Podcast
Questions and Answers
What is one of the primary functions of a bank?
What is one of the primary functions of a bank?
- Acting as a government agency
- Accepting deposits from customers (correct)
- Manufacturing financial products
- Conducting marketing research
Which type of account allows customers to deposit money and withdraw funds at will?
Which type of account allows customers to deposit money and withdraw funds at will?
- Fixed deposit account
- Savings account (correct)
- Current account (correct)
- Investment account
What is the main purpose of granting loans and advances by banks?
What is the main purpose of granting loans and advances by banks?
- To generate profits for the bank (correct)
- To support government initiatives
- To provide a place for savings
- To increase customer deposits
Which payment method is NOT typically facilitated by banks?
Which payment method is NOT typically facilitated by banks?
What role do banks play in financial advice?
What role do banks play in financial advice?
What defines a bank as an intermediary?
What defines a bank as an intermediary?
Which of the following is a common type of loan provided by banks?
Which of the following is a common type of loan provided by banks?
How do banks contribute to the payments system?
How do banks contribute to the payments system?
What happens to interest rates when the supply of funds exceeds demand?
What happens to interest rates when the supply of funds exceeds demand?
Which of the following best describes the nature of term deposits?
Which of the following best describes the nature of term deposits?
What role does the BSP's key policy rate play in the banking system?
What role does the BSP's key policy rate play in the banking system?
What is a primary characteristic of investment funds compared to term deposits?
What is a primary characteristic of investment funds compared to term deposits?
What coverage does the Philippines Deposit Insurance Corporation provide?
What coverage does the Philippines Deposit Insurance Corporation provide?
What are banks' considerations when determining interest rates on loans?
What are banks' considerations when determining interest rates on loans?
Which statement accurately differentiates deposits from investments?
Which statement accurately differentiates deposits from investments?
In the event of a bank's insolvency, how much is ensured for each customer by the Philippines Deposit Insurance Corporation?
In the event of a bank's insolvency, how much is ensured for each customer by the Philippines Deposit Insurance Corporation?
What is a primary advantage of banks that contributes to economic growth?
What is a primary advantage of banks that contributes to economic growth?
Which of the following is NOT a disadvantage associated with banks?
Which of the following is NOT a disadvantage associated with banks?
A bank run typically occurs due to which of the following reasons?
A bank run typically occurs due to which of the following reasons?
What type of bank possesses the authority to act as both a commercial bank and an investment house?
What type of bank possesses the authority to act as both a commercial bank and an investment house?
Which of the following is a characteristic function of commercial banks?
Which of the following is a characteristic function of commercial banks?
Which factor is a direct cause of bank bankruptcy?
Which factor is a direct cause of bank bankruptcy?
What is one primary function of thrift banks?
What is one primary function of thrift banks?
Thrift banks primarily obtain their funding from which source?
Thrift banks primarily obtain their funding from which source?
Which of the following is NOT a service typically offered by thrift banks?
Which of the following is NOT a service typically offered by thrift banks?
What distinguishes cooperative banks from rural banks?
What distinguishes cooperative banks from rural banks?
What is a potential consequence of a bank run?
What is a potential consequence of a bank run?
Which of the following is a required capitalization for thrift banks?
Which of the following is a required capitalization for thrift banks?
What is one of the core principles of Islamic banking?
What is one of the core principles of Islamic banking?
Which bank type is focused on serving rural communities with specifically tailored financial services?
Which bank type is focused on serving rural communities with specifically tailored financial services?
Which of the following statements about Islamic banks is true?
Which of the following statements about Islamic banks is true?
What is the primary capital requirement for cooperative banks?
What is the primary capital requirement for cooperative banks?
What role do banks serve in the financial system?
What role do banks serve in the financial system?
Which of the following is NOT covered by the Philippine Deposit Insurance Corporation's insurance?
Which of the following is NOT covered by the Philippine Deposit Insurance Corporation's insurance?
