JMJ

RPTL

Money, Banking and How to Move Money in the Philippines (Group 7) One cannot travel without money. A few essential tips and information may be helpful if you are foreigner to stay here for an extended journey or for good or just for tourism. Banking 2009 Country Report as Published by Oxford Groups Philippines Philippine banking sector has witnessed a strong lending growth, alongside major improvements in asset quality, capital adequacy and banking supervision. BSP supervises 835 banks (commercial, thrift and rural segments) but was reduced by 15 (2006-2007 alone) due to several mergers and acquisitions. Basel II implemented (July 2007) to further strengthen capitalism and overall risk management under Central Banks supervision. capital requirements force banks to improve their risk management practices and use internal ratings and statistical modeling measures to determine capital charge. Basel 1-type approach requires banks to assign greater weight to operational risk. The country is in a better position than many emerging markets to deal with the effects of the US sub-prime crisis, the global credit crunch, and the risk-aversion among investors as a result of its improved asset base, higher capitalization and tighter regulation. Philippine Banking System Central Bank: Central Monetary Authority which provides policy direction in the areas of money, credit, and banking. It was established on January 3, 1949 through the Republic Act No. 265 also known as The Central Bank Act Miguel Cuaderno Sr. first governor of Central Bank. - He is also the one who advocated the idea of disengaging the Philippine Economy from the Gold Standard into Manage Currency System - Gold Standard Currency is directly convertible into gold. - Manage Currency System - Any currency that can have its exchange rate affected by the intervention of a central bank. Bangko Sentral ng Pilipinas (BSP): Central Bank of the Philippines It was established on July 3, 1993 through Republic Act No.7653 also known as the Central Act Amando Tetangco Jr current governor of BSP since July 2005 Objectives of BSP: To maintain price stability conducive to balanced sustainable growth of economy. To preserve the international value of the peso and the convertibility of the peso into other freely convertible currencies. To promote a rising level of production, employment, and real income in the Philippines. Functions of BSP: Bank of Currency Issue the BSP is the only institution that has the power to print and issue paper money and coins. Acts as Government Banker Agent and Adviser it provides foreign exchange to the government to carry out its importing activities and servicing debt. Bankers Bank the BSP also service different banks by maintaining accounts for the other bank. But its main function is to be the custodian of bank reserve as a clearing house for other banks. Lender of Last Resort in case a bank faces a problem financially, the BSP can provide loan facilities to that particular bank.

Copyrights 2012

JMJ

RPTL
Custodian of the Countries Foreign Exchange Reserves the BSP is the keeper of our international reserves.

BSP monitors and compiles various indicators of the Philippine banking system which is composed of: 1. The Thrift Banking System - Savings and mortgages banks, private development banks, stock savings and loan associations and microfinance thrift banks. - Accumulate and invest the savings of depositors. - Provide short tem working capital and medium and long-term financing to businesses engaged in agriculture, services, industry and housing, and diversified financial and allied services, and to their chosen markets and constituencies, especially small and medium enterprises and individuals. - Has the power to accept savings and time deposits, act as a correspondents with other financial institutions and as a collection agent for government entities, issue mortgages, engage in real estate transactions and extend credit. 2. Rural and Cooperative Banks - More popular type in rural communities. - Role: promote and expand rural economy in an orderly and effective manner by providing the people in rural communities with basic financial services. - Help farmers (buying seedlings marketing). - Differentiated by ownership: Rural banks privately owned and managed Cooperative banks organized/owned by cooperatives or federation of cooperatives Rural bank has the power to provide adequate credit facilities to the people of the rural communities of which it operates in. 3. Universal and Commercial Banks - Represent the largest single group, resource-wise, of financial institutions in country. - Offer the widest variety of banking services among financial institution - In addition to the function of an ordinary commercial bank, universal banks are also authorized to engage in underwriting and other function of investment houses, and to invest in equities of non-allied undertaking. - Present: 17 universal banks, 21 commercial banks, 80 thrift banks, 726 rural banks. - List of commercial and universal banks: 1. Private Domestic Universal b. Development Bank of the Banks: Philippines a. Allied Banking Coporation c. Land Bank of the Philippines b. Banco de Oro Unibank Inc 3. Branches of Foreign Banks c. Bank of the Philippines Islands (Universal Banks): d. China Banking Corporation a. ING Bank N.V. e. Metropolitan Bank & Trust Company b. Standard Chartered Bank f. Philippine National Bank c. Hongkong and Shanghai Banking g. Philippine Trust Company Corporation h. Rizal Commercial Banking 4. Private Domestic Coommercial Corporation Banks: i. Security Bank Corporation a. Asia United Bank Corporation j. Union Bank of the Philippines b. Bank of Commerce k. United Coconut Planters Bank c. BDO Private Bank Inc. 2. Government-Owned Universal d. East West banking Corporation Banks: e. Export and Industry Bank a. Al-Amanah Islamic Bank of the f. Philippine Bank of Communication Philippines

Copyrights 2012

JMJ g. Philippine Veterans Bank

RPTL i. Korea Exchange Bank j. Mizuho Corporate Bank Ltd k. Mega International Commercial
Bank Co, Ltd. 6. Subsidiaries of foreign banks(Commercial banks) a. The royal bank of Scotland (Phil.), Inc. b. Chinatrust (Phils) Commercial Bank Corporation c. Maybank Philippines, In

The Plastic Money - Most convenient comfort zone of people who spend more than what they earn. - Keep you away from the eyes of pickpockets, robbers, hold-uppers and other criminal elements. - Carries with it the payment of interest. - How one user look at it that is the value of its use. Independence of the Central Bank - CB should be independent form the influence of politicians, so that they can set monetary policy for best long-term interest of the economy. - Can control inflation more effectively when they are not accountable to the fiscal policy makers, elected officials, president, Congress, etc. - Fed (Federal Reserve) can affect Monetary System (MS) by changing the reserve requirements which is rarely used as a tool for monetary policy. Lower reserve requirements Expansionary monetary policy/easing of monetary policy. Higher reserve requirements Contractionary policy, or restrictive policy/tightening. - Excess reserves would be loaned out, and the MS would increase, for banks dont like excess reserves due to its non-interest bearing. - Reserve requirements usually put in place and left alone. Open Market Operations - Also known as OMO, is an activity by a central bank to buy or sell government bonds on the open market. A central bank uses them as the primary means of implementing monetary policy. The usual aim of open market operations is to control the short term interest rate and the supply of base money in an economy, and thus indirectly control the total money supply. This involves meeting the demand of base money at the target interest rate by buying and selling government securities, or other financial instruments. - The Federal Reserve System (FRS), often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system. - The Fed regulates financial institutions, manages the nation's money and influences the economy. By raising and lowering interest rates, creating money and using a few other tricks, the Fed can either stimulate or slow down the economy. This manipulation helps maintain low inflation, high employment rates, and manufacturing output. When does Bangko Senptral ng Pilipinas deal with the public? BSP is the banks of all banks so it doesnt make any business with other entities but to banks only. During an open market operations is the only instance that it deals with the public. When does an open market operation occur?

Copyrights 2012

JMJ

RPTL
This is the time when Banko Sentral ng Plipinas will sell its bonds, treasury bills and government bonds. The BSP can buy and sell this type of commercial paper to and from the public.

Reference: Principles of Economics with Agrarian Reform and Taxation by Paraiso, Larao, and Cuevas (2011). Mutya Publishing House, Inc.

Copyrights 2012