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Questions and Answers
What are rural banks and cooperative banks more popular for in rural communities?
What are rural banks and cooperative banks more popular for in rural communities?
providing basic financial services
Who are non-bank financial institutions? Select the correct options.
Who are non-bank financial institutions? Select the correct options.
Rural and cooperative banks are owned by cooperatives or a federation of cooperatives, while are privately owned and managed.
Rural and cooperative banks are owned by cooperatives or a federation of cooperatives, while are privately owned and managed.
rural banks
Non-bank financial institutions can accept deposits from customers.
Non-bank financial institutions can accept deposits from customers.
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When was the Central Bank of the Philippines established?
When was the Central Bank of the Philippines established?
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The primary objective of the Bangko Sentral ng Pilipinas is to maintain price stability.
The primary objective of the Bangko Sentral ng Pilipinas is to maintain price stability.
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Who disapproved the first monetary law of the Philippines that aimed to establish a central bank?
Who disapproved the first monetary law of the Philippines that aimed to establish a central bank?
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The Bangko Sentral ng Pilipinas has the exclusive power to issue the national ________.
The Bangko Sentral ng Pilipinas has the exclusive power to issue the national ________.
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Match the following responsibilities with the Bangko Sentral ng Pilipinas functions:
A. Liquidity Management
B. Currency Issue
C. Lender of Last Resort
D. Financial Supervision
Match the following responsibilities with the Bangko Sentral ng Pilipinas functions: A. Liquidity Management B. Currency Issue C. Lender of Last Resort D. Financial Supervision
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What is the main responsibility of the Currency Management Sector in BSP?
What is the main responsibility of the Currency Management Sector in BSP?
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What are the main responsibilities of the Monetary and Economics Sector in BSP? (Select all that apply)
What are the main responsibilities of the Monetary and Economics Sector in BSP? (Select all that apply)
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BSP stands for Bangko Sentral ng Pilipinas, which is the __________ body of all banking institutions in the country.
BSP stands for Bangko Sentral ng Pilipinas, which is the __________ body of all banking institutions in the country.
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Financial intermediaries like banks help channel funds from savers to borrowers directly.
Financial intermediaries like banks help channel funds from savers to borrowers directly.
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Study Notes
Creation of the Central Bank of the Philippines
- In 1933, a group of Filipinos conceptualized a central bank for the Philippines, drafting a bill for its establishment after studying the economic provisions of the Hare-Hawes Cutting Bill, the Philippine independence bill approved by the US Congress.
Early Development of the Central Bank
- In the Commonwealth period (1935-1941), discussions about a Philippine central bank that would promote price stability and economic growth continued.
- The country's monetary system was administered by the Department of Finance and the National Treasury, using the US dollar as the standard currency.
- In 1939, the Philippine legislature passed a law establishing a central bank, but President Franklin D. Roosevelt disapproved it due to strong opposition from vested interests.
Establishment of the Central Bank of the Philippines
- In 1944, during the Japanese occupation, a second law was passed, but its implementation was aborted by the American liberalization forces.
- In 1946, President Manuel Roxas instructed Finance Secretary Miguel Cuaderno, Sr. to draft a charter for a central bank.
- The Joint Philippine-American Finance Commission, chaired by Mr. Cuaderno, recommended a shift from the dollar exchange standard to a managed currency system, making a central bank necessary.
Bangko Sentral ng Pilipinas (BSP)
- On June 14, 1993, President Fidel V. Ramos signed into law Republic Act No. 7653, also known as the New Central Bank Act, establishing the Bangko Sentral ng Pilipinas (BSP).
- The law provides for the establishment of an independent monetary authority with the primary objective of maintaining price stability.
Functions of the BSP
- Maintaining monetary stability and promoting economic growth
- Supervising banks and exercising regulatory powers over non-bank financial institutions
- Managing foreign currency reserves
- Determining exchange rate policy
- Acting as the banker, financial advisor, and official depository of the government and its instrumentalities
Monetary Board
- Exercises the powers and functions of the BSP
- Comprises seven members, including the Governor of the BSP
- Meets at least once a week to discuss monetary policy and the exercise of its powers
Organizational Structure of the BSP
- Divided into four sectors: Monetary and Economics, Financial Supervision, Currency Management, and Corporate Services
- Each sector is headed by a deputy governor or senior assistant governor
Governor of the BSP
- Chief executive officer of the BSP
- Directs and supervises the operations and internal administration of the BSP
- Represents the Monetary Board and the BSP in all dealings with other offices, agencies, and instrumentalities### Financial Intermediation
- Financial intermediaries channel funds from savers (lenders) to borrowers.
- They transform assets or liabilities into different assets or liabilities.
- Examples of financial intermediation services: collection of bills, payment of insurance premiums, purchase and sale of securities, issue of travelers' checks, credit cards, and locker facilities.
Philippine Banking System
- The Bangko Sentral ng Pilipinas is the regulating body of all banking institutions in the country.
- The Monetary Board is the policy-making body that issues policies and guidelines for banks.
- The banking system consists of universal and commercial banks, thrift banks, rural and cooperative banks.
Universal and Commercial Banks
- They offer the widest variety of banking services.
- They are authorized to engage in underwriting and other functions of investment houses.
- They can invest in equities of non-allied undertakings.
Thrift Banks
- They accumulate savings of depositors and invest them.
- They provide medium- and long-term financing to businesses and individuals.
Rural and Cooperative Banks
- They are the most popular type of banks in rural communities.
- They provide basic financial services to people in rural communities.
- They promote and expand the rural economy.
- They help farmers through the stages of production.
Non-Bank Financial Institutions
- They offer financial services but do not hold banking licenses.
- Examples: insurance companies, brokerage firms, companies offering microloans.
- They cannot accept deposits from customers.
Types of Non-Bank Financial Institutions
- Institutional Investors: pension funds, mutual funds that trade securities in volumes.
- Other Non-Bank Financial Institutions: leasing companies, market makers, management companies, financial advisors, and securities brokers.
- Investment Houses: individuals or organizations engaged in investment banking and financing activity.
- Financing companies: concerned with providing money, primarily for short-term loans.
- Securities Dealers: buy and sell securities.
- Investment Companies: corporations engaged in the business of investing the pooled capital of investors in financial securities.
- Fund Managers: employees or departments of a large institution that manage the investment of money.
- Lending Investors: corporations engaged in granting loans from its own capital funds or from funds sourced from not more than nineteen (19) persons.
- Pawnshops: offer secured loans to people, with items of personal property used as collateral.
- Government Nonbank Financial Institutions: institutions that offer loans and financial products but do not have a full banking license.
- Venture Capital Corporation: a type of private equity that provides financing to small, early-stage, emerging firms with high growth potential.
- Risk Pooling Institutions: organizations that spread financial risk among a large number of entities, such as insurance companies.
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Description
A quiz about the creation of the Central Bank of the Philippines and its history.