What is the primary purpose of the Deposit Insurance Fund (DIF)?
What is the primary purpose of the Deposit Insurance Fund (DIF)?
How does the Bangko Sentral ng Pilipinas (BSP) influence interest rates?
How does the Bangko Sentral ng Pilipinas (BSP) influence interest rates?
In what scenario would the BSP likely raise the Reverse Repurchase Rate (RRP)?
In what scenario would the BSP likely raise the Reverse Repurchase Rate (RRP)?
What determines the market interest rates in banking?
What determines the market interest rates in banking?
Which banks are covered by the Philippine Deposit Insurance Corporation’s insurance?
Which banks are covered by the Philippine Deposit Insurance Corporation’s insurance?
Which type of deposit is available on demand?
Which type of deposit is available on demand?
Study Notes
Bank Definition and Role
- A bank is a government-authorized institution that accepts deposits, pays interest, clears checks, and provides loans.
- Acts as an intermediary, channeling funds from savers to borrowers while offering various financial services.
Key Functions of Banks
- Accepting Deposits: Customers can deposit funds through various accounts (savings, current, or fixed deposits) and withdraw at will.
- Granting Loans & Advances: Banks provide loans for personal, business, and governmental needs, charging interest over time.
- Payment and Settlement Systems: Essential for domestic and international transactions, banks facilitate money transfers via checks, drafts, and electronic methods.
- Providing Financial Services and Advice: Banks offer financial management services, including wealth management and investment opportunities.
Financial Intermediary Role
- Banks pool deposited funds to loan out to borrowers, balancing accounts of both depositors and borrowers.
- Deposits may have demand options or restrictions.
Philippine Deposit Insurance Corporation (PDIC)
- Protects depositors by insuring deposits up to Php500,000 per depositor, per bank.
- Funds PDIC through assessments on banks, maintaining a Deposit Insurance Fund.
- Covers various bank types, including universal, commercial, thrift, rural, cooperative, and Islamic banks.
Interest Rates in Banks
- Bangko Sentral ng Pilipinas (BSP) Monetary Policy: Sets benchmark interest (Reverse Repurchase Rate) influencing loan rates to control inflation.
- Market Forces: Interest rates are affected by supply and demand dynamics; administrative and operational costs are also factored in by banks.
Deposits vs. Investments
- Deposit: Safe, guaranteed returns through bank products, insured by PDIC.
- Investment: Variable returns based on financial asset performance, pooled from multiple investors.
Advantages and Disadvantages of Banking
- Advantages: Public wealth safety, access to low-cost loans, economic growth support, rural development, global reach.
- Disadvantages: Bankruptcy risk, likelihood of fraud, potential public debt issues.
Bank Run & Bankruptcy
- Bank Run: Mass withdrawals by customers due to solvency concerns, leading to increased default chances.
- Bankruptcy: Legal status indicating asset insufficiency to meet liabilities, often resulting from economic downturns, mismanagement, fraud, or bank runs.
Classifications of Banks
- Universal Banks: Combines commercial banking with investment house capabilities; capitalization of Php4.95B. Examples: BPI, Landbank.
- Commercial Banks: Offers everyday banking services, including loans and foreign exchange; capitalization of Php2.4B. Examples: Citibank, Metrobank.
- Thrift Banks: Focus on consumer deposits, mortgages, and related services; capitalization of Php325M. Examples: PSBank, Allbank.
- Rural and Cooperative Banks: Serve rural economies; rural banks capitalize with Php100M, cooperative banks with Php10M. Examples: Rural Bank of Bacong, Planters Development Bank.
- Islamic Banks: Operate under Sharia law, prohibiting interest; profits through equity participation. Examples: Al-Amanah Islamic Bank.
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Description
Explore the various classifications of banks and their roles in monetary policy and central banking in this quiz. This assessment is designed for the BA-FM 31P - A course at Silliman University. Test your understanding of banking definitions and types.
