Banking and Financial Institutions Overview

Banking and Financial Institutions

• Banking is the business of accepting and safeguarding money from individuals and entities, and then lending it out to earn profit.
• The financial system is a complex web of institutions including government agencies, laws and policies responsible for generating, circulating and controlling money and credits.
• Financial institutions act as intermediaries connecting borrowers and lenders.
• Financial management involves planning, asset management, and raising funds to enhance business value.

Types of Financial Institutions

• Private Banking Institutions:

  • Commercial Banks: Collect deposits from individuals and lend to businesses and individuals.
  • Thrift Banks: Mobilize small savings, encourage thrift, and provide loans at reasonable rates.
  • Universal Banks: Combine retail banking, which services the public and small and medium-sized businesses, wholesale banking, which involves large-scale borrowing and lending, and investment banking, which focuses on services for major investors and companies.

• Government Banking Institutions:

  • Philippine National Bank (PNB): A universal bank operating under Executive Order No. 80.
  • Development Bank of the Philippines (DBP): Provides banking services to agricultural and industrial enterprises, particularly small and medium enterprises.
  • Landbank of the Philippines: Financed agricultural estates' acquisition and distribution to small landholders. It also financed the purchase of landholdings by Agricultural lessees.
  • Al-Amanah Islamic Investment Bank of the Philippines: Promotes socio-economic growth and development in Mindanao.

• Private Non-Bank Institutions:

  • Securities brokers: Agents matching buyers with sellers of securities.
  • Securities dealers: Link buyers and sellers by buying and selling securities at stated prices.
  • Building and Loan Association: Corporations with capital stock paid in by stockholders in regular installments.
  • Lending Investors: Operate as money brokers.
  • Pawnshops: Provide credit to small borrowers who are not qualified for loans from other institutions, using personal property as collateral.

• Government Non-Bank Financial Institutions:

  • Government Service Insurance System (GSIS): Provides life insurance coverage and benefits to government employees.
  • Social Security System (SSS): Provides benefits to workers/employees in the private sector.

Bangko Sentral ng Pilipinas (BSP)

• Objective: To maintain price stability conducive to balanced and sustainable economic growth and promote and preserve monetary stability and the convertibility of the national currency.
• Responsibilities: Provide policy directions in money, banking, and credit. Supervise bank operations and regulate non-bank financial institutions with quasi-banking functions.
• BSP Seal:
  • Features a stylized Philippine eagle, three gold stars, and the text "Bangko Sentral ng Pilipinas".
  • The blue background symbolizes stability, gold represents wisdom, wealth, idealism, and quality, and white symbolizes purity, neutrality, and clarity.
  • The round shape symbolizes the BSP's pursuit of excellence and commitment to Filipino well-being.

Contemporary Issues Affecting Financial Institutions

• Money Supply: The total amount of money circulating in an economy.
• Deposit Expansion: Changes in the money supply due to increases in bank reserves.
• Monetary Board: The decision-making body of the BSP, consisting of seven members appointed by the Philippine President.
• Monetary Policy: Actions taken by the central bank to influence the price level and liquidity in the economy.
• Financial Stability: The ability of the financial system to facilitate economic processes, manage risks, and absorb shocks.
• Regulator: An official body monitoring company behavior and competition in specific markets.
• Transparency: Full, accurate, and timely disclosure of information.
• Deregulation: Removal or simplification of government rules and regulations on market forces.

Security Features of Philippine Currency

• Embossed prints
• Serial number
• Security fibers
• Watermark
• See-through mark
• Concealed value
• Security thread
• Optically variable device
• Optically variable ink
• Tactile mark

Money

• An object readily accepted as payment for goods or services.
• The Barter system was the earliest form of trading, involving direct exchange of goods and/or services.

Characteristics of Money

• Durability: Must withstand repeated use.
• Portability: Must be easily carried and transferred.
• Divisibility: Can be divided into smaller units of value.
• Uniformity: All versions of the same denomination must have equal purchasing power.
• Limited Supply: Restricted circulation to maintain value.