Module 2 and 3 Banking PDF

2&3 MODULE:___ MODULE G ALS BFBANFIX To understand and explain the history of the THE PHILIPPINE Philippine Financial System, objectives, and some regulation. To understand, analyze and explain the govern...

2&3 MODULE:___ MODULE G ALS BFBANFIX To understand and explain the history of the THE PHILIPPINE Philippine Financial System, objectives, and some regulation. To understand, analyze and explain the government banking FINANCIAL institutions and their functions to the economy ENVIRONMENT PREPARED BY: MR. DAN JEWARD C. RUBIS, MBA OBJECTIVES CTI  OBJECTIVES Define what a Financial Elaborate what roles the System is and illustrates Discuss the Banking different participants in a the role it plays in the financial system play Structure economy of a nation.  INTRODUCTION FINANCIAL SYSTEM is composed of banking institutions and nonbank financial intermediaries, including commercial banks, specialized government banks, thrift banks and rural banks. It is also composed of offshore banking units, building and loan associations, investment and brokerage houses and finance companies.  INTRODUCTION FINANCIAL SYSTEM consisting of a variety of institution, markets, and the instruments which are related in a systematic manner and provide the principal means by which savings are transformed into instruments.  INTRODUCTION A FINANCIAL INSTITUTION (FI) is a company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange. Financial institutions encompass a broad range of business operations within the financial services sector including banks, trust companies, insurance companies, brokerage firms, and investment dealers.  PHILIPPINE FINANCIAL STRUCTURE BANK Banks are the traditional institution for handling deposits and extending credit, but they aren't the only place that performs these functions. NON-BANK Non-banking finance companies don't have a full banking license, don't provide all of the services that an individual bank provides and aren't subject to the same regulation FINANCIAL INSTITUTIONS PARTICIPANTS INTERMEDIARIES  BANK A bank is a financial institution that is licensed to accept checking and savings deposits and make loans. Banks also provide related services such as individual retirement accounts (IRAs), certificates of deposit (CDs), currency exchange, and safe deposit boxes. There are several types of banks including retail banks, commercial or corporate banks, and investment banks. OF BANKING IN THE PHILIPPINES The FIRST ORGANIZED CREDIT INSTITUTIONS were established in the Philippines during the 16th century Spanish colonial era. These were the OBRAS PIAS. OBRAS PIAS was a charitable foundation during the Spanish period. The word itself means WORKS OF PIETY in Spanish. The Church directed a share of personal fortunes to its charities such as the Obras Pias. Donors had specified that the funds are to be used for charitable, religious and educational purposes. However, some of the funds were managed by confraternities that invested capital in secular activities like underwriting cargoes for the galleon trade. The OBRAS PIAS was the source of credit and its funds were invested in mortgage financing loans, trade with Acapulco and maritime insurance. Obras Pias profits were channeled to the construction of churches , government buildings and other charitable and religious projects.  It was in 1851 that the first Philippine Bank was established, the "BANCO ESPANOL-FILIPINO DE ISABELA II". It was established on August 1, 1851 and named after the mother of then Spanish King Alfonso XII. Her mother's name was Isabella. The bank only came into being after 23 years after Spanish Monarch Ferdinand VII decreed that a public bank was to be established in the Spanish colonized country of the Philippines. The bank began its operations in 1852 and was given the honor of being the first to issue paper money. 15 TRIVIA! BANCO ESPAÑOL-FILIPINO DE ISABELA II is now known as: ____________________________________ BANK OF THE PHILIPPINE ISLANDS. It is the oldest standing bank in the Philippines and in the whole of Southeast Asia.  In 1869, the opening of the SUEZ CANAL facilitated trade between the Philippines and Europe. The Philippines then attracted British capital, and in the years that followed, the Chartered Bank of India, Australia, and China (now known as the Standard Chartered Bank) and the Hong Kong and Shanghai Banking Corporation (HSBC), both British-owned banks, opened their branches in Manila. MONTE DE PIEDAD First mutual savings established in 1882 A Spanish Franciscan friar Felix Huertas was the prime mover in convincing the Archbishop of Manila and the Governor- General to establish a bank especially for the poor. The original name in Spanish was Monte de Piedad y Caja de Ahorros. It was bank and a pawnshop.  