Overview of Philippine Banking Sector

Financial institutions that attract funds primarily through customer deposits and lend those funds to borrowers.

Financial institutions that do not typically accept traditional deposits. They raise capital through various methods like issuing securities, selling insurance, managing investment funds.

The process of institutions like banks and NBFIs channeling funds from savers to borrowers.

The largest and most diversified type of bank, offering a wide range of services including deposits, lending, investment banking, and trust services.

Banks primarily focused on deposit-taking and lending to businesses and individuals, less involved in investment banking.

Banks specializing in accumulating savings and providing mortgage loans and financing for small and medium-sized enterprises (SMEs).

Banks dedicated to serving rural communities, mobilizing savings and extending credit to farmers, small businesses, and underserved individuals.

The practice of ensuring that financial services are accessible to everyone, regardless of socioeconomic background.

Non-bank financial institutions (NBFIs) are financial service providers that operate outside the traditional banking system. Unlike banks, they don't accept deposits but raise funds through methods like selling securities or insurance products. They offer various financial services to both individuals and businesses.

In contrast to banks, which primarily focus on taking deposits and lending, NBFIs offer more specialized financial services. They cater to specific needs and offer specialized products not typically found in traditional banks.

The core operational model of a bank involves intermediation. Banks act as intermediaries, gathering funds from depositors and investors and providing loans to borrowers, businesses, and other financial players. This process generates income through the difference between the cost of funds and the return on those funds.

A well-functioning financial system relies on the interplay between banks and NBFIs. Banks provide fundamental deposit-taking and lending services, while NBFIs introduce specialized financial products and services. This collaboration creates a diverse financial ecosystem, offering a wider range of financial options for individuals and businesses.

The BSP is the central monetary authority of the Philippines and plays a pivotal role in overseeing the financial system. It is responsible for regulating and supervising both banks and non-bank financial institutions (NBFIs)

A diverse financial system with both banks and NBFIs helps mitigate risks in the market. This diversity facilitates competition and ensures efficient allocation of capital. As a result, the economy gains strength and resilience.

The BSP regulates banks directly, while other NBFIs are supervised by separate governing bodies. For example, insurance companies fall under the Insurance Commission's purview, and investment houses are supervised by the Securities and Exchange Commission.

The total value of loans provided by Philippine banks to customers for various purposes, including business ventures and household consumption.

Loans granted by banks to customers for personal use, such as purchasing vehicles or covering daily expenses.

Loans granted by banks to customers involved in real estate development and related businesses.

Loans that are unlikely to be repaid, considered a risk for banks as they impact cash flow.

The ratio comparing the value of nonperforming loans to the total value of loans provided by banks.

A period of time granted by banks to borrowers during emergencies, allowing them to delay their loan payments without penalties.

A process banks use to verify the identity and financial standing of customers before providing services.

The central bank of the Philippines, responsible for regulating the banking sector and managing the country's currency.

A financial institution that offers a wide range of services, including deposit-taking, lending, investment banking, and trust services. Essentially, they act as a one-stop shop for various financial needs.

A type of bank focused primarily on accepting deposits and providing loans to businesses and individuals. They are not as involved in investment banking as Universal Banks.

This is a financial institution that specializes in accumulating savings and providing mortgage loans and financing for small and medium-sized enterprises.

A bank dedicated to serving rural communities and focuses on mobilizing savings and extending credit to farmers, small businesses, and underserved individuals.

Digital banks operate entirely online, offering services like deposits, loans, and payments through websites and apps.

The BSP issues regulations and guidelines for the financial sector in the Philippines. They ensure stability and transparency in the banking system.

The SEC oversees and regulates corporations in the Philippines, ensuring they operate in a fair and transparent manner. One of their key tasks is to ensure corporations submit their annual reports.

These are statements that provide information about a company's financial performance and position. Auditors play a vital role in ensuring accuracy and transparency in financial statements.

Auditing banks requires specialized knowledge due to their complex operations, strict regulations, and unique transactions.

Auditors must carefully consider their expertise and resources to handle the complex nature of bank accounting and regulations.

Banks operate within a strict regulatory framework, demanding compliance with numerous reporting requirements and specific accreditation standards.

Banks deal with intricate financial instruments, estimations, and assets with fluctuating values, requiring specialized auditing techniques.

PFRS 9 introduces complexities in accounting for financial instruments, demanding deep knowledge of the standards for accurate auditing.

High-value transactions and digital operations increase the risk of fraud in banks, prompting auditors to implement robust fraud detection and prevention measures.

The pandemic has presented challenges for remote auditing, requiring auditors to adapt their methodologies to address the limitations of virtual audits.

If borrowers default on their loans, it can lead to liquidity risks, where the bank lacks sufficient funds to meet its obligations.

Operational failures, such as system outages or data breaches, can significantly damage a bank's reputation.

Unforeseen changes in interest rates can negatively impact the value of a bank's assets and liabilities, potentially endangering its financial stability.

Over-reliance on a single customer or industry can expose a bank to increased risk if that entity faces difficulties.

A bank's reputation can be severely damaged by a breach of trust, which can lead to customer loss and financial instability.

Inadequate documentation or legal non-compliance can result in regulatory issues, disputes, and financial losses for a bank.

Political or economic instability in a country can cause fluctuations in its currency, leading to risks for banks operating internationally.

Non-compliance with regulations can result in fines, penalties, and reputational damage, negatively impacting a bank's financial stability.

Banks must ensure accounting principles used by their foreign branches and subsidiaries align with the generally accepted accounting principles in the Philippines.

Banks often face unique accounting regulations, especially for their operations in other countries.