 2,771 and 1,419 respectively. (See Table 22.1)

The Philippine banking system remained fundamentally sound and stable in 2010 amid the global financial crisis. The total financial resources grew to PhP9.04 trillion, reflecting a growth of 13.4 percent from previous year’s record of PhP7.97 trillion.

Universal/Commercial banks continued to be the prime contributor to the banking resources accounting for 71.1 percent. Its resources further increased by 12.8 percent over the 2009 level. Thrift banks shared 6.9 percent while rural banks accounted for 2.0 percent of the total banking resources. The remaining 20 percent came from nonbank institutions. Both banking and nonbank resources generated an increase of 12.4 percent and 17.5 percent, respectively, over that of 2009 value. (See Table 22.2 for details.)

The system by which banking institutions mobilize domestic resources includes savings deposits, time deposits, demand deposits, negotiable order for withdrawal (NOW) accounts, and money market instruments. These are also the sources of funds for the bank’s lending operations. Therefore, an increase in deposits is a reliable indicator of the healthy state of the system.

BSP’s preliminary reports showed commercial banks' total loans went up by 10.1 percent from PhP1.92 trillion in 2009 to PhP2.12 trillion in 2010 December value. Major recipients of bank loans were the financial institutions, real estate and business services sector (27.6%); manufacturing (18.3%); and agriculture, fisheries and forestry (18.1%). Transportation, storage and communication meanwhile, hold back by 3.6 percent from PhP150.05 billion to PhP144.70 billion in December 2010. (See Table 22.6)


Commercial banks. These form the predominant group of institutions in the Philippine banking system.

Commercial banks have added 159 more to 4,520 banks existing in 2009. They now represent 52.8 percent of the 8,869 banking institutions and 18.9 percent of all financial institutions (banks and nonbanks), which numbered 24,874. (See Table 22.1 for details.)

Commercial banks are primarily characterized by their depository and safekeeping functions. A deposit is a contract between the saver and the bank, giving rise to a creditor-debtor relationship. Deposits, which are the lifeblood of commercial banks, may be in peso or in foreign currency; private or government; and demand, savings, or time deposits. These deposits are protected by statutory requirements and legal reserves. Legal reserves act as a safety fund in meeting the normal demands of depositors and also as a tool of monetary policy to regulate money supply. The BSP sets the rate of legal reserve requirements.

For additional protection of depositors, RA 3591 established the Philippine Deposit Insurance Corporation (PDIC), which insures the deposit liabilities of banking institutions engaged in the business of accepting deposits. Originally, the maximum deposit insurance coverage (MDIC) was set at PhP10,000 per depositor. It was escalated to PhP100,000 until the passage of Republic Act No. 9576 increasing the MDIC to PhP500,000 effective June 1, 2009. As stated by the PDIC, the increase is a means to promote and safeguard the interests of the depositing public.

Apart from the BSP, commercial banks are the only institutions that can create money by issuing new demand deposits in the process of granting loans. This is called demand deposit function. This ability to create money is tied up with the fractional reserve system that the BSP requires for demand deposits.

In its function as a lending institution, the lending policies of commercial banks serve as the performance guidelines of bank personnel. The bank must have its policies regarding rate charges on loans. In granting a loan, proper evaluation should be made and should conform to the widely accepted four Cs of credit, namely, credit character, capacity to pay the loan, sufficient capital, and the climate or conditions surrounding the loan.

Another aspect of commercial banking is the provision of trust services. Trust servicing is actually a nonbanking service. Trust business is an arrangement whereby a person called trustee holds and manages property for the benefit of another person (or persons) called beneficiary. It includes the business of settling estates, and administering guardianship. Commercial banks may also offer its facilities as part of providing foreign financial services. These include correspondent banking relationships, financing of foreign trade, provision of facilities for letters of credit, buying and selling of traveler’s checks, foreign drafts, international credit card servicing, and facilities for foreign currency deposits.

As per BSP Circular No. 156, series of 1998, the minimum capitalization requirements of commercial bank is PhP2.8 billion, while the expanded commercial bank or universal bank is PhP5.4 billion effective December 31, 2000.

Expanded commercial banking (universal banking) is a combination of commercial banking with the powers of an investment house. Benefits derived from universal banking are numerous, such as those arising from economies-of-scale in operations, flexibility in arranging financial packages, stronger competitive capacity, and ability to service broader market. Universal banks have likewise been given the


expanded authority to invest in the equity not only of allied undertakings but also of nonallied enterprises, and to own up to 100 percent of the equity of a financial intermediary other than a commercial bank.

For the year 2010, commercial banks yielded PhP6.42 trillion in resources, putting up 88.9 percent of the banking system’s total resources. Excluding the BSP, commercial banks brought in 71.1 percent to the aggregate resources of the Philippine financial system. (See Table 22.2.)

Meanwhile, loans outstanding of commercial banks in 2010 increased by 10.1 percent to PhP2.12 trillion from PhP1.92 trillion over the previous year. These loans remained concentrated in the financial institutions, agriculture, fisheries and forestry sector, and manufacturing industries. (See Table 22.6 for details.)

As commercial banks continue to form the core of the banking industry, the BSP is promoting, by way of policies, the creation of fewer but more financially powerful main banks that are better equipped to compete in the globalizing economy. This is the rationale behind the current wave of bank mergers and acquisitions. Thrift banks. They mobilize small savings and provide loans at generally longer and easier terms to lower income groups. Loans are usually for basic social and economic needs, and are granted to small producers, such as farmers, cottage industry entrepreneurs, and consumers, to finance their production and consumption require-ments.

The thrift banking system is composed of private development banks, savings and mortgage banks, and stock savings and loan associations (SSLAs). These are described as follows:

Private development banks - cater to the capital needs and demand for investment

credit or medium- to long-term loans for the promotion and growth of industry and agriculture at reasonable costs. These banks are also authorized to generate deposits from public and other government institutions as the source of funds for the loans and financing services they provide.

Savings and mortgage banks - banks organized to accumulate the savings of

depositors and invest them in marketable bonds and securities, commercial papers and accounts receivable, drafts of exchange, acceptances or notes arising from loans (whether secured or unsecured), mortgages on real estate, financing for housing loans and other investments, and loans authorized by the Monetary Board of the BSP for national economic development purposes.

Stock savings and loan associations - involved in similar activities but limit such

services to their members and stockholders. For existing thrift banks with head offices located within the National Capital

Region (NCR), the capitalization requirements as per BSP Circular No. 156, series of 1998 shall be PhP400 million, while those operating outside the NCR is PhP64 million.

In 2010, there were 1,419 thrift banks, most of which (939 or 66.2 percent) were savings and mortgage banks. The others were private development banks (22.1%), stock savings and loan associations (9.9%), and microfinance banks (1.9%). (See Table 22.1)


Thrift banks yielded a total of PhP626.4 billion worth of resources or comprised the 8.7 percent of the PhP7.23 trillion total banking resources and 6.9 percent of the PhP9.04 trillion total financial resources. (See Table 22.2)

While the direction of change in the banking environment is to have a handful of financially strong banks, the ideal situation is for smaller specialist players to complement the services of big banks. These small banks are deemed more effective in covering important niche markets that have their own unique needs. Important niches that the thrift banking industry can well play a role in include consumer lending, housing loans, small business loans, agribusiness loans, as well as niches based on specific consumer markets and geographic markets.

Many large domestic and foreign banks, as well as other financial service organizations, have already established their own thrift banking subsidiaries as part of a broader corporate strategy to service a wide range of client markets. Within 1999, the BSP reported that 18 thrift bank subsidiaries, representing a mere 15.0 percent of thrift banks in number, account for more than 40.0 percent of total banking offices and account for half of the total resources of the entire thrift banking industry. Rural banks. These are unit-type community-oriented banks organized as a stock corporation with five to 15 incorporators, majority of whom must be residents of the place where the rural bank will operate and must own the bulk of controlling voting shares.

Rural banks provide savings facilities in rural areas and extend loans to farmers and small businessmen. Because of their credit and savings function in the rural economy, rural banks receives considerable assistance from the government.

In addition, upon approval of the Monetary Board, a rural bank may open current or checking accounts, or NOW accounts; act as official depository of municipal, city, and provincial funds in the locality where it is located; rediscount papers with the Philippine National Bank and DBP; and invest in allied undertakings.

Acting as a depository or agent, a rural bank performs the following: 1. Offers trusteeship services, such as receiving in custody funds,

documents, and other valuables; 2. Acts as trustee over estates and properties of farmers and merchants; 3. Acts as a financial agent for the account of its clients and buys or sells

for their accounts, shares, securities, and other types of indebtedness; and

4. Makes collections and payments for the account of their customers, which are not incompatible with the banking business.

Agricultural loans include farm expenses in connection with the preparation,

cultivation, transportation, and storage or marketing of products and other farm-related activities necessary to increase and maintain productivity. Commercial loans are granted for the conduct, development, or improvement of commercial operations, as well as the purchase of commodities for resale. Industrial loans are granted for the purchase of raw materials, manufacture and processing of goods, and payment of labor and cost of marketing finished goods. Other types of loans include term loans and loans for cooperatives.


Two special features of the rural bank’s lending operations are the program on supervised credit and special financing programs. Supervised credit refers to timely credit combined with farm and management guidance under a trained technician. Special financing programs, on the other hand, refer to special programs of the government for agricultural production that have been established and placed under the administration of the BSP, in which rural banks are allowed to participate. Funds in this program are channeled through rural banks in the form of special time deposits to provide them with funds for initial loan releases to finance specific projects under the program and to enable the rural banks to generate more funds through rediscounting with the BSP.

Launched in early 1987, the rehabilitation program for the rural bank was implemented to help distressed rural banks regain a solvent position through fresh capital infusion and through conversion of supervised rediscount fund arrears into equity of the LBP and payment plan not exceeding 10 years.

