Podcast
Questions and Answers
Which of the following are main functions of a central bank? (Select all that apply)
Which of the following are main functions of a central bank? (Select all that apply)
What is a bank?
What is a bank?
Entities engaged in the lending of funds obtained in the form of deposits.
The BSP was established on ______ pursuant to the provisions of the 1987 Philippine Constitution.
The BSP was established on ______ pursuant to the provisions of the 1987 Philippine Constitution.
3 July 1993
What is the primary role of the Bangko Sentral ng Pilipinas (BSP)?
What is the primary role of the Bangko Sentral ng Pilipinas (BSP)?
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BSP has fiscal autonomy from the National Government.
BSP has fiscal autonomy from the National Government.
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Which law governs the secrecy of bank deposits in the Philippines?
Which law governs the secrecy of bank deposits in the Philippines?
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Name one type of financial service provided by banks.
Name one type of financial service provided by banks.
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Match the following major central banks with their respective countries:
Match the following major central banks with their respective countries:
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Study Notes
What is a Bank?
- Banks are entities that lend money obtained through deposits.
- They can be defined by their economic functions, products and services offered and legal basis.
Economic Functions of Banks
- Facilitate payments between households, businesses, and governments.
- Act as financial intermediaries for savers and borrowers.
- Pool assets to fund loans.
- Transform short-term deposits into long-term loans.
- Manage risk for savers by guaranteeing full repayment.
Products and Services Offered by Banks
- Depository functions: Checking and savings accounts, and term deposits.
- Trust functions: Escrow arrangements.
- Collection and remittance functions: Global remittances.
- Loans and discount functions: Personal and business loans.
- Advisory functions: Wealth management and estate planning.
Legal Basis for Banks
- The General Banking Law (GBL) of 2000 (R.A 8791).
- Law on Secrecy of Bank Deposits (R.A 1405).
- Foreign Currency Deposit Act (R.A 6426).
- Unclaimed Balances Law (R.A 3936).
- Bouncing Check Law (Batas Pambansa 22).
Important Concepts in Banking & Finance
- Moral hazard: Occurs when one party in a transaction has more information than the other, leading to poor decision-making and risk-taking.
- Asymmetric information: One party in a transaction has more information than the other, which can lead to problems. Both moral hazard and asymmetric information present challenges for banks.
Main Functions of a Central Bank
- Oversees the monetary system of a country, promoting economic growth.
Bangko Sentral ng Pilipinas (BSP)
- The central bank of the Philippines, established on July 3, 1993.
- It replaced the Central Bank of the Philippines, established in 1949.
- The BSP enjoys fiscal and administrative autonomy from the national government.
- Focused on maintaining price stability, monetary stability, and the convertibility of the peso.
- Responsible for financial stability, overseeing payment and settlement systems, and promoting financial services access.
Fiscal Autonomy
- The Supreme Court defines this as "freedom from outside control."
- The BSP is allowed to create its own budget and authorize expenditures without congressional oversight.
BSP Mandate
- To maintain price stability, monetary stability, and the convertibility of the peso.
- To promote financial stability and oversee payment and settlement systems.
- To promote broad and convenient access to high-quality financial services.
Major Central Banks
- The Federal Reserve System (The Fed) - United States of America.
- European Central Bank - European Union.
- Bank of England - United Kingdom.
- Bank of Japan - Japan.
- Swiss National Bank - Switzerland.
- Bank of Canada - Canada.
- Reserve Bank of Australia - Australia.
- Reserve Bank of New Zealand - New Zealand.
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Description
This quiz explores the basic concepts of banking, including its economic functions, products, services, and the legal framework that governs banks. Test your knowledge on how banks facilitate payments, manage risks, and provide various financial services to individuals and businesses.
