Philippine Financial System Overview

Questions and Answers

A financial system is a set of institutions such as banks, insurance companies, and stock exchanges that facilitate the exchange of ______.

funds

The government is responsible for defining and regulating the ______.

financial system

Households primarily receive income from ______.

wages/salaries

The central monetary authority in the Philippines is known as the ______.

Bangko Sentral ng Pilipinas (BSP) Signup and view all the answers

Depository institutions, such as ______, bridge the gap between savers and borrowers.

banks Signup and view all the answers

Involved in international trade and finance, contributing to ______.

globalization Signup and view all the answers

The financial system is crucial for resource allocation, similar to the heart's role in the ______.

human body Signup and view all the answers

In 1654, the establishment of ______, a banking institution run by friars.

Obras Pias Signup and view all the answers

The first state bank, Banco Espanol-Filipino de Isabel II, is now known as ______.

Bank of the Philippine Islands Signup and view all the answers

The Bangko Sentral ng Pilipinas (BSP) was established under ______.

Republic Act No. 7653 Signup and view all the answers

Study Notes

Overview of the Philippine Financial System

A financial system comprises institutions that facilitate fund exchange, including banks, insurance companies, and stock exchanges.
Key components include financial markets, participants, instruments, and securities, impacting households, businesses, non-profits, and governments.
Regulation is governed by the government to ensure proper functioning.

Functions of the Financial System

Channels funds from savers (surplus units) to borrowers (deficit units).
Serves as a medium for transactions, enhancing economic activity.
Provides mechanisms for sharing financial risks among participants.
Enables central bank influence to stabilize the economy.

Financial System Participants

Households/Consumers:
- Income primarily derived from wages or salaries.
- Gross savings calculated by subtracting current expenditures from current income.
Financial Institutions/Intermediaries:
- Facilitate the flow of funds between savers and borrowers.
- Include depository institutions like banks and non-depository institutions.
Non-Financial Institutions:
- Entities outside the financial sector such as manufacturers and traders, acting as either borrowers or lenders.
Government:
- Comprised of national and local government units, each with distinct governing bodies.
Bangko Sentral ng Pilipinas (BSP):
- Central monetary authority known as the “Bank of all Banks,” overseeing the financial system in the Philippines.
Foreign Participants:
- Engage in international trade and finance, contributing to globalization.

Overview of Savings

Sources of savings include households, individuals, companies, and government agencies with cash inflows exceeding outflows.
Financial intermediaries play a crucial role in directing savings to borrowers and investors.

Historical Development of Philippine Banking

Spanish Period:
- 1654: Obras Pias established as a banking institution.
- 1851: First state bank, Banco Espanol-Filipino de Isabel II, founded.
- 1882: Monte de Piedad Y Caja de Ahorros de Manila, the first savings bank, opened.
American Period:
- 1906: Establishment of the Postal Savings Bank.
- 1937: Bank of Taiwan opened in Manila.
Japanese Period:
- 1942: Southern Development Bank branch established in Manila.
New Society Period:
- 1993: Creation of BSP as an independent monetary authority.

Founding of the Central Monetary Authority

1900: Act No. 52 placed all banks under the Bureau of Treasury.
1948: Republic Act No. 265 founded the Central Bank of the Philippines.
1993: Republic Act No. 7653 established the BSP.

Bangko Sentral ng Pilipinas (BSP)

Vision: Aim to be a globally recognized monetary authority.
Mission: Maintain price stability and promote a robust financial system.

Mandate of BSP

Price Stability: Aim for a stable environment conducive to economic growth.
Financial Stability: Strengthen the financial system's resilience against shocks.
Payment Systems Oversight: Ensure sound payment practices.
Access to Financial Services: Promote wide access to quality financial services.

Governance of BSP

BSP Governor: Dr. Eli M. Remolona, Jr.
Monetary Board: Responsible for monetary policy formulation and financial system supervision.

Core Functions of BSP

Formulate and implement monetary policy for low inflation.
Manage systemic risks to ensure financial stability.
Ensure secure and reliable payment systems.
Influence money supply for price stability.
Exclusively issue national currency.
Act as a lender of last resort to provide liquidity to banks.
Manage foreign currency reserves for stability.
Set and manage exchange rate policy.

Description

This quiz covers the essential components of the Philippine financial system, highlighting the roles of banks and other institutions. Understand the definition, components, and overall impact of financial systems on society. Perfect for those looking to grasp foundational concepts in finance.