The BSP’s continued supervision over rural banks boosted investments of local banking units, particularly in the form of deposits and loans extended to various economic sectors of different localities. Rural banks, numbering 2,771 in 2010, registered a total of PhP178.2 billion resources. Their resources increased by 7.3 percent compared to PhP166.01 billion in 2009 contributing the least share of 2.5 percent to the total banking resources. (Refer to Tables 22.1 and 22.2)

As per BSP Circular No. 156, series of 1998, the new minimum capitalization requirement of rural banks effective December 31, 2000 shall be as follows:

Cities of Manila, Caloocan, Quezon, Pasay, Mandaluyong, Makati, Malabon, Navotas, San Juan, and Parañaque PhP32 million Cities of Cebu and Davao PhP16 million 1st, 2nd and 3rd class cities and 1st class municipalities PhP8 million 4th, 5th and 6th class cities and in 2nd, 3rd, 4th class municipalities PhP4.8 million

5th and 6th class municipalities PhP3.2 million

Specialized government banks. In response to specific needs, government-owned banks were created. Among these are the Development Bank of the Philippines (DBP) and the Al-Amanah Islamic Investment Bank of the Philippines (AAIIBP). The Islamic Bank is mandated to promote and accelerate the socioeconomic development of the Autonomous Region in Muslim Mindanao (ARMM) by performing banking, financing and investment operations and participating in agricultural, commercial and industrial ventures based on the Islamic concept of banking. However, these specialized government banks, DBP and AAIIBP, were consolidated with commercial banks in 1997. Offshore Banking System

Offshore banking units (OBUs) were established in the country through PD 1034 on September 30, 1976. OBU operations involve receipt of funds, mostly from external sources, and transfer of these funds within or outside the country.


Activities open to OBUs consist of the following: acceptance of time and call deposits or issuance of negotiable certificates of deposit in any foreign currency; acceptance of demand deposits in any amount; and extension of foreign currency loans and advances or participation in syndicated loans. They could likewise invest in, underwrite, or deal in debt instruments, regardless of maturity; discount bills; accept negotiable certificates of time deposit; and, engage in spots or forward foreign exchange trading.

On the other hand, for the depositor--whether resident or nonresident of the Philippines--OBUs have the following attractions: acceptance of time, demand, and call deposits or issuance of negotiable certificate of time deposits; absence of restrictions on the withdrawability of deposits subject only to the contract terms with the bank; discounting and borrowing facilities; and, transferability of deposits to any bank abroad.

Foreign currency deposit system. Established primarily to attract foreign currency deposits, this expanded with the enactment of PD 1035 in 1976. While OBUs are principal suppliers of long-term funds, foreign currency deposit units (FCDUs) are considered as retail bankers of such funds. In 2010, total assets by the foreign currency deposit unit increased by 13.4 percent to US$29.36 billion from the previous year’s record of US$25.46 billion. (See Table 22.7) 22.3 Nonbank Financial Institutions

Nonbank financial institutions (NBFIs) are a group of institutions with varying characteristics. These are nonmonetary financial institutions, classified into government and private, with or without quasi-banking functions. They are primarily engaged in long-term financing for the expansion and modernization of productive ventures and in facilitating short-term placements in other financial institutions.

The three major classifications of NBFIs are private nonbank financial intermediaries, government nonbank financial institutions, and private nonbank thrift institutions. Investment houses, financing companies, securities dealers and brokers, investment companies, fund managers, lending investors, pawnshops, private insurance companies, venture capital corporations, and money brokers comprise private nonbank financial intermediaries. Government nonbank financial institutions, on the other hand, consist of the Government Service Insurance System (GSIS), Social Security System (SSS), National Home Mortgage Finance Corporation, Philippine Veterans Investment Development Corporation, and National Development Corporation. Private nonbank thrift institutions, meanwhile, are composed of mutual building and loan associations and nonstock savings and loan associations.

The number of NBFIs was generally on the uptrend, registering an annual average increase of 5.9 percent since 2001. The biggest growth at 7.1 percent was obtained in 2008 while the smallest growth at 3.1 percent happened in 2009 where the number of NBFIs stood at 15,225. (Refer back to Table 22.1 for details.)

The resources of NBFIs exhibited positive growth from 2001 to 2007. From the PhP756.5 billion resources recorded in 2001, it grew to PhP1.8 trillion in 2007. The global financial meltdown in 2008, however, may have affected the growth when the resources slid to only PhP1.4 trillion. The NBFIs slightly regained strength in 2009 with


a 7.2 percent increase at total resources of PhP1.5 trillion then to PhP1.81 trillion in 2010. (See Table 22.2 for details.)

Private Nonbank Financial Institutions

In 1972, the BSP was given regulatory authority to institute and implement reforms on NBFIs under PD 72. Private NBFIs were given the function of providing long- and short-term financing and mobilizing funds for the account of others.

The following describes briefly the duties and functions of various private NBFIs and nonbank thrift institutions: Investment houses - enterprises engaged in guaranteed underwriting of securities of

any kind issued by another corporation, person, or enterprise, including securities of government and its instrumentalities.

Financing companies - corporations or partnerships organized primarily for these

purposes: extend credit to consumers and agricultural enterprises either by discounting or factoring commercial papers, account receivables or other evidences of indebtedness; and lease motor vehicles, heavy equipment, industrial machinery and equipment, and appliances.

Securities dealers - institutions organized either as partnerships or corporations that

buy and sell securities of another for the purpose of reselling or offering them for sale to the public for their own accounts. They do not earn commissions but derive income from trading (the difference in the buying and selling prices of securities).

Securities brokers - institutions engaged in the business of effecting transactions in

the sale of securities for the account of others. They earn commissions out of these intermediary transactions.

Investment companies - entities primarily engaged in investing, reinvesting, or trading

in securities. Fund managers - institutional and personal administrators of funds created or

constituted for the benefit of others. Lending investors - persons who practice lending money among themselves or others,

usually utilizing their own capital to extend all types of loan, generally short-term and without collateral.

Pawnshops - business establishments engaged in lending money for personal

property delivered as security or pledge. Private insurance companies - insurance carriers of all kinds, such as life, fire, marine,

accident, health, title, financial obligations, casualty, fidelity, and surety; insurance agents and brokers’ organizations servicing insurance carriers; consultants for policy holders; adjusting agencies; and independently organized pension (superannuation) funds.


Venture capital corporations - entities organized jointly by private banks and government agencies to develop, promote, and assist small and medium enterprises through debt or equity financing.

Mutual building and loan associations - corporations whose capital stock is required or

permitted to be paid in by the stockholders in regular, equal, or periodic payments to repay said stockholders their accumulated savings and profits upon surrender of their shares. This is done to encourage industry, frugality, and home-building among the stockholders on the security of unencumbered real estate pledge of shares of the capital stock owned by such stockholders as collateral security.

Nonstock savings and loan associations - corporations organized primarily for mutual

self-help and the common interest of its members who must belong to a well-defined group and shall not transact business with the general public. These associations are businesses that accumulate the funds of their members through earnings or capital contributions, and relend these accumulated funds to their members or invest them in either government securities or other productive enterprises.

In compliance with the provision of Section 130 of Republic Act No. 7653 or

the New Central Bank Act, the BSP transferred to the Securities and Exchange Commission its regulatory powers and responsibilities over finance companies without quasi-banking functions and other institutions performing similar functions. Government Nonbank Financial Institutions The Government Service Insurance System. The GSIS is a social insurance institution created under Commonwealth Act No. 186 on November 14, 1936. It provides and administers a pension fund to secure the future of all employees in the Philippine government which has the following social security benefits: compulsory life insurance, optional life insurance, retirement benefits, and disability benefits for work-related accidents and death benefits. As mandated by Republic Act 696 or the Property Insurance Law, the GSIS also manages the General Insurance Fund for the comprehensive protection to government insurable interests.

In 2010, the GSIS have accumulated PhP578.44 billion assets earning additional 2 percent from its 2009 PhP566.96 billion. In addition, the GSIS has PhP478.37 billion worth of investments and reserves valued at PhP530.78 billion. Both have also posted an increase of 1.5 percent and 4.5 percent, respectively. (See Table 22.8.)

Meanwhile, the GISIS covers all government workers irrespective of their employment status except members of the judiciary and Constitutional Commissions who are covered by separated retirement laws; contractual employees who have no employee-employer relationship with their agencies; uniformed members of the Armed Forces of the Philippines and the Philippine National Police, including the Bureau of Jail Management and Penology and the Bureau of Fire Protection.

The GSIS provides services not only to its members but also their dependents and beneficiaries, the retirees and pensioners, and the survivors of deceased members or pensioners. Active members are entitled to loan privileges such as salary, policy, emergency and housing loans.


RA 8291, known as the Government Service Insurance Act of 1997, expanded the social security protection of the government workers. It also enhanced the powers and functions of the GSIS to better respond to the needs of its members.

The Premium-Based Policy, which GSIS uses to compute and pay retirement and other social benefits on the basis of actual premiums received, was adopted in 2003. Thus, those who have served the government for 30 years but paid premiums corresponding to only 25 years should be entitled to benefits equivalent to 25 years of service. The implementation of this policy saw the suspension of the loan privileges of members belonging to 66 delinquent agencies.

Another decision designed to enhance the healthy relationship between the premium and benefit structure of the Social Insurance Fund is the restructuring of the survivorship benefits provided under RA 8291. The restructuring hopes to prevent a situation where survivors who never paid any contribution to the fund qualify to benefits more easily and actually enjoy more benefits than the retirees or pensioners who actually paid their contributions to the fund.

Meanwhile, the GSIS introduced a legacy of innovations in 2003. It set in place a network of systems and data that permits members to transact business with any GSIS office across the nation and an online service that allows members to check all their GSIS accounts and records.

GSIS also opened a mobile phone texting facility for checking loan balances, maximum loan amount, and status of loan applications. This is the first such service in all Asian bureaucracies.

On the other hand, the GSIS Identification Card was introduced. This card may be used by a member in transacting purchases with department stores and any outlet allowing such transaction, and it shall also be the depository of benefits and loan proceeds in real time.

