Philippine Financial System

• The financial system comprises institutions, markets, instruments, and services that facilitate the flow of funds between savers and borrowers.

Components of the Financial System

• Financial institutions such as banks, insurance companies, and investment firms
• Financial markets such as the stock market and bond market
• Financial instruments such as loans, bonds, and stocks
• Regulators such as central banks and securities commissions

Functions of the Financial System

• Transforms savings into productive investments through loans and capital markets
• Provides funding for businesses, creating jobs and wealth, promoting economic growth
• Allows diversification through financial instruments like insurance and derivatives, enabling risk management
• Offers infrastructure for efficient payment processing

Key Players in the Philippine Financial Landscape

• Bangko Sentral ng Pilipinas (BSP)
• Supervise banks
• Maintain price stability
• Regulate monetary policy
• Example, being the introduction of QR PH for digital payments
• Universal and Commercial Banks
• Examples being, the BDO Unibank & Metrobank and Bank of the Philippine Islands (BPI)
• Provide corporate and consumer banking services
• Thrift and Rural Banks specialize in small businesses and agricultural lending
• Examples being the Philippine Business Bank and CARD Bank
• Non-Bank Financial Institutions provide specialized services like insurance, mutual funds, and stockbroking
• Examples include insurance companies like Philam Life and investment firms like COL Financial
• Capital Market Players facilitate the trading of securities to raise capital
• Example, the Philippine Stock Exchange (PSE)

Regulatory Framework

• The Bangko Sentral ng Pilipinas (BSP) oversees banks and payment systems
• The Securities and Exchange Commission (SEC) regulates securities markets and protects investors
• The Insurance Commission (IC) supervises insurance companies and products

Bangko Sentral ng Pilipinas (BSP)

• The BSP implements monetary policy by maintaining price stability and managing the country's money supply and interest rates
• The BSP regulates and supervises universal, commercial, thrift, rural, and cooperative banks to ensure the safety, soundness, and stability of the banking system
• They implement risk-based capital adequacy standards in line with Basel III
• They promote financial inclusion and ensures transparent and fair practices in the banking sector
• The BSP regulates foreign exchange transactions and oversees the remittance sector

Securities and Exchange Commission (SEC)

• The SEC oversees the incorporation and registration of companies, partnerships, and associations
• They regulate public offerings, stock exchanges, and trading activities to ensure transparency and fairness
• They regulate mutual funds, pre-need companies, and investment houses
• The SEC enforces rules to prevent fraudulent and manipulative practices in the securities market

Philippine Deposit Insurance Corporation (PDIC)

• The PDIC protects depositors by providing insurance coverage of up to PHP 500,000 per depositor per bank
• Acts as the receiver and liquidator for banks ordered closed by the BSP
• The PDIC promotes trust in the banking system by ensuring the safety of deposits

Insurance Commission (IC)

• Issues licenses to insurance companies, agents, and brokers
• Monitors compliance with financial solvency standards
• Ensures fair claims practices and policyholder rights
• Oversees insurance products linked to investment funds

Philippine Stock Exchange (PSE) and Philippine Dealing & Exchange Corp. (PDEx)

• The PSE facilitates trading of equities and implements rules for listed companies
• The PDEx manages the trading of fixed-income securities like government and corporate bonds

Anti-Money Laundering Council (AMLC)

• The AMLC monitors transactions exceeding PHP 500,000 and reports suspicious activities
• They conduct investigations and freezes assets linked to money laundering or terrorism financing
• The AMLC ensures financial institutions comply with Anti-Money Laundering/Counter-Terrorism Financing (AML/CTF) laws

Cooperative Development Authority (CDA)

• The CDA oversees cooperative financial institutions, ensuring they adhere to cooperative principles
• Provides training and technical assistance to cooperatives

Financial Technology (FinTech) Oversight

• The BSP, SEC, and IC collaborate to regulate emerging financial technologies, including digital payments, crowdfunding, and virtual currencies
• The BSP's Regulatory Sandbox tests innovative financial products in a controlled environment
• The SEC's Crowdfunding Rules regulates online fundraising platforms
• The BSP regulates virtual currency exchanges to mitigate risks

Digital Transformation in Philippine Banking

• UnionBank embraced digital transformation by launching apps, AI-based customer support, and blockchain services
• This increased customer base and operational efficiency, recognizing UnionBank as a leader in digital banking

Challenges in the Philippine Financial System

• Low Financial Inclusion, where many rural areas lack access to banking services
• Increased online transactions expose Cybersecurity Risks
• Climate-Related Risks, where disasters disrupt banking operations in affected areas

Comparative Analysis of The Financial system in The Philippines

• Financial inclusion remains a challenge
• Many rural areas lack access to formal banking services
• Initiatives like GCash and Maya aim to bridge this gap
• A significant portion of the economy relies on remittances from Overseas Filipino Workers (OFWs)
• The banking sector is rapidly embracing digitalization, but there are disparities in adoption across regions
• The Bangko Sentral ng Pilipinas (BSP) emphasizes financial inclusion and promotes initiatives like microfinance and digital payment systems
• Dominated by a few large universal banks like BDO and Metrobank, alongside many rural and thrift banks

Summary of the Philippine Financial System

• BSP (Central Bank) oversees the system
• Banks provide deposit, credit, and investment services
• NBFIs like insurance, investment houses, and financing companies cater to specific financial needs
• Financial Markets include money markets, capital markets (stocks and bonds), and forex markets
• Regulatory Bodies ensure fairness, transparency, and financial stability
• Financial Products and Services allow businesses and consumers to invest, save, insure, and borrow

The financial system facilitates fund flow between savers and borrowers through institutions, markets, instruments, and services. It transforms savings into productive investments and provides funding for businesses, promoting economic growth. Key players include Bangko Sentral ng Pilipinas (BSP).