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Questions and Answers
Which of the following is a primary way that banks attract capital?
Which of the following is a primary way that banks attract capital?
Non-Bank Financial Institutions (NBFIs) typically accept traditional deposits.
Non-Bank Financial Institutions (NBFIs) typically accept traditional deposits.
False (B)
What is the primary focus of commercial banks?
What is the primary focus of commercial banks?
Deposit-taking and lending
Rural/Cooperative banks aim to promote __________ development and financial inclusion.
Rural/Cooperative banks aim to promote __________ development and financial inclusion.
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Match the type of bank with its primary focus:
Match the type of bank with its primary focus:
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What distinguishes NBFIs from banks?
What distinguishes NBFIs from banks?
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Thrift Banks focus primarily on providing loans to large corporations.
Thrift Banks focus primarily on providing loans to large corporations.
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What was the approximate value of loans granted by universal and commercial banks in the Philippines as of October 2020?
What was the approximate value of loans granted by universal and commercial banks in the Philippines as of October 2020?
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The target market of thrift banks includes individuals seeking __________.
The target market of thrift banks includes individuals seeking __________.
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The nonperforming loans to total gross loans ratio in the Philippines was nearly 2% as of 2019.
The nonperforming loans to total gross loans ratio in the Philippines was nearly 2% as of 2019.
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What act requires lenders under BSP supervision to grant a 30-day grace period for loan payments during the ECQ?
What act requires lenders under BSP supervision to grant a 30-day grace period for loan payments during the ECQ?
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As of October 2020, approximately _____ billion pesos were granted for motor vehicle loans and household consumption.
As of October 2020, approximately _____ billion pesos were granted for motor vehicle loans and household consumption.
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What is the main purpose of the Bangko Sentral's rules and regulations during the pandemic?
What is the main purpose of the Bangko Sentral's rules and regulations during the pandemic?
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Match the loan purposes with their approximate values:
Match the loan purposes with their approximate values:
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A high ratio of nonperforming loans to total gross loans indicates a healthy banking sector.
A high ratio of nonperforming loans to total gross loans indicates a healthy banking sector.
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What significant impact did the pandemic have on the banking industry in the Philippines?
What significant impact did the pandemic have on the banking industry in the Philippines?
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Which of the following is NOT an example of a non-bank financial institution (NBFI)?
Which of the following is NOT an example of a non-bank financial institution (NBFI)?
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Banks raise capital mainly by selling securities.
Banks raise capital mainly by selling securities.
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What is the primary role of non-bank financial institutions (NBFIs)?
What is the primary role of non-bank financial institutions (NBFIs)?
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The independent central monetary authority of the Philippines is known as the ______.
The independent central monetary authority of the Philippines is known as the ______.
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Match the following governing bodies with their areas of oversight:
Match the following governing bodies with their areas of oversight:
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What generates a bank's profit margin?
What generates a bank's profit margin?
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The regulatory oversight for all NBFIs is exclusively under the Bangko Sentral ng Pilipinas.
The regulatory oversight for all NBFIs is exclusively under the Bangko Sentral ng Pilipinas.
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What is one key benefit of having a well-regulated financial system?
What is one key benefit of having a well-regulated financial system?
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What is one of the complexities auditors face when dealing with banks?
What is one of the complexities auditors face when dealing with banks?
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Auditors do not need specialized knowledge to handle banking audits.
Auditors do not need specialized knowledge to handle banking audits.
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What does PFRS 9 stand for?
What does PFRS 9 stand for?
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Due to the pandemic, auditors have faced challenges in performing audits __________.
Due to the pandemic, auditors have faced challenges in performing audits __________.
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Match the key risks to their descriptions:
Match the key risks to their descriptions:
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What is a primary factor that increases the risk of fraud in banks?
What is a primary factor that increases the risk of fraud in banks?
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Banks have fewer regulatory compliance requirements than other industries.
Banks have fewer regulatory compliance requirements than other industries.
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Which BSP Circular is related to the establishment of digital banks?
Which BSP Circular is related to the establishment of digital banks?
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What is one methodology auditors need to adapt due to the limitations of virtual audits?
What is one methodology auditors need to adapt due to the limitations of virtual audits?
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SEC Memorandum Circular No. 18, s. 2020 pertains to the procedures for filing Annual Financial Statements and General Information Sheets.
SEC Memorandum Circular No. 18, s. 2020 pertains to the procedures for filing Annual Financial Statements and General Information Sheets.
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The recent BSP Memorandum regarding the extension of compliance is labeled as Memorandum No. __________-045.
The recent BSP Memorandum regarding the extension of compliance is labeled as Memorandum No. __________-045.