Another breakthrough introduced by the GSIS was “e-GSIS”. This puts the System on the leading edge of online delivery of services by government agencies. It is the first online service in the Philippine bureaucracy that answers queries from live databases, and is programmed and expanded to include online processing of loan applications submitted through the web. This can be accessed through the GSIS website at www.gsis.gov.ph.

The Social Security System. The SSS was created on September 1, 1957 by virtue of RA 1972. Section 2 of the SSS Law (Republic Act No. 1161), as amended by the SSS Act of 1997 (Republic Act No. 8282) provides that, it is the policy of the State to establish, develop, promote and perfect a sound and viable tax-exempt social security system suitable to the needs of the people throughout the Philippines, which shall promote social justice and provide meaningful protection to members and their beneficiaries against the hazards of disability, sickness, maternity, old age, death and other contingencies resulting in loss of income or financial burden. On its more than 50 years of existence, the SSS has been a key partner of government in fulfilling the collective mission to improve the lives of the people. As of 2010, its members accounted a total of 29.65 million members comprising of regular employees, self-employed individuals, and employers. Correspondingly, the SSS has total assets of PhP271.27 billion recording a 9.4 percent increase from its PhP228.92 billion in 2009. Likewise, it posted a total of PhP253.84 billion worth of investment and reserves at PhP262.66 billion in 2010. (Refer to Table 22.8)


The continued innovation of products and services being offered by the SSS to its members has achieved greater heights that made a difference for the past decade. In 2001, the SSS launched the Flexifund Program for Overseas Filipino Workers (OFW) which allowed them to contribute beyond the maximum level so they can avail of higher benefits. In its commitment to reduce the processing time of member, the SSS Covenant of Service (COS) Program was also launched. A Daily Remittance Scheme for members belonging in the informal sector was offered in April 2002. In September of the same year, various services initiatives were launched such as On-line Inquire System through the SSS website; Text-SSS, which allowed members to inquire their contributions and loan records through mobile phones; Branch Tellering System, which allowed specific SSS branches to directly receive contributions and loan payments; and the Sickness, Maternity, and Employee’s Compensation (SMEC) Payment Thru-the-Bank Program, which allowed employers to directly receive their reimbursements for SMEC payments advanced to their employees through their respective bank accounts. In 2003, the Special Financing Programs for small enterprises was opened to support the micro-business development program of the government. A Condonation Program was also offered on penalties on delinquent Stock Investment and Privatization Fund loans. It was the same program was offered to short-term member loans in early part of 2004, September 2006, and May 2008. To ensure that pension benefits are being paid to the right and qualified beneficiaries, the Annual Confirmation of Pensioners (ACOP) Program was launched in 2004. Aimed at streamlining, harmonizing and unifying existing identification systems used by government agencies, the SSS joined the Unified Multi-Purpose Identification System (UMID) Project in May 2006. This was done through the issuance of a common reference number (CRN). This paved the way for a Single Employer Registration Process initially started between SSS and Philippine Health Insurance Corporation in May 2009.

In a bid to reach out to its members worldwide, the SSS has its official website on the Internet with www.sss.gov.ph as the address. This website serves the members’ access to convenient electronic service, through which they can inquire, retrieve forms, and transmit feedback from their homes or offices any time of the day. 22.4 Insurance

The insurance industry forms an integral part in the development process and expansion of financial establishments and other basic industries.

The five government-owned insurance corporations, namely, the GSIS, SSS, Philippine Crop Insurance Corporation (PCIC), Philippine Deposit Insurance Corporation (PDIC), and Home Insurance and Guaranty Corporation also form part of the insurance industry although they are not under the supervision and control of the Insurance Commission.

In 2010-2011, 119 insurance companies were granted certificate of authority by the Insurance Commission to transact business in the country. This composed of four composite, 30 life and 84 non-life companies and one reinsurance company. Certificate of registration were also issued to 39,861 intermediaries and technical support entities to support the insurers in the conduct of their businesses.


From PhP391.95 billion in 2008, the investment portfolio of the private insurers expanded by 6.5 percent reaching PhP417.27 billion in 2009. It further went up to PhP475.02 billion in 2010 generating an increase of 13.8 percent. The major bulk of investments was placed in government securities or bonds (PhP269.14 billion), followed by stocks (PhP62.43 billion) and fixed deposits (PhP35.85 billion). (Refer to Table 22.12)

Deposit Insurance

Deposit insurance is guaranteed by the Philippine Deposit Insurance Corporation (PDIC). The PDIC promotes economic development by preserving public confidence in the banking system. It is the sole insurer of deposits, the primary agency of receivership and liquidation, and an institution entrusted to strengthen the Philippine banking system.

A total of 218,959 deposit accounts amounting to PhP10.4 billion were served by the PDIC in 2010. This consists of insured deposits paid to 23 of the 25 banks closed in 2010 as well as banks closed in the previous years.

Of the 23 banks which closed in 2010, the PDIC paid 40,818 out of 78,750 estimated insured deposits amounting to PhP1.25 billion. Prior to the closure of deposit insurance for banks in 2010, a total of 178,141 accounts amounting to PhP9.1 billion were paid by the Corporation.

The deposit insurance fund (DIF) reached PhP64.6 billion or 7.2 percent higher than its 2009 level of PhP60.3 billion. The DIF to Insurance Reserves Target (IRT) ratio stood at 86 percent compared to 67 percent in 2009.

The PDIC covered more than 926 banking institutions beyond 2001 with total assets of PhP156.73 billion in 2010, 4.4 percent increase from PhP150.05 billion in 2009. Deposits gained by 6.8 percent from PhP60.26 billion in 2009 to PhP64.59 billion in 2010. (See Table 22.8)

The year 1992 witnessed a turning point in the PDIC’s history--the passage of RA 7400, which amended the Corporate Charter (RA 3591). The new law is considered the strongest affirmation of the endeavor to strengthen this institution. This milestone has amplified the PDIC’s powers and responsibilities needed in enhancing depositor confidence and in infusing strength on the payments system and the economy. Life Insurance

The oldest and most widely used form of life insurance protection is the ordinary insurance issued to individual policyholders. Ordinary insurance policies are more in demand compared to industrial insurance. Group insurance, on the other hand, is life insurance issued to a group of persons under a single contract called master policy.

With PhP476.46 billion in assets in 2010, the life insurance sector put up 81.4 percent of the insurance industry’s combined assets. (Refer to Table 22.11 for details.)

The number of life-insurance policies in-force stood at 3.07 million in 2010, slightly decreased by 0.4 percent over the 2008 figure of 3.08 million. However, the sum assured out of the number of policies in 2010 figured at PhP2.15 trillion compared to the previous year’s PhP1.99 trillion. (See Table 22.10)


Benefit payment to policyholders paid by private insurance companies reached PhP32.38 billion in 2010. A total of PhP24.62 had been surrendered to insurers or 76.0 percent of the total benefit payments. Death benefits posted PhP4.23 billion claims while PhP3.21 billion goes to maturity benefits. Other benefits aggregating to PhP319.6 million pulled in the remaining 1 percent share. (See Table 22.14)

Nonlife Insurance

Risks incurred by nonlife insurance companies doing business in the Philippines are classified into fire, marine, casualty, surety, and recently, professional reinsurers.

Casualty insurance includes loss of liability arising from accident or mishap, but excludes certain types of loss which by law or customs are considered exclusively within the scope of other types of insurance, such as fire or marine. It includes but is not limited to public liability insurance; motor vehicle insurance; health and accident insurance; burglary, larceny, and theft insurance; and other substantially similar kinds of insurance as written by nonlife insurance companies.

The contract of suretyship, which is another major line of insurance coverage by nonlife insurance companies, guarantees the performance of an obligation or undertaking in favor of a third party and also includes official recognizances, stipulations, and bonds of undertakings issued by any nonlife insurance company doing business in the Philippines under the provisions of Act 536 as amended by Act 2206.

The operations of professional reinsurers are limited to reinsurance transactions and they do not, therefore, issue direct policies or deal with the insuring public. Their type of insurance has been defined as an insurance by which an original insurer distributes its risks by giving off the whole or some portion thereof to another insurer to reduce the amount of possible loss.

In 2010, the private insurance industry in the Philippines, posted total assets of PhP585.16 billion or 10.8 percent growth over the 2009 level of PhP528.16 billion. About 81.4 percent of the total amount was shared by life insurance companies and 18.6 percent by non-life insurers. (Refer to Tables 22.11)

Total premiums in 2010 went up by 6.7 percent, reporting a value of PhP22.12 billion compared to PhP20.74 billion in 2009. Much of the total premiums went to motor car business (PhP10.73 billion or 48.5%). Other premiums were for casualty PhP4.49 billion or 20.3 percent, fire and allied risks PhP4.03 billion or 18.2 percent, marine-related PhP1.56 billion or 7.1 percent, and suretyship PhP1.31 billion or 5.9 percent.

Losses incurred for 2010 amounted to PhP9.84 billion. The overall loss ratio over premiums earned slightly went down by 5.1 points from 49.6 in previous year to 44.5 percent in 2010. (See Table 22.15)

Crop Insurance

Crop insurance is an important component in yield risk management due to the adverse effects of forces of nature, pests, diseases, and man-made disasters. In any agricultural venture, crop insurance becomes a necessity for protection against


any unforeseen adversity. The crop insurance program, which has been in effect since 1981, is an improvement over the old agriculture guarantee system in the sense that while the agricultural guarantee scheme protected the liquidity or financial stability of lending institutions (banks), crop insurance was designed to benefit directly small farmers by providing them protection against losses brought about by natural calami-ties. Insurance coverage is limited to production inputs invested by the farmer in his farm lot during the crop season--from transplanting or direct seeding to the stage when the crop is ready for harvest. Only supervised farmers (those under the supervision of duly accredited production technicians) and borrowing farmers are eligible for coverage. Since only inputs are insured, the insurance ceases when the crop is harvested.

The Philippine Crop Insurance Corporation (PCIC) is a government owned-and controlled corporation created in 1978 and given further substance with the passage of its new mandate under RA 8175 in 1995. As the implementing agency of the agricultural insurance program of the government under PD 1467, as amended by RA 8175, PCIC is mandated to provide insurance protection to the country's agricultural producers particularly the subsistence farmers, against loss of their crops and noncrop agricultural assets on account of natural calamities such as typhoons, floods, droughts, earthquakes, and volcanic eruptions, plant pests and diseases, and other perils.

