Philippines Central Bank Functions and Structure

Questions and Answers

Which of the following is NOT a function of the Bangko Sentral ng Pilipinas?

Debt management for private companies (correct)

Currency issuance

Lender of last resort

Financial supervision

What is the primary objective of the Bangko Sentral ng Pilipinas?

Price stability (correct)

Supervision of government institutions

Financial regulation

Currency issue

Which statement accurately describes the independence of the Bangko Sentral ng Pilipinas?

It requires the president's approval for its decisions.

Its decisions are independent and do not require ratification. (correct)

It operates under direct control of the executive branch.

It is supervised by a committee of government officials.

What role does the Bangko Sentral ng Pilipinas play as the lender of last resort?

It extends discounts, loans, and advances to banking institutions. Signup and view all the answers

What is one of the supervisory responsibilities of the Bangko Sentral ng Pilipinas?

To supervise banks and non-bank financial institutions. Signup and view all the answers

What is a key function of the Bangko Sentral ng Pilipinas in terms of currency?

It has the exclusive power to issue national currency. Signup and view all the answers

Which of the following accurately describes the liquidity management function of the Bangko Sentral ng Pilipinas?

It formulates policies to influence money supply. Signup and view all the answers

What legislative act defines the responsibilities of the Bangko Sentral ng Pilipinas?

R.A. 7653 Signup and view all the answers

What is the primary goal of the BSP in maintaining international reserves?

To preserve the international stability and convertibility of the Philippine peso Signup and view all the answers

Which statement best describes the current exchange rate policy of the BSP?

It is market-oriented, ensuring orderly conditions in the foreign exchange market. Signup and view all the answers

What significant change occurred on 3 July 1993 regarding the central monetary authority of the Philippines?

The Bangko Sentral ng Pilipinas was established, replacing the Central Bank of the Philippines. Signup and view all the answers

Who was the first governor of the Central Bank of the Philippines?

Miguel Cuaderno, Sr. Signup and view all the answers

What amendment to the Republic Act No. 7653 was made on 14 February 2019?

It strengthened the BSP's capability to safeguard price and financial stability. Signup and view all the answers

Which of the following was a key reason for the amendment of RA No. 265 in November 1972?

To make the Central Bank more responsive to changing economic conditions. Signup and view all the answers

What legislation was passed in January 1981 to enhance the financial system of the Philippines?

Presidential Decree No. 1771 Signup and view all the answers

What was the capitalization increase of the Central Bank of the Philippines authorized by PD No. 1771?

From P10 million to P10 billion Signup and view all the answers

Study Notes

Major Functions of the Reserve System

Each nation has an independent central bank; in the Philippines, it is the Bangko Sentral ng Pilipinas (BSP).
The BSP oversees monetary policy, banking, and credit regulations to ensure financial stability.
Key functions include:
- Monetary policy formulation
- Financial regulation and supervision
- Maintenance of price stability
- Issuance and management of a stable currency
- Ensuring a stable financial system

Structure of the Reserve System

BSP operates independently from the Philippine Executive, with no need for ratification of its decisions by the president.
It has supervisory, regulatory, and examination powers over banks and quasi-banking institutions.
Manages liquidity, issues national currency, and acts as a lender of last resort to banks.

Monetary Policy Tools Used by the Central Bank

The BSP implements monetary policies to influence money supply and maintain price stability.
Exclusive authority to issue and manage the national currency, which the government guarantees as legal tender.
Provides liquidity to banks through discounts, loans, and advances.
Maintains sufficient international reserves to uphold the peso's stability and convertibility.
Determines exchange rate policies, currently adhering to a market-oriented approach.

Monetary Policy Considering Recent Financial Crises

The BSP's historical context includes legislative changes aimed at responding to evolving economic conditions.
Key legislative milestones:
- 1900: Act No. 52 established initial banking regulations under the Bureau of Treasury.
- 1948: Establishment of the Central Bank of the Philippines (CBP) under Republic Act No. 265.
- 1993: Replacement of CBP with the BSP under Republic Act No. 7653.
- 2019: Amendments to the BSP’s charter via Republic Act No. 11211 to enhance its capabilities for ensuring price and financial stability.

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Description

This quiz explores the major functions and structure of the reserve system in the Philippines, primarily focusing on the Bangko Sentral ng Pilipinas. It also covers monetary policy tools and their application amid recent financial crises. Test your knowledge on how the Central Bank regulates financial institutions in the country.