The first American bank was established in the country at the turn of the 20th century. At the same time, Americans established the Guaranty Trust Corporation (GTC) and International Banking Corporation (IBC), which were eventually taken over by the National City Bank of New York (now known as Citibank N.A.). Other foreign banks subsequently entered the Philippines. In 1916, the PHILIPPINE NATIONAL BANK was established with the Philippine Government as the majority stockholder. This is to break the foreign banking monopoly and remedy the lack of credit facilities. It was also given the special power to issue circulating notes. In effect, PNB was the de facto central bank of the country until 1949. The PNB was meant to function as a government enterprise that would widen the variety of banking services “beyond trade finance in exportation and importation, money changing of foreign currency, and fund transfers, all of which , while useful in the short term, failed to mobilize capital in the development of natural resources.” It’s charter at that time empowered PNB to issue bank notes and act as a depository of government funds. CHINA BANKING CORPORATION (PSE: CHIB), commonly known as China Bank, is a Filipino bank established in 1920. It was the first privately owned local commercial bank in the Philippines initially catering to the banking needs of Chinese Filipino businesspeople. It offers various banking services and products related to deposit, investment, trust, cash management, remittance, and financing products and services. Between 1935 to 1946, more foreign bank branches were established in the Philippines. These include the Bank of Taiwan, and the Nederlandsche Indische Handelsbanks. In 1939, the government created the AGRICULTURAL AND INDUSTRIAL BANK to absorb the functions of the National Loan and Investment Board and to harness government resources. The PHILIPPINE BANK OF COMMUNICATIONS is the first non-American foreign commercial banks to operate in the Philippines (foreign because it was under Chinese control at the time)However, it was temporarily closed at the outbreak of WWII. In 1947, a branch of the BANK OF AMERICA was allowed to establish a branch in Manila and in the following year, it absorbed the assets and liabilities of the local branch of the Nederlandsche Indische Handelsbanks. CENTRAL BANK OF THE PHILIPPINES Established in 1949 The BSP actually started out as the Central bank of the Philippines established in January 3, 1949 as the Philippines’ Central Monetary Authority. In accordance with the pursuant of the 1987 constitution, the Central Bank of the Philippines was re-chartered in July 3, 1993 and was renamed as the Bangko Sentral ng Pilipinas The CENTRAL BANK OF THE PHILIPPINES (CBP) was inaugurated and formally opened with Hon. Miguel Cuaderno, Sr. as the first governor. In 1952, the Rural Bank Act was enacted and two years later, the Agricultural and Industrial Bank merged with the Reconstruction and Rehabilitation Fund to form the DEVELOPMENT BANK OF THE PHILIPPINES.  JULY 1993 Republic Act No. 7653 was passed establishing the BANGKO SENTRAL NG PILIPINAS (BSP), replacing CBP as the country's central monetary authority. ELI REMOLONA JR. Current Governor of the Bangko Sentral ng Pilipinas (Tagapangasiwa ng Bangko Sentral)  November 2020, the Bangko Sentral ng Pilipinas (BSP) introduced a new logo featuring a full-bodied Philippine Eagle  BANK A bank is a financial institution that is licensed to accept checking and savings deposits and make loans. Banks also provide related services such as individual retirement accounts (IRAs), certificates of deposit (CDs), currency exchange, and safe deposit boxes. There are several types of banks including retail banks, commercial or corporate banks, and investment banks.  ROLES OF BANK IN THE ECONOMY 1. Credit Provision – Credit fuels by allowing businesses to invest beyond their cash on hand, households to purchase home without saving the entire cost in advance, and governments to smooth out their spending by mitigating the cyclical pattern of tax revenues and to invest in infrastructure projects.  ROLES OF BANK IN THE ECONOMY 2. Liquidity provision – Businesses and households need to have protection against unexpected need for cash. Banks are the main direct providers of liquidity, both offering demand deposit that can be withdrawn any time and by offering lines of credit. Furthermore, banks and their affiliates are at the core of financial markets, offering to buy and sell securities and related products at need, in larges volumes, with relatively modest transaction cost.  ROLES OF BANK IN THE ECONOMY 3. Risk Management services – Banks allow businesses and household pool their risks from exposures to financial commodity and markets. Much of this is provided by banks through derivatives instrument transactions. Banks also enable individual and businesses to take part in the global foreign exchange commodity markets indirectly.  ROLES OF BANK IN THE ECONOMY 4. Remittance for Money A bank remittance is a funds transfer from one bank account to another as a gift or payment. Remittances are used to pay bills or invoices and are sent via an electronic payment system, wire transfer, mail, draft, or check.  ROLES OF BANK IN THE ECONOMY 5. Rapid Economic Development – Banks made available loans of different periods to agriculture, industry and trade.  ROLES OF BANK IN THE ECONOMY 6. Promotion of Entrepreneurship – The role of private sector is crucial in accelerating the pace of economic growth. The banks increase the participation of the private sector in economic development by making the loans easily on reasonable rate of interest. THE BANKING STRUCTURE RURAL BANKS COOPERATIVE SAVINGS AND MORTGAGE BANKS BANKS THRIFT BANKS PRIVATE DEVELOPMENT BANKS COMMERCIAL BANKS STOCK AND SAVINGS LOAN ASSOCIATIONS UNIVERSAL BANKS  Extend loans to farmers, fisherman, cooperatives, and other merchants Offer savings and time deposits Offer current/checking accounts, provided that the bank has, at least, P5 million worth of net assets Offer NOW (negotiable order of withdrawal) accounts Act as a trustee over the estate of farmers and merchants AGRIBUSINESS RURAL Bank, INC. (AGRIBANK), formerly known as Rural Bank of