The PCIC, which has reported assets of PhP780.20 million in 2002, has regular insurance programs. They are as follows:

Rice and Corn Crop Insurance is an insurance protection extended to farmers against losses in rice and corn crops due to natural calamities as well as plant pests and diseases.

High Value/Commercial Crop (HVCC) Insurance is an insurance protection extended to farmers against losses in high value/commercial crops, due to natural calamities and other perils such as pests and diseases. HVCCs consist of commodities in fresh or processed forms with high net returns based on market opportunities and cost-efficient technologies. The list of HVCCs includes asparagus, banana, cassava, sugarcane, tomato, peanut, potato, garlic, onion and a variety of industrial trees.

Noncrop Agricultural Asset Insurance (NCI) is an insurance protection extended to farmers against loss of their noncrop agricultural assets like warehouses, rice mills, irrigation facilities and other farm equipment due to perils such as fire and lightning, theft and earthquake.

Special insurance programs include the: Livestock insurance is an insurance protection for livestock raisers

implemented by PCIC as a member of the Philippine Livestock Management Services Corporation (PLMSC) formerly known as Pool of Livestock Insurers (PLI). This is a cover against loss of carabao, cattle, swine, goat and poultry due to accidental death or diseases. PCIC joined the PLMSC and marked the inclusion of livestock among its major programs.

Pagkain Sigurado Pag May Siguro sa Sakahan (PASIPAGAN) is an insurance program for rice and corn crops in support of the Food Security and Poverty Alleviation Program of the government. This is implemented through cooperative rural banks, nongovernment organizations and other lending conduits where farmer-borrowers can automatically be insured with PCIC.


Through the Tobacco Industry Insurance Program, the PCIC extends insurance protection to tobacco farmers/stakeholders against losses of tobacco crop due to natural calamities and other perils.

In support of the Hybrid Rice Insurance Program, the PCIC can extend insurance protection to hybrid rice seed growers and hybrid rice commercial producers against losses due to natural calamities, pests and diseases.

The PCIC recorded coverage of PhP1 billion worth of policies in 2008, 3.2 percent higher than the year ago coverage (PhP845.51 million). As a result, more farmers benefited in 2005 (36,466) than in 2004 (44,638). Total area covered also increased from 76,875 hectares in 2004 to 82,032 hectares in 2005.

More than three-fourths of the beneficiaries of policies were rice farmers (36,466 or 72.1 %) and corn crop farmers (12,645 or 25%).

Corn crop insurance started operating in 1982, initially covering 9,610 farmers. Since then, the corn crop insurance program has insured 421,357 farmers. For 2008, PCIC insured 12,594 corn farmers who cultivated a total area of 21,544 hectares of farmlands. (Refer to Table 22.16)

Like other insurance firms, the PCIC also invests in risk. It covers all losses in palay, corn, HVCCs, livestock and NCI caused by natural calamities, such as typhoons and floods, drought, plant diseases of all types, and other natural calamities. In 2008, claims incurred of crop insurance amounted to PhP86.30 million. Of this amount, PhP29.06 million or 33.7 percent was due to pest infestations while the rest accounted for cases of typhoons and floods (32.7%), plant diseases (21.7%), droughts (11.7%), and other natural calamities (0.1%). (See Table 22.17)

Sources: 22.1-22.3 Bangko Sentral ng Pilipinas Philippine Deposit Insurance Corporation Government Service Insurance System Social Security System 22.4 Insurance Commission Philippine Crop Insurance Corporation Philippine Deposit Insurance Corporation Department of Agriculture


Institution 2001 2002 2003 2004 2005 2006 2007 2008r 2009 2010

Total 17,432 17,944 18,644 19,336 20,107 20,396 21,536 23,213 23,845 24,874

Banks 7,585 7,454 7,494 7,612 7,670 7,710 7,744 8,448 8,620 8,869

Commercial banksb 4,320 4,265 4,296 4,329 4,318 4,313 4,275 4,447 4,520 4,679

Thrift banks 1,351 1,278 1,277 1,280 1,293 1,322 1,336 1,327 1,333 1,419 Private development banks 404 340 336 302 298 300 300 299 304 313 Savings and mortgage banks 725 743 747 784 817 844 861 843 864 939 Stock savings and loan associations 220 193 191 191 162 165 161 158 138 140 Microfinance banks 2 2 3 3 16 13 14 27 27 27

Rural banks 1,914 1,911 1,921 2,003 2,059 2,075 2,133 2,674 2,767 2,771

Nonbanksc 9,847 10,490 11,150 11,724 12,437 13,243 13,792 14,765 15,225 16,005

a Excludes Bangko Sentral ng Pilipinas.b Beginning February 1996, specialized government banks were consolidated with commercial banks.c Include investment houses, finance companies, investment companies, securities dealers/brokers, pawnshops, lending investors, nonstock savings and loan associations, mutual building and loan associations, venture capital corporations and others, also includes private and government insurance companies (SSS and GSIS).

Source: Bangko Sentral ng Pilipinas.

TABLE 22.1 Number of Philippine Financial Institutionsa: 2001-2010


Institution 2001 2002 2003 2004 2005 2006 2007 2008r 2009 2010

Total 4,159.8 4,416.1 4,714.7 5,175.9 5,619.5 6,781.7 6,740.1 7,411.8 7,970.0 9,039.5

Banking institutions 3,403.3 3,608.4 3,810.8 4,183.0 4,464.1 4,985.7 4,943.4 5,973.8 6,428.4 7,228.3

Central Bank of the Philippines (or Bangko Sentral ng Pilipinas) - - - - - - - - - -

Commercial banks 3,070.5 3,250.2 3,425.6 3,760.6 3,986.0 4,392.6 4,456.4 5,219.1 5,694.1 6,423.7

Thrift banksb259.0 274.7 292.8 317.9 357.8 453.8 484.9 590.8 556.1 626.4

Private development banks 66.7 55.3 63.5 67.2 71.1 77.7 81.8 - - - Savings and mortgage banks 173.4 196.2 208.3 233.9 269.2 346.8 372.5 - - - Stock savings and loan - - - associations 18.7 23.0 20.7 16.5 16.9 28.7 30.0 - - - Microfinance banks 0.2 0.2 0.3 0.3 0.6 0.6 0.6 0.7 0.7 -

Rural banks 73.8 83.5 92.4 104.5 120.3 139.3 145.9 163.9 178.2 178.2

Nonbanks c 756.5 807.7 903.9 992.9 1,155.4 1,796.0 1,796.7 1,438.0 1,541.6 1,811.2

a Excluding Bangko Sentral ng Pilipinas.b Based on the new Financial Reporting Package data beginning March 2008 and values are after revaluation.

Source: Bangko Sentral ng Pilipinas, Selected Philippine Economic Indicators.

TABLE 22.2 Resources of the Financial Systema: 2001-2010(Billion Pesos)

c Include investment houses, finance companies, investment companies, securities dealers/brokers, pawnshops, lending investors, nonstock savings and loan associations, mutual building and loan associations, venture capital corporations and credit companies with under BSP supervision. Also includes private and government insurance companies.

Total Demand Savings Time Total Demand Savings Time

Total 2,933,457.7 387,642.6 1,571,070.2 974,742.9 3,436,891.0 490,824.9 1,791,942.0 1,154,124.1

Commercial banksa 2,591,829.0 368,490.0 1,311,343.0 911,996.0 3,028,092.0 467,474.0 1,480,092.0 1,080,526.0

Thrift banks 260,524.9 17,331.9 205,416.1 37,774.9 319,141.8 21,371.8 252,067.9 45,702.1

Savings banks 205,732.6 14,943.7 165,010.8 25,778.1 257,181.5 18,684.0 206,275.9 32,221.6 Private development banks 44,948.0 2,092.8 32,328.6 10,526.6 49,991.9 2,327.4 35,957.7 11,706.8 Stock savings and loan associations 9,708.8 295.4 7,943.2 1,470.2 11,797.9 360.4 9,663.8 1,773.7 Microfinance banks 135.5 - 133.5 - 170.5 0.0 170.5 0.0

Rural banks 81,103.8 1,820.7 54,311.1 24,972.0 89,657.2 1,979.1 59,782.1 27,896.0

a Include Development Bank of the Philippines and Al-Amanah Islamic Investment Bank of the Philippines.p Preliminary.


Institution

TABLE 22.3 Outstanding Deposits of the Banking System: 2005-2006(In Million Pesos)

2005 2006p


Broad Net Net Net Net Transferable and other LiabilitiesMoney Foreign Domestic Claims on Other deposits in foreign excluded from

Assets Credits Residents Items currency of residents broad money

2002 1,846,142 493,102 2,067,695 2,478,116 (410,421) 643,646 71,0092003 1,923,636 597,668 2,120,077 2,624,827 (504,750) 695,454 98,6552004 2,121,391 677,664 2,306,673 2,849,197 (542,524) 786,614 76,3322005 2,339,012 911,651 2,299,648 2,804,251 (504,602) 787,716 84,3712006 2,869,568 1,366,258 2,444,787 3,006,570 (561,783) 852,520 88,957

2007 3,174,365 1,659,261 2,421,539 3,161,647 (740,108) 751,045 155,3902008 3,668,433 1,930,644 2,738,011 3,691,351 (953,340) 941,972 58,2502009 3,971,529 2,442,877 2,614,894 3,962,960 (1,348,066) 1,025,933 60,3102010 4,396,811 2,849,243 2,651,666 4,310,447 (1,658,781) 1,049,965 54,131


TABLE 22.4 Broad Money Liabilities and Its Origin: 2002-2010(Million Pesos)

