Central Banking Overview Quiz
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Questions and Answers

What is one of the primary goals of a central bank?

  • Limit consumer spending
  • Regulate international trade
  • Stabilize the nation's currency (correct)
  • Increase unemployment

Which central bank was the first ever founded in history?

  • Bank of England
  • Sveriges Riksbank (correct)
  • Bangko Sentral ng Pilipinas
  • European Central Bank

Which of the following functions is NOT typically performed by a central bank?

  • Issuing consumer credit (correct)
  • Setting reserve requirements
  • Controlling the money supply
  • Open market operations

What was the primary reason for establishing the Sveriges Riksbank?

<p>To address the failure of Stockholms Banco (B)</p> Signup and view all the answers

When did discussions about establishing a central bank for the Philippines begin?

<p>1933 (B)</p> Signup and view all the answers

What legislative act necessitated the establishment of a Philippine central bank in 1939?

<p>Tydings-McDuffie Act (C)</p> Signup and view all the answers

Which tool is used by the central bank to control inflation?

<p>Base rate adjustments (B)</p> Signup and view all the answers

What was one of the objectives of the discussions during the Commonwealth period regarding a Philippine central bank?

<p>To promote price stability and economic growth (A)</p> Signup and view all the answers

Who instructed Miquel Cuaderno, Sr. to draw up a charter for a central bank in 1946?

<p>President Manuel Roxas (D)</p> Signup and view all the answers

What significant change was mandated by the 1973 Constitution regarding the Central Bank?

<p>To establish an independent central monetary authority (D)</p> Signup and view all the answers

What was one of the key features of the New Central Bank Act signed into law in 1993?

<p>It established fiscal and administrative independence for the Bangko Sentral (A)</p> Signup and view all the answers

Who is the chief executive officer of the Bangko Sentral?

<p>The BSP Governor (D)</p> Signup and view all the answers

What sector is mainly responsible for overseeing the regulation of banks in the BSP?

<p>Financial Supervision Sector (B)</p> Signup and view all the answers

When did the New Central Bank Act officially take effect?

<p>3 July 1993 (A)</p> Signup and view all the answers

What is the primary responsibility of the Monetary and Economics Sector?

<p>Monetary policy formulation and assessment (B)</p> Signup and view all the answers

Who comprises the Monetary Board of the Bangko Sentral?

<p>The BSP Governor and six members from the private sector (C)</p> Signup and view all the answers

What role does the Bangko Sentral serve as a fiscal agent of the government?

<p>It acts as the official representative of the government to financial entities. (B)</p> Signup and view all the answers

What is the main objective of financial stability as mandated to the Bangko Sentral ng Pilipinas?

<p>To enhance the resilience of the financial system against shocks. (C)</p> Signup and view all the answers

How does the Bangko Sentral manage systemic risks?

<p>By using macroprudential policy to oversee the financial system. (A)</p> Signup and view all the answers

What was a significant outcome of the Global Financial Crisis that affects how the Bangko Sentral approaches financial stability?

<p>The recognition of the failure of private entities in isolation. (A)</p> Signup and view all the answers

Which document specifically provides the mandate for the Bangko Sentral to promote financial stability?

<p>The BSP Charter (Republic Act No. 11211). (A)</p> Signup and view all the answers

What is the primary responsibility of the Payments and Currency Management Sector (PCMS)?

<p>To maintain safety and integrity of the Philippine currency (D)</p> Signup and view all the answers

Which function allows the BSP to issue legal tender for the country?

<p>Currency issue (C)</p> Signup and view all the answers

What role does the BSP serve as in relation to banking institutions?

<p>Lender of last resort (A)</p> Signup and view all the answers

How does the BSP ensure stability in the foreign exchange market?

<p>By adhering to a market-oriented foreign exchange rate policy (D)</p> Signup and view all the answers

What is a key responsibility of the Senior Assistant Governor?

<p>To formulate and implement programs and policies (D)</p> Signup and view all the answers

Which of the following is NOT a function performed by the BSP under the New Central Bank Act?

<p>Issuing government bonds (D)</p> Signup and view all the answers

What is the purpose of maintaining sufficient international reserves by the BSP?

<p>To preserve the international stability and convertibility of the Philippine peso (B)</p> Signup and view all the answers

Which of the following best describes the 'other activities' of the BSP?

<p>Acting as banker and financial advisor to the government (D)</p> Signup and view all the answers

Flashcards

Central Bank

An independent national authority controlling monetary policy, regulating banks, and providing financial services.

Monetary Policy

Policies used by a central bank to control inflation, exchange rates, and the money supply.

Bangko Sentral ng Pilipinas (BSP)

Central Bank of the Philippines.

Objectives of Central Bank

To stabilize currency, keep unemployment low, and prevent inflation.

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Base Rate

The interest rate at which a central bank lends money to commercial banks.

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Open Market Operations

Buying or selling government securities to influence the money supply.

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Reserve Requirements

The percentage of deposits that banks must keep in reserve and not lend out.

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1st Central Bank

Sveriges Riksbank (Sweden) established in 1668.

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Central Bank Council

A group created by President Roxas to draft a charter for a central bank.

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New Central Bank Act

Republic Act No. 7653, establishing the modern Bangko Sentral ng Pilipinas (BSP).

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Monetary Board

The governing body of the BSP, responsible for monetary policy and financial system supervision.

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BSP Governor

The head of the BSP, leading its operations and internal administration.

