BOFI Group 3 Module 3 PowerPoint PDF

4. Principles of Banking and Business 5. Economic Significance of Banks 6. Why the State Supervises 7. The Bank Liberalization 1. Explain the principles of banking business. 2. Discuss the economic signficance of banks. State the reasons why the government should regulate...

4. Principles of Banking and Business 5. Economic Significance of Banks 6. Why the State Supervises 7. The Bank Liberalization 1. Explain the principles of banking business. 2. Discuss the economic signficance of banks. State the reasons why the government should regulate 3. and supervise banks. Enumerate and explain the purpose, and the salient 4. features of the Bank Liberalization Law Banks must keep sufficient liquid assets to accommodate withdrawal requests and cover their obligations. A bank's assets must exceed its obligations in order to maintain long-term stability. Ortilla, Jenella C. Banks project to earn revenues through their operations. The security of customers' savings and assets is a crucial principle. Ortilla, Jenella C. With fast technological change, banks must continually innovate, embracing digital transformation and increasing consumer expectations while keeping traditional service standards. Ortilla, Jenella C.  ECONOMIC SIGNIFICANCE OF BANKS Banks hold significant importance in the economy as they facilitate the efficient flow of capital by managing savings, extending credit, and promoting investments, which collectively drive economic growth. They contribute to financial stability by ensuring proper resource allocation, enabling credit creation, and supporting the implementation of monetary policies. Yao, Iris Yvonne S. Facilitation of Savings and Investments: Banks promote capital formation and economic growth by collecting savings and lending them to businesses and consumers. Efficient Allocation of Resources: Banks allocate resources efficiently by lending to creditworthy projects that drive productivity and economic growth. Support for Entrepreneurship and Innovation: Banks provide essential financing to startups and innovators, fostering job creation and technological advancement. Yao, Iris Yvonne S. Payment System and Liquidity Provision: Banks ensure smooth financial transactions and provide liquidity to businesses, supporting uninterrupted economic activity. Monetary Policy Implementation: Banks implement central bank policies that influence interest rates, inflation control, and economic stability. Stabilization of Financial Markets: Banks help stabilize financial markets by acting as intermediaries and providing risk management tools. Yao, Iris Yvonne S. Promoting Economic Inclusivity: Banks promote economic inclusivity by offering financial services to marginalized communities, supporting poverty reduction. Foreign Exchange and International Trade Facilitation: Banks facilitate international trade by offering foreign exchange services and ensuring secure cross-border transactions. Risk Diversification and Wealth Management: Banks offer products that help individuals and businesses manage risk and optimize their financial portfolios. Yao, Iris Yvonne S. Crisis Management and Financial Stability: Banks provide liquidity during financial crises and are regulated to maintain economic stability. Credit Creation and Economic Multiplier Effect: Banks create credit, boosting purchasing power and fostering economic activity, resulting in job creation and growth. Yao, Iris Yvonne S.  WHY THE STATE SUPERVISES BANKS The regulation and supervision of banks are vital for maintaining financial stability, protecting consumers, and reducing systemic risks. By enforcing strict guidelines, regulators ensure institutions operate safely, fostering confidence and sustainable economic growth. Faustino, Charles F. Financial Stability and Systemic Risk Mitigation: Government supervision of banks helps maintain the stability of the financial system. Consumer Protection: Regulations are necessary to ensure that banks operate in a manner that protects consumers from unfair practices. Market Integrity and Confidence: Supervisory bodies monitor banks to prevent fraud, manipulation, and other unethical behaviors. Faustino, Charles F. Preventing Moral Hazard and Excessive Risk Taking: Regulation discourages banks from taking excessive risks, knowing that they might be bailed out by the government during crises. Transparency and Accountability: The government requires that banks operate transparently by enforcing reporting and transparency rules, which facilitates understanding of the financial condition and operations of banks by investors, consumers, and regulators. Economic Stability and Growth: Creates the foundation for sustainable growth by maintaining favorable conditions for investment, innovation, and business development. Celen, Florica Jazmine A.  THE BANK LIBERALIZATION LAW The Republic Act No. 7721, enacted in 1994, is known as the Bank Liberalization Law in the Philippines, aimed at promoting competition by allowing foreign banks to operate within the country. This legislation marked a crucial shift towards a more open banking environment, enhancing the efficiency and resilience of the financial sector while facilitating foreign capital inflow. It established a framework for licensing foreign banks, balancing local interests with the need for competition and regulatory safeguards. Over the years, the law has been recognized for improving banking practices and promoting financial inclusion, though it has also raised concerns regarding the implications of foreign competition and regulatory compliance in the local market. Bueza, Sofia Moneth C. Promotion of Foreign Investment: The law aims to attract foreign banks, increasing foreign capital flow into the Philippine economy. Enhancing Competition: By allowing foreign banks to operate, the legislation seeks to foster competition, leading to improved services and lower costs for consumers. Improving Banking Services: The introduction of foreign banks is intended to enhance the quality and variety of banking services available to the public. Bueza, Sofia Moneth C. Strengthening the Financial System: The law aims to contribute to the stability of the banking sector by diversifying financial institutions and reducing systemic risks. Facilitating Access to Global Markets: The entry of foreign banks is designed to enhance the local banking sector's access to international markets, benefiting local businesses. Encouraging Financial Institution: The law promotes financial inclusion by increasing access to banking services for underserved populations and small businesses. Bueza, Sofia Moneth C.  SALIENT FEATURES OF THE BANK LIBERALIZATION LAW Entry of Foreign Banks Consumer Protection Modes of Entry Regulation and Oversight 1. Establishing a full branch. Consumer Protection 2. Setting up a wholly-owned subsidiary. Capital Assignment for Foreign Banks 3. Acquiring up to 60% of the voting stock of an existing domestic bank. Board Representation Limit on Foreign Bank Participation Safeguards on Domestic Control Equal Treatment Head Office Guarantee Minimum Capital Requirements Development Loans Incentives Lajara, Serwin F. Bangko Sentral ng Pilipinas. (n.d.). Republic Act No. 7721: An act liberalizing the entry of foreign banks in the Philippines [PDF]. Retrieved September 27, 2024, from https://www.bsp.gov.ph/Regulations/Banking%20Laws/RA7721.pdf Kondapalli, P. K. (2023, May 8). Importance of Banking in Economic Development. LinkedIn. https://www.linkedin.com/pulse/importance-banking-economic-development- pradeep-kumar-kondapalli Patterson, S. (2009). Banking Principles and Practices. Dodo Press. Retrieved October 2, 2024, from https://www.pdfdrive.com/banking-principles-and-practice-e8859202.html