Year

Currency Securities otherTotal outside Transferable Savings Time than shares

depository deposits deposits deposits included incorporations broad money

2002 1,846,143 214,674 262,055 1,240,448 121,648 7,3182003 1,923,637 232,427 285,177 1,240,662 158,637 6,7342004 2,121,393 253,429 311,412 1,266,656 277,658 12,2382005 2,339,013 267,782 348,886 1,276,829 421,914 23,6022006 2,869,568 305,313 463,582 1,500,293 557,550 42,830

2007 3,174,365 347,671 538,369 1,505,557 737,448 45,3202008 3,668,433 429,510 641,322 1,424,526 1,116,554 56,5212009 3,971,529 458,149 763,713 1,621,887 1,043,379 84,4012010 4,396,811 478,489 867,446 1,797,193 1,163,104 90,583


TABLE 22.4a Broad Money Liabilities and Its Composition: 2002-2010(Million Pesos)

Year


Short Term External Gross Reserve Foreign Foreign Import Debt Cover (Percent)

International Position Gold SDRsb Investments Exchange Coverc Original ResidualReserves in the Fund Maturity Maturityd

1995 7,785.74 129.55 1,389.36 7.96 6,146.42 112.45 2.60 191.72 113.151996 11,773.39 125.04 1,715.39 2.40 9,793.75 136.81 3.20 216.78 139.171997 8,799.47 118.06 1,472.03 31.18 6,986.41 191.79 1.97 138.66 95.811998 10,841.54 122.17 1,568.56 1.21 8,756.73 392.87 3.06 185.10 112.031999 15,063.99 119.54 1,782.20 19.08 12,901.26 241.91 4.49 304.38 188.04

2000 15,062.83 113.44 1,972.65 1.93 12,388.35 586.46 4.20 274.12 163.922001 15,692.24 109.37 2,216.17 13.99 12,805.30 547.41 4.61 261.54 143.642002 16,364.76 118.22 3,035.85 10.21 12,732.29 468.19 4.70 294.38 143.662003 17,063.06 129.81 3,408.19 1.77 12,945.40 577.89 4.22 276.15 140.662004 16,227.91 135.33 3,112.07 1.00 12,742.09 237.42 3.66 321.60 159.57

2005 18,494.35 125.04 2,568.38 0.84 15,397.53 402.56 3.82 289.20 150.04

2006r 22,966.72 131.70 2,941.30 2.33 19,611.41 279.98 4.23 458.51 250.072007 33,751.05 138.28 3,540.61 0.74 29,715.21 356.21 5.69 476.44 260.512008 37,550.82 135.02 4,357.93 10.65 32,065.86 981.36 5.67 452.47 287.092009 43,112.88 137.51 5,459.75 11.41 36,655.12 849.09 8.72 1,105.51 500.542010 61,263.50 250.70 7,010.28 11.21 53,440.59 550.72 9.49 990.84 558.80

a Figures from 1995 to 2004 were revised to reflect the reclassification of released collaterals on Brady Bonds from non-IR to IR-eligible assets of the BSP. This is in line with the treatment of foreign investments under R.A. 7653 (New Central Act), which allows investments in securities even for maturities over 5 years to be included as part of the GIR.b Special drawing rights.c Number of months of average imports of goods and payment of services and income that can be financed by reserves.d Refers to adequacy of reserves to cover outstanding short-term external debt based on original maturity plus principal payments on medium- and long-term loans of the public and private sectors falling due in the next 12 months.

Source: Bangko Sentral ng Pilipinas, Selected Philippine Economic Indicators.

TABLE 22.5 Gross International Reserves of the Bangko Sentral

Year

ng Pilipinasa: 1995-2010(Million US Dollars)


2006 2007 2008 2009 2010

A. Classified Economic Activity

Total 2,000,000 2,186,684 1,748,206 1,921,667 2,115,288

1. Agriculture, fisheries and forestry 142,324 139,809 313,213 337,247 382,2682. Mining and quarrying 10,165 10,887 6,890 5,237 15,7833. Manufacturing 393,736 390,513 392,794 327,010 386,6584. Electricity, gas and water 76,601 123,747 112,599 144,244 166,6025. Construction 34,312 35,362 34,485 25,046 28,9436. Wholesale and retail trade 266,410 272,965 228,716 239,290 255,4917. Transportation, storage and communication 83,689 96,533 81,017 150,046 144,6958. Financial institutions, real estate and business services 621,840 701,598 413,440 507,528 583,4829. Community, social and personal services 370,923 415,270 165,052 186,019 151,366

B. Growth rate (Percent)

Total 205.2 111.7 (57.2) 93.0 302.2

1. Agriculture, fisheries and forestry 54.0 (1.8) 124.0 7.7 20.82. Mining and quarrying (16.8) 7.1 (36.7) (24.0) 201.43. Manufacturing (6.1) (0.8) 0.6 (16.7) 18.24. Electricity, gas and water (0.7) 61.5 (9.0) 28.1 15.55. Construction 14.8 3.1 (2.5) (27.4) 15.66. Wholesale and retail trade 24.4 2.5 (16.2) 4.6 6.87. Transportation, storage and communication 10.9 15.3 (16.1) 85.2 (3.6)8. Financial institutions, real estate and business services 70.7 12.8 (41.1) 22.8 13.89. Community, social and personal services 53.9 12.0 (60.3) 12.7 13.7

C. Percent Share

Total 100.0 100.0 100.0 100.0 99.9

1. Agriculture, fisheries and forestry 7.1 6.4 17.9 17.5 18.12. Mining and quarrying 0.5 0.5 0.4 0.3 0.73. Manufacturing 19.7 17.9 22.5 17.0 18.34. Electricity, gas and water 3.8 5.7 6.4 7.5 7.95. Construction 1.7 1.6 2.0 1.3 1.46. Wholesale and retail trade 13.3 12.5 13.1 12.5 12.17. Transportation, storage and communication 4.2 4.4 4.6 7.8 6.88. Financial institutions, real estate and business services 31.1 32.1 23.6 26.4 27.69. Community, social and personal services 18.5 19.0 9.4 9.7 7.1

a Peso and foreign accounts but excluding transactions of local banks foreign office and interbank loans.


Economic Activity

TABLE 22.6 Loans Outstanding of Commercial Banksa: 2006-2010(Million Pesos; Value as of December)


Particulars 2002 2003 2004 2005 2006 2007 2008 2009 2010

Due from Bangko Sentral 405 15 30 30 38 15 0 30 0Due from other Banks 1,718 1,089 1,600 1,845 2,489 2,688 2,553 2,358 2,835 Local 123 131 189 190 151 176 188 242 501 Foreign 1,186 708 1,208 1,997 2,234 2,323 2,259 2,012 2,134 Local Banks (Clearing accounts) 409 250 203 251 104 189 106 104 200Due from Head Office/Branch/Agencies Abroad 671 394 761 895 623 784 629 525 701Interbank Loans Receivables 2,968 3,708 3,550 5,045 6,432 6,267 3,627 5,326 3,661 Local 132 1,313 1,332 1,378 794 1,044 933 395 1,127 Foreign 2,836 2,395 2,228 3,667 5,638 5,223 2,964 4,931 2,534Loans and Discounts/Restructured Loans 4,668 3,450 3,167 2,611 2,639 3,896 5,120 10,508 5,773 Resident 4,782 3,527 3,320 2,772 2,601 3,406 3,427 4,904 3,228 Public 872 450 453 337 259 136 303 282 136 Private 3,910 3,067 2,867 2,435 2,342 3,270 3,124 4,622 2,409 Nonresident 153 185 128 81 261 665 277 187 - Loans and Discounts (Gross) 4,549 3,471 3,262 2,594 2,650 3,914 4,391 4,327 4,974 Restructured Loans (Gross) 386 241 186 258 212 157 222 214 228 Less: Allowances for Probable Losses 234 234 260 212 177 146 92 152 193 General Loan Provision 33 28 21 29 46 29 26 30 25Export Bills Purchased 30 24 31 17 10 10 10 10 10 Export Bills Purchased (Gross) 30 24 31 17 10 10 10 10 10 Less: Allowances for Probable Losses 0 0 0 0 0 0 0 0 0Investments 6,318 8,235 9,903 9,831 11,267 12,013 7,977 9,231 8,362 Local 4,497 5,489 6,085 5,441 5,586 6,130 4,391 4,327 3,228 Foreign 1,832 2,782 3,847 4,328 5,482 5,741 3,427 4,904 4,974 Add: Accumulated Bond Discount 11 19 25 (1) 41 7 17 7 25 Accumulated Market Gains/(Losses) 3 (12) (14) 95 207 176 186 49 193 Less: Allowances for Probable Losses 19 30 18 27 34 31 30 34 35 Accumulated Premium Amortization 6 13 22 6 16 10 14 22 23Real and Other Property Owned or Acquired (Net) 35 29 16 6 7 7 7 7 7 Real and Other Properties (Gross) 35 29 16 6 7 7 7 7 7 Less: Allowances for Probable Losses 0 0 0 0 0 0 0 0 0Other Assets 480 519 637 742 708 715 355 214 384

Total Assets 17,293 17,453 19,705 21,616 24,213 25,455 23,382 25,876 29,356

Deposit Liabilities 12,864 13,421 15,544 16,458 18,773 19,346 19,336 21,484 23,815 Local 12,331 12,762 14,552 15,564 17,909 18,217 18,024 19,865 22,531 Foreign 533 659 992 894 864 1,129 1,312 1,619 1,284Bills Payable 1,596 1,357 1,451 1,959 1,632 2,076 1,273 670 1,407 Local 100 168 220 129 116 103 317 118 859 Foreign 1,426 1,169 1,210 1,820 1,500 1,966 956 552 548 Bangko Sentral 68 20 21 10 16 7 0 0 0

Continued

TABLE 22.7 Foreign Currency Deposit Units - Assets and Liabilities: 2002-2010(Million US Dollars)


Table 22.7--Concluded

Particulars 2002 2003 2004 2005 2006 2007 2008 2009 2010

Due to Head Office/Branches/Agencies Abroad 1,844 1,211 1,170 1,160 1,170 1,546 1,699 1,828 1,370Due to Central Bank 0 0 0 0 0 0 0 0 0Due to Local Banks 299 448 298 271 162 255 276 514 712Payment Orders Payable 18 13 19 15 21 24 30 26 32Accrued Interest Fringe Benefits, Taxes 43 57 60 85 112 122 282 72 63 and Other Expenses PayableBonds Payable 165 0 125 510 475 351 126 1,026 548Unearned Income and Other Credits 36 30 52 46 36 46 3 9 6Unsecured Subordinate - 522 573 571 950 825 150 150 150Other Liabilities 243 151 137 110 249 260 23 109 152

Total Liabilities 17,108 17,210 19,429 21,185 23,581 24,851 23,162 24,988 28,255

Undivided profits 176 266 293 319 347 431 176 394 556 Net Unrealized Gains/(Losses) on SAS-ASS 0 (13) (17) 112 285 1,736 222 494 545 Surplus 0 0 0 0 0 0 0 0 0

Total Liabilities and Capital Accounts 17,293 17,463 19,705 21,616 24,213 25,455 23,382 25,876 29,356

Notes: Difference of US$2 million is due to revaluation. Totals may not add up due to rounding off.