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Financial Supervision

Regulation and oversight of banks and other financial institutions.

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Fiscal and Administrative Autonomy

Independence from government interference in its operational decisions.

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1973 Constitution

National Assembly mandated establishment of central monetary authority in this Constitution.

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Fiscal Agent

An entity appointed by the government to manage its finances, including representing it in financial transactions, holding its deposits, providing financial advice, and managing its debt.

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Bangko Sentral's role as Fiscal Agent

The Bangko Sentral ng Pilipinas (BSP) acts as a fiscal agent for the Philippine government, managing its financial affairs.

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Systemic Risk

The risk of a failure in one part of the financial system causing wider disruptions and instability across the entire system, potentially impacting the overall economy.

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Macroprudential Policy

Policies implemented by a central bank or financial regulator to address systemic risks, aiming to make the financial system more resilient to shocks.

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Financial Stability

A state where the financial system can withstand shocks and disruptions, ensuring the continuous flow of credit and financial services to the economy.

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BSP's Role in Monetary Policy

The BSP sets and implements monetary policy to control money supply, aiming to keep prices stable.

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BSP's Currency Issue Power

The BSP has the sole right to print the Philippine national currency. All issued notes and coins are backed by the government.

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BSP as Lender of Last Resort

The BSP provides loans and other financial assistance to banks facing liquidity issues.

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BSP's Financial Supervision Role

The BSP oversees banks and other institutions performing quasi-banking functions.

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BSP's Foreign Currency Reserve Management

The BSP maintains international reserves to meet foreign currency demands, ensuring the peso's stability.

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BSP's Exchange Rate Policy

The BSP sets the exchange rate policy for the Philippines, currently using a market-oriented approach.

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BSP's Other Core Functions

The BSP acts as banker, financial advisor, and official depository for the Philippine government.

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Regional Operations and Advocacy Sector

The sector manages activities related to regional operations, consumer empowerment, advocacy, and communications.

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Study Notes

Central Banking Overview

  • This unit covers the history, objectives, operations, and functions of a central bank, specifically focusing on the Bangko Sentral ng Pilipinas (BSP).
  • Students will gain in-depth knowledge of BSP operations.
  • Learning activities will assess students' understanding of the topic.

Learning Objectives

  • Students will be able to appreciate the history and objectives of a central bank.
  • Students will be able to identify and analyze the functions of a central bank through reading.
  • Students will be able to explain BSP operations and policies.

What is a Central Bank?

  • A central bank is an independent national authority that conducts monetary policy.
  • It regulates banks and provides financial services, including economic research.
  • Key goals include stabilizing the currency, low unemployment, and preventing inflation.
  • Central banks control the money supply and how it reaches consumers.
  • They print and inject money, and regulate commercial bank operations.
  • They control monetary policy, impacting inflation, exchange rates, and the money supply.

History of Central Banks

  • Sweden founded the first central bank (Sveriges Riksbank) in 1668.
  • The first banknotes were introduced in Europe in 1661.
  • Filipinos initially envisioned a central bank as early as 1933.
  • Discussions continued through the Commonwealth period (1935-1941).
  • The Philippine legislature, in 1939, established a central bank, but the US President vetoed it.
  • Manuel Roxas, in 1946, appointed Miquel Cuaderno Sr to draft a new central bank charter.
  • The Council created by Roxas developed a draft charter.

Functions of a Central Bank (from page 2)

  • Base Rate
  • Open Market Operations
  • Reserve Requirements
  • Foreign Exchange Reserves

BSP (Bangko Sentral ng Pilipinas) History Highlights

  • Filipinos envisioned a central bank as early as 1933.
  • Discussions about a Philippine central bank continued during the Commonwealth period (1935-1941).
  • A central bank law was passed in 1939, but it was vetoed by the US President.
  • In 1946, President Roxas directed the creation of a central bank charter.
  • The Central Bank Council created a draft charter under Roxas.

Organizational Structure and Governance of BSP (from page 3)

  • The Monetary Board exercises the powers of the BSP, including monetary policy and financial systems supervision.
  • The Governor is the chief executive, overseeing the BSP's operations and internal administration.
  • Deputy Governors lead operating sectors like Monetary and Economics or Financial Supervision.

BSP Functions (from page 5)

  • Liquidity Management: Implements monetary policy to affect the money supply (with a goal of maintaining price stability)

  • Currency Issue: Has exclusive control to issue national currency.

  • Lender of Last Resort: Offers loans to banks facing liquidity issues.

  • Financial Supervision: Supervises banks and other quasi-banking institutions.

  • Management of foreign exchange reserves to stabilize peso.

  • Determines exchange rate policy (market oriented)

  • Other activities: acts as a banker, financial advisor, depository for the Government.

BSP as Fiscal Agent (from page 5)

  • Official representative to financial entities
  • Acts as depository banker for the Government
  • Provides financial advice to the Government
  • Manages public debts

BSP Role in Financial Stability (from pages 5, 6)

  • Promotes "Financial Stability", which enhances the financial system's resilience to shocks.
  • Aims to manage "systemic risks" through macroprudential policies.
  • Aims at making the financial system useful to consumers during good and bad economic times.

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Description

Test your knowledge on the essential functions and historical aspects of central banks with this quiz. From the first central bank ever founded to specific legislation in the Philippines, this quiz covers key facts and details regarding monetary authorities.

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