Sta. Fe (N.V.) Inc., began operations in its hometown in Sta. Fe, Nueva Vizcaya, in 1978. To revitalize the Bank, the current stockholder group acquired full ownership in 1988 and immediately implemented operational improvements, such as offering new products and services. BDO Network Bank (BDO NB), formerly known as One Network Bank (ONB), is a rural bank in the Philippines. Established in 2004 through the consolidation of Network Rural Bank of Davao del Sur, the Rural Bank of Panabo of Davao del Norte, and the Provident Rural Bank of Cotabato, ONB is the largest rural bank in the Philippines in terms of assets, with a network of 96 branches in Mindanao, 1 branch in Makati and province of Iloilo (including Iloilo City) and a fleet of 135 ATMs throughout the provinces in Mindanao, including 17 localities where it is the sole provider of financial services. CHINA BANK SAVINGS  PHILIPPINE BUSINESS BANK BANK OF MAKATI  A financial institution focusing on taking deposits and originating home mortgages. Also known as "savings and loan associations". Thrift Banks tend to be community- focAused, and smaller than retail and commercial banks. While the main lines of business continue to be loan origination and savings deposits, many thrifts offer checking accounts and other basic banking services. The thrift banking system was created in an attempt to transition mortgage loan origination away from insurance companies and into banking institutions, as early mortgages were often set up as interest-only loans that often couldn't be repaid when balloon payments came due.  SAVINGS AND 1 MORTGAGE BANKS PRIVATE DEVELOPMENT THRIFT 2 BANKS BANKS 3 STOCK AND SAVING LOAN ASSOCIATIONS CLASSIFICATION OF THRIFT BANK accumulating the savings of depositors and investing them, together with its capital, in readily marketable bonds and debt securities; Saving and Mortgage commercial papers and account receivables; Bank drafts, bill of exchange, acceptances, or notes arising out of commercial transactions. It is allowed to make investment, grant loans, issue domestic Letter of Credit dominated in the Philippine currency. CLASSIFICATION OF THRIFT BANK It is organized under the provision of R.A a No Batasang Pambansa Blg. 63 Section No. 1, Private Development amending Section No. 3, states that a private Bank development bank shall exercise all the power and shall assume all the obligations of Savings and Mortgage bank as provided in the General Banking Act. Originally established as the Ibaan Rural Bank, Inc. in 1957, when the bank celebrated its 40th anniversary, it adopted the business name "Bangko Kabayan" with a resolve to be of service not only to Batangueños but also to other communities in nearby provinces CLASSIFICATION OF THRIFT BANK They are corporation engaged in the business of accumulating the saving of its member stockholders, and using such accumulations together with its capital in the The savings and loan case of stock corporation, for loans and/or investment in association the securities of productive enterprises or securities of the Government or its political subdivision instrumentalities or corporation. City Savings Bank, Inc. (CitySavings) is the thrift bank subsidiary of Union Bank of the Philippines (UnionBank) and a member of the Aboitiz Group. It is one of the largest thrift banks in the country, providing a wide range of mass market financial products and services, such as salary loans to public and private school teachers, pension loans to GSIS and SSS pensioners, motorcycle loans, government salary loans, AFP salary loans, AFP pension loans for retired pensioners and legal beneficiaries, BFP salary loans, and traditional deposit products. RURAL BANKS SAVINGS AND MORTGAGE BANKS PRIVATE DEVELOPMENT THRIFT BANKS BANKS STOCK AND SAVINGS LOAN ASSOCIATIONS COOPERATIVE BANKS Philippine Bank of Communications (PBCOM)  BANK OF COMMERCE MAYBANK PHILIPPINES PHILIPPINES VETERANS BANK “Focused on You” “You First” “We find ways” Partners Through Generations.  BANKING STRUCTURE RURAL COOPERATIVE UNIVERSAL BANKS BANKS BANKS THRIFT COMMERCIAL BANKS BANKS https://www.bsp.gov.ph/Statistics/Financial%20Statements/Commercial/assets.aspx  Capital Requirement (100 million and P10 million Rural Banks and Cooperative Banks (R/CBs) capitalization, respectively) (P1 billion minimum capitalization Thrift Banks (TBs) for head office in Metro Manila) Commercial Banks (KBs) (2.4 billion minimum capitalization) (4.95 billion minimum Universal Banks (UBs) capitalization)  RURAL BANKS COOPERATIVE SAVINGS AND MORTGAGE BANKS BANKS GOVERNMENT THRIFT BANKS PRIVATE BANKS DEVELOPMENT BANKS COMMERCIAL BANKS STOCK AND SAVINGS LOAN ASSOCIATIONS UNIVERSAL BANKS LANDBANK or also known by its initials, LBP, is a universal bank in the Philippines owned by the Philippine government with a special focus on serving the needs of farmers and fishermen. While it provides the services of a universal bank, it is officially classified as a "specialized government bank" with a universal banking license Development Bank of the Philippines (DBP) is classified as a development bank. It is primarily tasked to provide banking services to cater to the needs of agricultural and industrial enterprises. It focuses on four major areas of financing — infrastructure and logistics, social services, small and medium enterprises, and the environment  Al-Amanah Islamic Investment Bank of the Philippines (AAIIBP) is a universal bank authorized to perform and provide Islamic banking, financing and investment services THANK YOU!