Invest- Invest-ments ments

1981 10,943.8 7,859.2 9,808.3 11,362.1 11,086.2 11,221.11982 13,312.2 9,323.9 11,533.4 13,645.9 13,308.3 13,515.31983 14,610.0 9,903.4 12,959.7 16,227.1 15,880.1 16,082.91984 15,641.7 10,899.3 13,916.2 20,115.8 19,296.6 19,760.81985 16,752.9 11,857.7 15,225.3 26,301.5 24,963.3 25,508.1

1986 19,326.2 12,746.6 18,114.0 31,188.7 30,172.2 30,640.71987 22,536.6 14,797.8 18,931.9 37,211.3 35,774.2 36,684.11988 24,513.2 17,623.0 21,537.2 43,529.6 42,618.1 43,230.01989 28,859.7 21,052.2 24,481.2 51,940.8 50,682.2 51,431.81990 36,068.0 26,871.0 29,899.5 62,557.1 61,030.7 62,075.5

1991 43,207.4 33,284.2 37,966.2 76,431.6 73,862.8 75,477.71992 50,794.2 34,919.7 43,841.6 88,981.7 86,264.7 88,231.11993 59,351.5 38,968.5 51,660.4 103,629.2 100,248.0 100,957.51994 70,792.9 47,893.7 61,869.6 116,036.7 111,005.2 113,145.81995 85,199.0r

56,933.3 73,840.8 128,352.5 122,347.1 127,104.3

1996 101,594.4 63,545.1 79,288.7 143,151.2 136,324.2 141,803.51997 120,084.4 72,902.4 105,977.0 143,875.3a 139,649.0a 141,862.51998 147,608.0 89,178.2 123,442.2 143,481.0 135,494.8 166,751.71999 170,428.0 113,673.2 144,881.9 159,552.2 151,666.0 185,864.02000 181,064.9 65,320.9 165,963.1 181,741.0 166,183.0 171,947.9

2001r211,305.0 157,984.0 180,981.0 163,113.6 151,015.0 161,234.3

2002 245,914.0 181,457.0 212,932.0 162,606.4 148,911.2 161,175.42003 258,123.5 189,635.0 218,063.0 170,848.8 155,939.7 168,137.32004 329,230.0 247,330.0 287,290.0 175,731.2 157,062.6 173,033.12005 377,700.0 271,980.0 337,730.0 199,833.1 181,772.3 173,033.0

2006 411,193.0 215,681.4 376,091.0 228,444.5 210,414.7 224,995.92007 441,448.0 372,176.7 424,749.2 247,737.2 225,565.3 243,016.72008 484,343.9 349,223.4 460,512.4 233,122.2 211,345.8 225,602.92009 566,962.0 471,336.0 507,807.0 247,890.3 228,919.5 240,501.92010 578,435.0 478,371.0 530,781.0 271,267.5 253,842.5 262,663.2

Continued

Reserves Assets

Insurance System

Reserves

Government Service

TABLE 22.8 Assets, Investments, and Reserves of Government-OwnedInsurance Corporations: 1981-2010

(Million Pesos)

YearSocial Security System

Assets


Invest- Invest- Deposit ments ments Insurance Fund

1981 372.4b 297.9b 3.4b 268.7 180.2 267.71982 415.6 320.6 7.3 353.9 246.2 352.61983 428.4 345.0 9.1 455.7 282.5 452.21984 420.2 345.3 7.6 589.8 221.8 572.71985 509.0 414.4 12.1 3,809.3 301.6 2,596.9

1986 452.4 321.7 11.0 3,841.4 279.5 2,597.91987 522.3 380.2 12.9 4,455.9 304.1 2,580.91988 450.2 268.7 16.5 5,718.5 1,086.7 2,531.51989 423.2 176.6 21.7 6,626.6 2,134.8 2,607.71990 465.8 163.6 28.5 7,741.0 3,223.2 2,864.7

1991 648.0 194.7 49.3 7,975.4 3,613.6 3,490.41992 980.9 373.4 31.3 9,357.0 3,500.5 5,152.01993 1,180.6 420.7 35.5 7,686.9 4,708.3 4,214.81994 1,098.5 398.0 26.2 8,821.1 4,906.1 6,953.71995 452.4c 272.8 6.9 10,926.0 6,900.6 9,051.8

1996 1,049.5 298.8 17.5 13,686.7 9,907.7 11,798.91997 1,225.4 480.7 5.2 18,439.7 13,513.3 15,321.01998 1,404.3 560.4 26.7 24,502.1 17,869.4 20,053.51999 1,589.9 601.6 35.8 25,283.6 21,519.8 23,412.82000 562.3 284.4 34.3 50,734.0 23,817.4 27,195.6

2001 630.4 412.6 42.4 63,043.9 26,390.7 31,430.12002 780.2 449.2 40.5 97,910.9 26,766.3 36,708.72003 800.3 490.7 42.8 125,780.4 27,103.8 37,721.52004 1,379.5 566.3 44.7 127,620.9 34,485.5 41,612.82005 1,486.3 610.8 48.6 126,437.6 50,013.4 47,565.1

2006 1,560.5 622.4 50.4 137,977.1 68.9 d 49,384.62007 1,686.9 658.7 56.9 131,643.0 78.5 d 54,265.92008 1,842.5 702.8 60.2 142,316.5 80.5 d 60,461.72009 - - - 150,052.9 - 60,259.12010 156,729.1 64,588.7

a Exclusive of Medicare which has been transferred to the Philippine Health Insurance Corporation on October 8, 1997.b For an eight-month period that ended December 31, 1981.c Excluding P542.9 million receivables from the national government, representing accumulation of unpaid government premium subsidy for calendar years 1985-1994. These receivables previously carried in the books have been reversed against retained earnings account upon the recommendation of the Commission on Audit.d Billion pesos.

"Deposit Insurance Fund" is composed of Permanent Insurance Fund (PIF), seed money from the National Government; Estimated Insurance Losses, a provision intended to cover anticipated losses from closed banks and operating member banks identified to have high probabilities of closure, where insurance claims already paid (in the case of closed banks) or to be paid in case of closure (in the case of operating member banks) may exceed recovery of assets during liquidation and retained earnings.

Sources: Government Service Insurance System. Philippine Crop Insurance Corporation. Social Security System. Philippine Deposit Insurance Corporation.

Philippine DepositInsurance Corporation

YearAssets Reserves

TABLE 22.8--Concluded

Philippine CropInsurance Corporation

Assets


Nonlife Companies andTypes of Bonds/Securities Professional Reinsurers

2008 2009 2010 2008 2009 2010 2008 2009 2010

Grand Total 215.07 233.79 224.40 21.09 21.96 25.51 193.98 201.83 224.40

Long-term Government Bonds 200.07 214.77 203.47 16.77 17.39 22.33 183.30 187.38 203.47

Treasury Notes 132.91 152.09 168.01 11.68 12.34 13.54 121.23 139.75 168.01 Land Bank Bonds 0.14 0.20 0.15 0.06 0.09 0.05 0.08 0.11 0.15 Pag-ibig Bonds 0.06 0.08 0.06 0.05 0.06 0.06 0.01 0.02 0.06 Euro Bonds 11.08 59.89 33.78 3.41 3.29 6.76 7.67 46.60 33.78 Retail Bonds 1.85 2.41 0.21 1.55 1.51 1.68 0.30 0.90 0.21 Others 54.03 0.10 1.26 0.02 0.10 0.24 54.01 - 1.26

Short-term Government Securities 1.22 2.15 1.53 1.22 1.41 2.11 0 0.74 1.53

Treasury Bills 1.22 2.15 1.53 1.22 1.41 2.11 - 0.74 1.53

Total Government Securities 201.29 206.92 205.00 17.99 18.8 24.44 183.3 188.12 205

Other Bonds 13.78 16.87 19.40 3.10 3.16 1.07 10.68 13.71 19.40

Private Bonds 8.64 14.53 17.75 2.58 2.43 0.17 6.06 12.10 17.75 Foreign Bonds 5.14 2.34 1.65 0.52 0.73 0.90 4.62 1.61 1.65

Source: Insurance Commission.

