Podcast
Questions and Answers
What is the minimum capital required to establish a Rural Bank?
What is the minimum capital required to establish a Rural Bank?
What is the primary function of a Thrift Bank?
What is the primary function of a Thrift Bank?
What is the primary function of a Trust Company?
What is the primary function of a Trust Company?
Which bank became the main bank of the Philippines after PNB was privatized?
Which bank became the main bank of the Philippines after PNB was privatized?
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What is the purpose of the Development Bank of the Philippines?
What is the purpose of the Development Bank of the Philippines?
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What is the name of the first mutual bank in the Philippines?
What is the name of the first mutual bank in the Philippines?
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What is a key characteristic of an asset according to the Shiftability Theory?
What is a key characteristic of an asset according to the Shiftability Theory?
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What is the main principle of Commercial Loan Theory?
What is the main principle of Commercial Loan Theory?
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According to the Anticipated Income Theory, how do banks plan to liquidate a term loan?
According to the Anticipated Income Theory, how do banks plan to liquidate a term loan?
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What is a lump sum, as opposed to?
What is a lump sum, as opposed to?
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What is the main argument of the Liability Management Theory?
What is the main argument of the Liability Management Theory?
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Which theory is proposed by H.V. Prochanow?
Which theory is proposed by H.V. Prochanow?
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Study Notes
Types of Banks
- Thrift Bank: also known as a “savings bank”
- Savings & Loan Association: gives loans and accepts deposits from its members
- Private Development Banks: accepts deposits from anyone, used by small or medium-scale businessmen (RA. 4093)
- Savings & Mortgage Banks: accepts pawned items as collateral for loans
- Commercial Banks: accepts all kinds of deposits
- Rural Banks: aims to help farmers to have capital, requires a capital of 2M Pesos to be published
- Trust Companies: takes care of properties or funds of people like minors, who have no power to take care of their properties
- Special Banks: organized with specific functions and objectives, helps small farmers, businessmen, or Muslims
- Land Bank of the Philippines: became the main bank of the Philippines after PNB was privatized
- Development Bank of the Philippines: helps the government in improving the economy, gives financial help to promote economic projects
- Al Amanah Islamic Investment Bank: caters to the needs of Muslim Filipinos
Government Financial Institutions
- Government Service Insurance System (GSIS)
- Social Security System (SSS)
- Pag-Ibig Fund
- Obras Pias (Pious Works): legacies and donations were from wealthy individuals
Sources of Commercial Credit
- Funds were invested in loans, trade, and maritime insurance
- Europe: France (Florence, Flanders) - Bourgeoisie (entrepreneurs) - en banc (term for the first banking system)
- El Banco Español Filipino de Isabel II: first state bank in the Philippines
- Rodriguez Bank: first rural bank; loan association more than a modern bank
- British-Orient Bank: expanded the Philippine-European trade
- Junta de Autoridades: not really a bank, but its functions are like one, in English, the Board of Authorities
- Hongkong-Shanghai Bank: the world’s largest and oldest multinational banking and financial organization
- Monte de Piedad y Caja de Ahorros: the first mutual bank in the Philippines, a pawnshop that accepts pawnable items
- Philippine Postal Savings Bank: offers enhanced credit facilities / financial assistance for OFWs and their families
Banking Theories
- Commercial Loan Theory or Real Bill Doctrine: states that a commercial bank should forward only short-term self-liquidating productive loans to business organizations
- Shiftability Theory: proposed by H.G.Moulton, an asset must be directly transferable without any loss of capital when there is a need for liquidity
- Anticipated Income Theory: proposed by H.V.Prochanow, banks plan the liquidation of the term loan from the expected income of the borrower
- Liability Management Theory: banks can borrow reserve money in the money market in case of need, no need to grant self-liquidating loans and keep liquid assets
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Description
Test your understanding of commercial loan theories, including the Real Bill Doctrine and Shiftability Theory, and their impact on liquidity and money supply.
