Private Banking Institutions

• Financial institutions can be categorized into private banking, government banking, private non-bank, and government non-bank.

Private Banking Institutions

• This includes universal banks, commercial banks, thrift banks, rural banks, and cooperative banks
• These are privately owned and operated
• They do not receive government funding
• They are regulated by government agencies to ensure safety and soundness

Universal Banks

• They offer a wide range of financial services beyond commercial banking
• They operate extensive networks of branches
• They provide diverse services and hold claims on firms
• They participate in corporate governance of firms they fund or underwrite

Advantages of Universal Banking

• Economies of scale can be achieved
• Diversification can be profitable
• Resources are efficiently utilized
• Marketing is simplified
• Offers one-stop shopping for customers
• Provides flexibility

Limitations of Universal Banking

• Potential for monopoly exists
• Failure can significantly impact the banking system
• Subject to different rules and regulations
• May lead to a lack of focus
• Risk of excessive risk-taking increases
• Potential for conflicts of interest arises

Commercial Banks

• Engaged in accepting drafts and issuing letters of credit
• Discount and negotiate promissory notes, drafts, bills of exchange, and other debt instruments
• Accept or create demand deposits
• Receive various types of deposits and deposit substitutes
• Buy and sell foreign exchange and gold or silver bullion
• Acquire marketable bonds and other debt securities
• Extend credit subject to Monetary Board rules

Thrift Banks

• Focus on basic banking services for individuals and small businesses
• Emphasize home mortgages and savings accounts with competitive interest rates
• Commonly offer checking accounts, car loans, and personal finance support services
• Operate as community development financial institutions
• Primarily serve individuals and small businesses within a local area
• May operate with a single location or a few branches in a small area
• Regulated by Republic Act 7906, also known as the "Thrift Banks Act of 1995"

Rural Banks

• Provide credit facilities to farmers, merchants, and cooperatives in rural communities
• Accept savings and time deposits
• Open current or checking accounts
• Act as correspondents for other financial institutions
• Serve as collection agents
• Act as official depositories for municipal, city, or provincial funds
• Extend financial assistance to public and private employees
• Established under Republic Act 7353, the "Rural Bank Act of 1992"

Cooperative Banks

• Established to provide rural financing and micro-financing
• Aim to reduce the influence of money lenders and middlemen
• Offer credit services to agriculturists and weaker sections of society at lower rates
• Organized and controlled by cooperative organizations
• Provide financial and credit services to cooperatives and members

Government Banking Institutions

• Include the Development Bank of the Philippines, Al-Amanah Islamic Investment Bank, and Land Bank of the Philippines
• Government banking is owned and operated by the government
• Receives government funding

Development Bank of the Philippines

• Provides loans for developmental purposes
• Offers loans to the agricultural, commercial, and industrial sectors

Al-Amanah Islamic Investment Bank

• Established under Republic Act No. 6048
• Aims to promote socio-economic development in the Autonomous Region of Muslim Mindanao
• Conducts banking, financing, and investment operations based on Islamic banking concepts
• Participates in agriculture, commercial, and industrial ventures

Land Bank of the Philippines (LBP)

• Provides financial support for the government's Agrarian Reform Program (CARP)

Private Non-Bank Financial Institutions

• Includes investment houses, financing companies, investment companies, insurance companies, pawnshops, securities brokers/dealers, venture capital corporations, and non-stock savings and loan associations

Investment Houses

• Underwrite securities of other corporations
• Underwriting guarantees the distribution and sale of securities
• Established under Presidential Decree No. 129, "The Investment Houses Law"

Financing Companies

• Defined in Republic Act 8556, the "Financing Company Act of 1998"
• Extend credit facilities to consumers and industrial, commercial, or agricultural enterprises
• Provide direct lending
• Discount or factor commercial papers or accounts receivable
• Buy and sell contracts, leases, chattel mortgages, or other evidences of indebtedness
• Offer financial leasing of movable and immovable property

Investment Companies

• Sell their own securities to the public and invest the proceeds in stocks and bonds
• Often operate through mutual funds

Mutual Funds

• Pool money from individual and corporate investors
• Managed by a professional fund manager
• Invest in financial securities such as stocks, bonds, or money market instruments
• Four types exist in the Philippines: stock or equity funds, bond funds, balanced funds, and money market funds

Insurance Companies

• Guarantee compensation for financial loss due to events like death, fire, and accidental damage
• Supervised by the Insurance Commission in the Philippines

Pawnshops

• Defined in Presidential Decree 114, the "Pawnshops Regulation Act"
• Lend money on personal property delivered as security for loans
• Synonymous with pawnbroker or pawn brokerage

Securities Brokers/Dealers

• Securities brokers buy and sell securities on behalf of clients
• Securities dealers buy and sell securities on behalf of themselves or their firms
• Securities broker-dealers perform both functions and are subject to special regulation

Venture Capital Corporations

• Provide financing for external start-up companies

Non-Stock Savings and Loan Associations

• Accept savings from private investors
• Provide home mortgage services

Government Non-Bank Financial Institutions

• Includes Government Service Insurance System (GSIS), Social Security System (SSS), and Pag-ibig

Government Service Insurance System (GSIS)

• Provides retirement benefits, housing loans, personal loans, emergency and calamity loans to government employees

Social Security System (SSS)

• Provides retirement benefits, funeral benefits, housing loans, personal loans, and calamity loans to employees in private companies and offices

Pag-ibig

• Provides housing loans to both government and private employees

Financial institutions are categorized into private banking, government banking, private non-bank, and government non-bank. Private banking institutions include universal banks, commercial banks, thrift banks, rural banks, and cooperative banks. These have many advantages, including economies of scale and efficient resource utilization.