TABLE 22.9 Investments in Bonds and Government Securities: 2008-2010(Billion Pesos)

Life CompaniesGrand Total


Sum Annual Sum AnnualNumber Assured Premium Number Assured Premium

of Policies (Million (Million of Policies (Million (MillionPesos) Pesos) Pesos) Pesos)

1979 5,362,653 270,755.4 2,945.0 1995 2,859,565 650,118.9 12,529.51980 5,242,942 372,613.4 3,289.1 1996 2,922,738 661,759.1 14,735.71981 5,363,641 402,340.4 3,615.8 1997 3,135,344 800,232.6 17,339.81982 5,109,359 372,907.4 4,006.5 1998 3,432,978 907,966.6 19,358.6

1983 5,461,758 388,498.6 4,104.3 1999 3,630,084 101,480.0 22,400.01984 4,857,251 522,621.7 4,706.3 2000 3,708,532 104,705.0 25,700.01985 4,707,693 598,200.5 5,190.3 2001 4,109,111 100,365.0 30,030.01986 4,780,584 677,796.6 5,620.9 2002 4,371,761 128,730.0 10,130.0

1987 5,340,277 1,014,506.6 6,327.0 2003 4,551,012 111,670.0 40,210.01988 5,614,114 1,104,665.8 7,466.4 2004 4,566,925 104,350.0 44,100.01989 5,731,603 1,417,071.2 8,815.5 2005 3,296,011 1,474.8 b 41.7

1990a 3,066,659 231,727.7 5,353.2 2006 3,352,383 1,599.6 b 40.7

1991a 2,885,311 261,882.0 6,350.2 2007 3,215,648 1,698.1 b 41.9

1992* 2,944,143 302,568.9 7,473.2 2008 3,336,609 1,925.9 b 56.91993 2,862,258 379,199.2 8,957.8 2009 3,081,998 1,990.1 b 46.61994 2,866,139 456,163.9 10,630.6 2010 3,070,505 2,152.3 44.2

a For private insurance only.b In billion pesos.


TABLE 22.10 Life Insurance Policies in Force: 1979-2010

Year Year


Life Nonlife ProfessionalCompanies Companies Reinsurers Amount Percent

1974 3,468.0 1,903.7 1,429.3 135.0 - -1975 4,224.5 2,260.6 1,785.9 178.0 756.5 21.811976 5,230.1 2,701.6 2,305.2 223.3 1,005.6 23.801977 6,167.5 3,026.9 2,873.2 267.4 937.4 17.921978 7,803.1 3,799.0 3,636.8 367.3 1,635.6 26.521979 8,955.1 4,414.8 4,102.0 438.3 1,152.0 14.761980 9,997.4 5,107.7 4,382.2 507.5 1,042.3 11.641981 11,333.6 5,950.7 4,870.5 512.4 1,336.2 13.371982 13,715.7 6,843.9 5,965.7 906.1 2,382.1 21.021983 15,286.6 8,003.6 6,535.4 747.6 1,570.9 11.45

1984 18,064.5 9,238.2 7,894.6 931.7 2,777.9 18.171985 20,284.5 10,499.5 8,815.5 969.5 2,220.0 12.291986 22,725.3 12,670.4 9,256.1 798.8 2,440.8 12.031987 25,372.0 14,378.2 10,082.2 911.6 2,646.7 11.651988 29,674.4 17,131.4 11,532.4 1,010.6 4,302.4 16.961989 36,205.9 21,335.7 13,825.8 1,044.4 6,531.5 22.011990 45,151.1 25,531.9 18,318.1 1,301.1 8,945.2 24.711991 51,380.9 31,634.4 18,404.5 1,342.0 6,229.8 13.801992 56,378.2 36,257.6 18,810.9 1,309.7 4,997.3 9.731993 75,806.7 50,491.6 23,842.7 1,472.4 19,428.5 34.46

1994 83,933.1 56,514.2 25,919.5 1,499.4 8,126.4 10.721995 100,268.7 66,754.5 31,702.3 1,811.9 16,335.6 19.461996 120,233.8 82,861.7 35,078.8 2,293.3 19,965.1 19.911997 140,203.5 92,997.9 44,390.0 2,815.6 19,969.7 16.611998 107,349.4 84,991.9 20,354.2 2,003.3 (32,854.1) (23.43)1999 68,960.0 12,690.0 52,820.0 3,450.0 (38,389.4) (35.76)2000 79,445.0 14,675.0 60,580.0 4,190.0 10,485.0 15.202001 79,750.0 15,330.0 59,690.0 4,730.0 305.0 0.382002 38,840.0 22,540.0 15,160.0 1,140.0 (40,910.0) (51.30)2003 277,620.0 208,370.0 69,250.0 - 238,780.0 614.78

2004 311,020.0 240,040.0 66,250.0 4,730.0 33,400.0 12.032005 349,610.0 273,570.0 69,940.0 6,100.0 38,590.0 12.412006 412,270.0 324,740.0 79,940.0 7,590.0 62,660.0 17.922007 454,902.4 366,880.5 88,021.9 - 42,632.4 10.342008 461,510.5 372,834.7 88,675.8 3,118.0 6,608.1 1.452009 528,160.1 419,525.1 108,635.0 3,250.0 66,649.6 14.442010 585,160.0 476,460.0 108,700.0 2,329.0 56,999.9 10.79

a 2003-2007 data in million pesos.


Increase (or Decrease)

TABLE 22.11 Summary of Admitted Assets, by Type of Insurance Company:1974-2010

(Million Pesos)

Year Total


Total Life2007 2008 2009 2010 2007 2008 2009 2010

Total 307.86 391.95 417.27 475.01 266.29 303.27 327.48 364.04

Bonds 178.48 214.41 222.88 269.14 158.88 193.98 201.09 222.88Stocks 38.96 41.53 45.71 62.43 32.95 21.54 32.06 38.59Real estate owned 17.63 18.77 18.91 22.43 13.61 13.94 13.66 12.75Purchase money mortgages 0.12 0.07 0.09 0.07 0.12 0.07 0.09 0.07Mortgage loans on real estate 6.32 5.68 5.19 3.00 5.98 5.33 4.11 2.61Collateral loans 4.45 12.60 29.14 22.29 4.31 12.54 28.90 21.79Guaranteed loans 15.11 12.25 5.23 16.84 15.11 12.25 5.23 16.84Policy loans 24.85 27.84 2.30 30.40 24.85 27.84 2.30 30.40Other loans 0.73 1.06 1.15 3.14 0.46 0.84 0.74 2.69Short-term investments 1.40 1.30 2.57 5.89 0.04 0.03 1.12 1.63Other investments 2.28 2.23 10.66 3.53 1.52 1.31 9.14 0.92Fixed deposits 17.53 35.88 52.32 35.85 8.46 13.60 29.04 12.87Asset-backed securities - 18.33 21.12 - - - - -

Nonlife2007 2008 2009 2010 2007 2008 2009 2010

Total 35.00 42.71 45.24 51.36 6.57 45.97 44.55 59.61

Bonds 15.42 19.87 21.33 23.40 4.18 0.56 0.46 22.86Stocks 5.44 7.15 7.24 9.05 0.57 12.84 6.41 14.79Real estate owned 3.87 4.10 4.11 4.14 0.15 0.73 1.14 5.54Purchase money mortgages - - - - - - - -Mortgage loans on real estate 0.34 0.35 0.27 0.22 0.00 0.00 0.81 0.17Collateral loans 0.05 0.06 0.16 0.25 0.09 0.00 0.08 0.25Guaranteed loans - - - - 0.00 0.00 0.00 0.00Policy loans - - - - - - - -Other loans 0.27 0.21 0.21 0.24 0.00 0.01 0.20 0.21Short-term investments 1.36 1.23 1.41 2.14 - 0.04 0.04 2.12Other investments 0.67 0.80 1.23 1.50 0.09 0.12 0.29 1.11Fixed deposits 7.58 8.94 9.28 10.42 1.49 13.34 14.00 12.56Asset-backed securities - - - - - 18.33 21.12 -


TABLE 22.12 Summary of Investments at Cost of Private Insurance

Professional Reinsurers

Type of Investment

Companies: 2007-2010(Billion Pesos)


Premium Claims Ratio Claims Premium Claims Ratio ClaimsYear Income Incurred or Premium Year Income Incurred or Premium

(Percent) (Percent)

1972 364.6 105.4 28.90 1992 7,473.2 38.781973 436.2 126.4 28.98 1993 8,957.8 3,351.6 37.421974 496.3 130.6 26.31 1994 10,630.6 4,148.0 39.021975 609.2 171.0 28.07 1995 12,529.5 4,521.1 36.081976 670.6 205.6 30.66 1996 14,735.7 5,454.6 37.02

1977 795.3 213.0 26.79 1997 17,339.8 6,592.2 38.021978 1,093.0 282.3 25.83 1998 19,356.6 7,550.6 39.011979 1,315.8 331.6 25.20 1999 22,400.0 5,700.0 25.451980 1,489.9 392.7 26.36 2000 11,970.0 5,790.0 48.371981 1,710.7 536.8 31.38 2001 12,660.0 5,530.0 43.68

1983 1,951.9 750.3 38.44 2002 13,170.0 5,640.0 43.891984 2,190.2 946.5 43.22 2003 13,970.0 6,190.0 44.281985 2,430.9 1,176.0 48.38 2004 15,390.0 7,060.0 45.901986 2,756.4 1,366.0 49.56 2005 15,510.0 6,560.0 42.301987 3,308.5 1,513.6 45.75 2006 25,715.4 8,092.8 46.13

1988 4,015.0 1,698.7 42.31 2007 42,406.8 8,599.9 44.931989 4,678.1 1,904.5 40.71 2008 36,236.7 9,648.8 47.061990 5,353.2 2,194.8 41.00 2009 31,794.2 10.301.6 49.671991 6,350.2 2,508.4 39.50 2010 44,220.00 9,840.0 22.25


TABLE 22.13 Summary of Premium Income, Claims Incurred, and Ratio Claimsor Premiums by Private Life Insurance Companies: 1972-2010

(Million Pesos)


Year Total Death Maturity Surrender Dividend Annuity Others

1991 2,508.4 725.2 368.4 513.7 481.4 28.8 390.91992 2,898.2 749.5 464.7 530.7 655.2 20.7 477.41993 3,351.6 874.8 573.9 566.4 798.0 36.7 501.81994 4,148.0 1,116.2 481.4 624.8 1,054.2 35.3 836.11995 4,521.1 1,309.1 604.5 752.6 1,283.9 19.6 551.4

1996 5,454.6 1,551.3 607.2 767.2 1,603.9 2.2 922.81997 6,592.2 1,917.3 673.4 1,056.2 1,472.7 2.0 1,470.61998 7,550.6 2,160.2 791.2 1,236.1 1,811.8 5.3 1,546.01999 8,470.0 2,400.0 880.0 1,370.0 1,900.0 - 1,920.02000* 10.30 3.23 0.94 1.57 2.42 0.01 2.13

2001* 11.49 3.23 1.10 2.08 2.58 0.01 2.492002* 13.29 3.49 1.36 2.51 2.98 0.01 2.942003* 16.08 3.89 1.72 3.55 3.22 0.01 3.692004* 19.11 3.99 2.66 4.15 3.97 - 4.342005 17,622.4 3,072.6 3,166.0 5,241.1 4,512.4 2.5 997.8

2006 19,116.5 3,927.4 3,708.5 6,248.9 5,082.3 2.4 147.02007 22,208.9 4,028.0 4,198.3 8,483.5 4,887.8 2.3 609.02008 28,759.3 4,106.1 5,449.6 13,513.4 5,326.9 3.5 359.82009 30,372.4 4,378.2 6,071.1 14,032.0 5,593.0 1.1 297.02010 32,379.6 4,230.0 3,210.0 24,620.0 - - 319.6

* In billion pesos.