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Match the BSP Memorandum Circulars with their purposes:
Match the BSP Memorandum Circulars with their purposes:
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What is the purpose of Memorandum No. M-2025-001?
What is the purpose of Memorandum No. M-2025-001?
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There are no BSP circulars related to credit and equity exposures in 2023.
There are no BSP circulars related to credit and equity exposures in 2023.
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BSP Circular No. 1203 addresses _________ of banks in the Philippines.
BSP Circular No. 1203 addresses _________ of banks in the Philippines.
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What is a likely consequence of political instability in a country?
What is a likely consequence of political instability in a country?
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Interest rate risk only affects the liquidity of banks.
Interest rate risk only affects the liquidity of banks.
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What is the main risk to a bank if there is a breach of trust?
What is the main risk to a bank if there is a breach of trust?
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The risk related to inadequate documentation is referred to as ______ risk.
The risk related to inadequate documentation is referred to as ______ risk.
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Match the following risks with their definitions:
Match the following risks with their definitions:
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What does non-compliance with regulations primarily affect?
What does non-compliance with regulations primarily affect?
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Changes in interest rates do not relate to solvency risk.
Changes in interest rates do not relate to solvency risk.
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The auditor needs to ensure that accounts of foreign branches conform to ______.
The auditor needs to ensure that accounts of foreign branches conform to ______.
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Study Notes
Overview of Philippine Banking Sector
- The Philippine banking and finance sector is vital to the national economy.
- This sector mobilizes domestic savings and channels them into productive investments.
- It fosters economic growth and job creation by encouraging savings for business expansion.
- Philippine banks are categorized into universal/commercial, rural/cooperative, and thrift banks.
- Universal and commercial banks dominate the industry, with approximately 12 trillion pesos in deposits.
Nature and Background of Specialized Industry
- The banking and finance sector is crucial for economic development.
- It efficiently channels savings into investments, boosting business growth, job creation, and overall economic prosperity.
- A stable financial sector facilitates capital allocation to high-performing sectors.
- Banks perform essential functions like accepting deposits, providing loans, and facilitating payment services.
Banks and Non-Bank Financial Institutions (NBFIs)
- Both banks and NBFIs contribute to the financial system by facilitating the flow of funds.
- Banks are deposit-taking institutions, primarily attracting capital through customer deposits that are then lent out to borrowers.
- NBFIs do not typically accept traditional deposits but raise capital through securities (bonds, stocks), insurance, investment funds, etc.
- Banks facilitate deposit-taking, lending, investment banking, and trust services.
- Commercial Banks handle deposits and lending to businesses and individuals.
- Thrift Banks focus on savings, mortgage loans, and financing for SMEs.
NBFI's Versus Banks
- Banks accept demand deposits, whereas NBFIs typically do not.
- Banks have limited scopes of business, unlike the diverse business models offered by NBFIs.
- Banks are usually subject to stringent regulations, while oversight of NBFIs is generally less rigid.
Overview, Updates, Statistics of Specialized Industries
- Bangko Sentral ng Pilipinas (BSP) is the independent central monetary authority in the Philippines, overseeing the nation's banking system.
- Financial intermediation is expanding the Philippine economy and creating employment opportunities.
- Loans granted by universal and commercial banks in the Philippines (as of 2020) reached nearly 9.7 trillion Philippine pesos, with portions allocated to motor vehicles, household consumption, and real estate.
Recent Issuances
- BSP issued several circulars, including those related to digital banks and lifting moratoriums.
- BSP and SEC issued Memoranda on various topics like compliance and corporate regulations.
Audit Considerations (Banking Sector)
- Auditing banks involves unique considerations due to the sector's complexity, resources used by banks, regulatory oversight, and transactions' nature.
- The role of regulators and politicians in influencing the banking sector's operations and legal compliance.
- The importance of accurate financial reporting and compliance with regulations.
Key Risks Considerations
- Credit risk, operational risk, reputational risk, fiduciary risk, legal and documentary risks, concentration risks, and liquidity risk are critical risk considerations for banks.
- Country and currency risk, Interest rate and price risk, solvency and regulatory risk.
- These risks are crucial for banks due to their significant transactions' value, digital nature of operations, and sensitive nature of financial instruments.
Reporting on the Financial Statements
- Auditors must adhere to specific formats, terminology, and regulatory requirements in reporting on financial statements.
- Banks must comply with local and global standards in reporting, especially in complex transactions that may involve subsidiaries and foreign branches.
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Description
Explore the critical role the Philippine banking sector plays in the economy. This quiz covers the categorization of banks, their functions, and their impact on economic growth and job creation. Test your knowledge on how financial institutions contribute to national prosperity.