TABLE 22.14 Annual Benefit Payments of Private Life Insurance Companies:1991-2010

(Million Pesos)


2010 2009Losses Premiums Loss Losses Premiums LossIncurred Earned Ratio (%) Incurred Earned Ratio (%)

Total 9.84 22.12 44.49 10.30 20.74 49.60

Fire and allied risks 2.02 4.03 50.09 3.11 4.20 73.90 Fire 1.40 3.19 43.95 2.11 3.19 66.30 Earthquake, fire, or shock 0.02 0.49 3.51 0.05 0.62 8.93 Typhoon 0.39 0.16 242.66 0.51 0.18 279.90 Flood 0.15 0.11 132.98 0.36 0.13 289.40 Extended coverage 0.06 0.08 77.92 0.63 0.09 73.50

Marine 1.14 1.56 73.19 0.66 1.58 41.90 Marine cargo 0.48 1.17 41.32 0.28 1.15 24.00 Marine hull 0.03 0.23 268.38 0.36 0.25 141.30 Aviation 0.63 0.16 19.77 0.03 0.17 15.20

Motor car 4.82 10.73 44.91 4.92 9.85 49.90 CMVL-LTO 0.05 0.42 13.08 0.05 0.35 14.50 CMVL Non-LTO 0.53 1.54 34.31 0.58 1.34 43.60 Other than CMVL-LTO 0.04 0.12 31.03 0.08 0.15 56.90 Other than CMVL-Non-LTO 4.20 8.65 48.54 4.20 8.01 52.40

Casualty 1.83 4.49 38.65 1.59 4.01 39.50 Health 0.15 0.50 30.24 0.10 0.42 25.10 Personal account 1.04 2.18 47.55 0.84 1.99 42.40 Engineering 0.17 0.63 27.37 0.20 0.38 51.50 Miscellaneous 0.32 0.85 38.08 0.33 0.93 35.30 Life, for Professional Reinsurers 0.15 0.33 45.79 0.11 0.29 38.10

Suretyship 0.03 1.31 2.29 0.03 1.10 2.32


TABLE 22.15 Summary of Losses Incurred, Premiums Earnedand Ratio Losses or Premiums for Each Major Line of Nonlife

(Billion Pesos)

Line of Insurance

Insurance Coverage: 2009-2010


Particulars 1993 1994 1995 1996 1997 1998 1999 2000

Number of farmers 203,192 155,939 94,903 113,150 83,981 62,732 69,279 54,783

Corn crop 25,316 23,486 13,568 16,049 20,081 12,651 9,112 7,931 Palay crop 177,512 132,249 81,314 97,007 63,872 48,634 56,402 45,341 Tobacco crop 358 204 19 87 28b 1,447b 3,765b - Banana crop or sugarcane 6a - 2 7 n.a. - - 1,511

Area covered 329,553 261,841 165,848 185,671 146,379 111,525 114,261 91,381

Corn crop 39,986 38,834 26,272 28,335 35,822 24,519 17,345 14,495 Palay crop 288,057 222,859 139,252 156,671 110,533 86,445 95,398 75,451 Tobacco crop 255 148 14 32 24b 561b 1,518b - Banana crop or sugarcane 1,255 - 310 633 n.a. - - 1,113

Amount of insurance covered 2,267,423 1,750,710 1,160,689 1,637,350 1,420,939 1,132,845 1,198,033 1,273,689

Corn crop 255,528 252,169 166,583 237,438 328,675 243,377 172,221 136,237 Palay crop 1,883,255 1,496,892 982,688 1,382,963 1,091,981 877,757 995,039 846,402 Tobacco crop 3,109 1,649 142 350 283b 11,711b 30,773b - Banana crop or sugarcane 125,531 - 11,276 16,599 n.a. - - 22,176

2001 2002 2003 2004 2005 2006 2007 2008

Number of farmers 35,940 36,480 39,046 44,638 50,597 50,430 54,697 62,538

Corn crop 4,037 5,933 7,869 9,583 12,645 11,979 12,866 12,594 Palay crop 30,401 29,362 30,993 35,055 36,466 36,865 40,054 48,275 Tobacco crop - - - - - - - - Banana crop or sugarcane 1,502 1,185 184 - 1,486 1,586 1,777 1,669

Area covered 62,871 61,335 68,264 76,875 82,032 87,742 94,845 101,526

Corn crop 7,961 9,232 13,347 18,198 21,544 22,404 24,799 26,322 Palay crop 52,900 50,211 52,502 58,677 60,488 65,338 70,046 75,204 Tobacco crop - - - - - - - - Banana crop or sugarcane 2,010 1,892 2,415 - - - - -

Amount of insurance covered 873,605 699,359 778,966 845,506 872,600 886,295 972,928 1,001,467

Corn crop 83,774 85,333 121,940 175,894 180,580 184,495 197,262 201,433 Palay crop 580,990 551,384 590,786 669,612 692,020 701,800 775,666 800,034 Tobacco crop - - - - - - - - Banana crop or sugarcane 35,923 62,642 66,240 - - - - -

a For banana crop only.b For high-value crops.

Source: Philippine Crop Insurance Corporation.

TABLE 22.16 Number of Farmers, Farm Area Coveredand Amount of Insurance Covered, by Kind of Crop: 1993-2008

(Area Covered in Hectares; Amount of Insurance in Thousand Pesos)


Crop Typhoons Otherand Total and Droughts Pest Plant NaturalYear Floods Infestations Diseases Calamities

Rice

1982 24.72 13.72 3.26 2.62 5.12 -1983 33.21 11.03 14.36 3.84 3.98 -1984 53.08 19.27 5.39 17.16 11.27 -1985 71.42 43.44 3.64 14.18 9.21 0.961986 98.14 69.17 4.73 13.20 9.26 1.78

1987 53.19 22.89 12.34 9.54 7.19 1.241988 162.15 88.14 25.65 30.07 15.15 3.141989 112.52 78.32 4.39 16.32 12.38 1.121990 115.60 63.75 20.15 17.42 12.14 2.141991 53.35 26.41 9.51 8.19 4.69 4.54

1992 143.00 58.02 57.13 15.66 7.08 5.121993 124.39 66.19 19.13 24.95 10.12 3.991994 162.12 113.02 7.35 26.04 13.12 2.591995 83.81 42.16 18.36 15.89 6.04 1.361996 52.95 46.80 4.71 0.27 1.17 -

1997 46.10 28.30 9.84 0.92 7.03 0.011998 96.34 59.42 27.10 4.84 4.98 -1999 90.46 49.02 2.21 16.52 22.71 -2000 54.41 19.29 0.78 20.91 13.03 0.402001 36.95 12.19 0.74 15.89 8.13 -

2002 41.45 15.01 2.33 16.43 7.68 -2003 49.16 25.70 9.26 11.54 3.06 -2004 56.41 44.24 8.02 2.14 2.01 -2005 71.39 42.57 21.16 3.65 4.01 -2006 107.24 46.32 25.64 30.18 5.10 -2007 115.32 61.19 21.31 24.16 8.66 -2008 161.48 73.62 51.39 16.22 9.25 -

Corn

1982* 2.07 0.70 1.15 0.13 0.09 -1983 33.26 1.40 17.64 13.89 0.33 -1984 34.16 2.38 4.35 26.08 1.36 -1985 50.86 6.11 21.47 15.18 7.68 0.421986 31.97 10.07 9.45 6.95 4.29 1.21

1987 24.69 5.74 13.04 3.44 2.16 0.301988 41.65 10.04 18.67 7.03 4.11 1.801989 53.91 31.00 5.39 7.87 8.14 1.511990 34.46 6.68 21.13 3.77 2.48 0.401991 30.61 3.93 21.50 3.57 0.92 0.70

Continued

TABLE 22.17 Claims Incurred of Crop Insurance, by Cause of Loan: 1982-2008(Million Pesos)


Table 22.17--Concluded

Crop Typhoons Otherand Total and Droughts Pest Plant NaturalYear Floods Infestations Diseases Calamities

1992 29.50 1.81 22.10 4.48 0.86 0.261993 28.07 11.27 13.55 1.94 1.21 0.101994 26.10 11.95 5.20 4.74 3.98 0.231995 20.90 5.26 12.98 1.44 1.05 0.161996 14.68 7.02 7.19 0.02 0.44 -

1997 25.13 6.61 17.35 0.03 1.05 0.091998 29.93 5.67 20.81 0.03 3.42 -1999 17.54 9.71 2.33 1.17 4.33 -2000 54.42 19.29 0.90 20.91 13.03 0.29

2001r 30.18 11.67 9.55 7.03 1.67 0.26

2002 34.66 7.03 3.11 15.08 9.44 -2003 47.75 11.51 6.08 19.78 10.36 0.022004 64.39 21.08 8.18 22.66 12.44 0.032005 70.06 23.50 8.27 23.88 14.39 0.022006 74.40 34.72 9.12 24.66 15.84 0.062007 80.18 26.34 9.58 27.74 16.43 0.092008 86.30 28.26 10.12 29.06 18.76 0.10

Note: Details may not add up to totals due to rounding.* Covering operations from July to December.

Source: Philippine Crop Insurance Corporation.

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