Commercial Banking

COMMERCIAL BANKING
VI. COMMERCIAL BANKING

CONTENT OF TOPICS
1. THE RISK OF BANKS
2. RISK MANAGEMENT
3. DOLLAR DEPOSITS
4. METHOD OF WITHDRAWAL
5. SECRECY OF BANKS DEPOSITS
6. PROTECTION OF DEPOSITORS
7. PRESIDENTIAL DEGREE ON BORROWINGS
8. LOANS AND DISCOUNTS FUNCTION
9. LOANS TO BUSINESS
10. SIGNIFICANCE OF BANK LOANS
11. THE EXCHANGE FUNCTIONS
15. THE TRUST FUNCTION
16. OTHERS SERVICES
17.SAFE DEPOSIT BOX
18. PAYROLL SERVICE
19. AUTOMATED TELLER MACHINES (ATM)
20. THE CREDIT RATING PROCESS
21. RATING DEFINITION
22. RATING PROCEDURES
23. CORPORATE CREDIT RATING
24. SOVEREIGN CREDIT RATING
25. MONITORING OUTSTANDING RATINGS
WHAT IS RISK BANKS
The risk of bank every business venture or investment involves somes risk
of loss: Investments offering high return are generally more risky and less
easily turned into cash than those offering low returns. Bank management
must balance the need for safety and liquidity against desire for higher
earnings.
TYPES OF RISK BANKS
• Liquidity risk- refers to the ability of a bank to access cash to meet funding
obligations. Obligations include allowing customers to take out their deposits
…
• Market risk - mostly occurs from a bank’s activities in capital markets. It is
due to the unpredictability of equity markets, commodity prices, interest rates
…
• Credit risk - can be classified into Sovereign Risk and Settlement Risk.
Sovereign risk usually arises due to difficult foreign exchange policies.
Settlement …
• Operational risk - This type of risk arises out of operational failures such as
mismanagement or technical failures.
• And etc..
WHAT IS RISK MANAGEMENT?
• Is a Central Banks would not want banks to expose themselves to excessive

risk. This is because if the risk becomes a reality and a bank failure ensues,
There are heavy costs on the central bank to rescue it. It may result in less
confidence in the integrity of the financial system, which it wants to avoid.
TYPES OF RISK MANAGEMENT
The main four types of risk are:
strategic risk – a competitor coming on to the market.
Compliance and regulatory risk – introduction of new rules or legislation.
Financial risk – interest rate rise on your business loan or a non-paying

customer.
Operational risk – the breakdown or theft of key equipment.
WHAT IS DOLLARS DEPOSIT?
• Is a fixed term investment account that allows you to grow your dollars with
higher interest rates compared to a regular Dollar savings account. This
account is for: Investors who want to benefit from the Dollar exchange rate.
Savers looking to grow their money faster and safer.
• WHAT IS METHOD WITHDRAWAL?
Is Government institutions or private sources could have a choice on the type

of deposits as to the method of withdrawal. This would largely defend upon
their need and on other considerations. Such choice may be between demand
and time deposits.
TYPES OF METHOD WITHDRAWAL
• There are three main types of deposits: demand , time and special time deposits
•
• Demand deposit - These deposits are withdrawn upon demand by the depositors
through the use of checks.
• Time deposit - Time deposits are those which can be withdrawn only after a certain
period of time.
• Special time deposits – These are governed by special provisions entered into between
the bank and the depositors.
WHAT IS SECRECY OF BANKS DEPOSIT?
A little more than a quarter of century old is R.A 1405. Popularly known as the
secrecy of bank deposits laws, congress enacted this Act prohibiting a bank
from reaveling how much a depositors may have in a hidden bank account.The
raison d’ etre is to dissuade private hoarding, so that the same may be Properly
subserve by banks pro bono publico in Authorized loans to assist in the
country’s economic development. Revelations about bank deposits of whatever
nature, Including investment in bonds,are lawful only if there is a written letter
consenting to the revelation.
TYPES OF SECRECY BANKS DEPOSIT
• Savings Bank Account –As the name suggests this type of account is suitable for people who
have a definite income and are looking to save money.
• Current Deposit Account – Big businessmen, companies, and institutions such as schools,
colleges, and hospitals have to make payment through their bank accounts. Since there are
restrictions on the number of withdrawals from a savings bank account, that type of account is
not suitable for them. They need to have an account from which withdrawal can be made any
number of times.
• Fixed Deposit Account – Some bank customers may like to put away money for a longer time.
Such deposits offer a higher interest rate. If money is deposited in a savings bank account,
banks allow a lower rate of interest. Therefore, money is deposited in a fixed deposit account
to earn interest at a higher rate.
• This type of deposit account allows the deposit to be made of an amount for a specified period.
This period of deposit may range from 15 days to three years or more during which no
withdrawal is allowed.
WHAT IS PROTECTION DEPOSIT?
For the purpose of protecting the interest of depositors with respect to their
deposits in banks, Republic Act No. 3591 as amended was enacted providing
for the establishment of the Philippine deposit insurance corporation,for this
purpose a permanent insurance fund in the amount of 5 million was
appropriated.
WHAT IS PRESIDENTIAL DECREE ON
BORROWINGS
• Is another important step taken for the benefit of bank depositors is the
presidential decree which amended the general banking act.
TYPES OF PROTECTION DEPOSIT
OTHERS SERVICES
Oftentimes, business firms are in need of cash with which to pay their officials
and employees on paydays. Such a problem becomes eliminated through the
assistance of commercial banks whose tellers perform the mechanical job of
placing the correct amount of currency in different denominations as requested
by the firm together with the accompanying check for such purpose.
SAFE DEPOSIT BOX
• The general public investing more in bonds, stocks and other forms of
securities, the need for safe deposit box has expanded accordingly . The deed
to a house and lot. Certificate or Torren Tittle. An automobile bill of sale. An
insurance policy, birth and marriage certificate, jewelry or keepsake that once
gone, could never be replaced, all these need to be safeguarded from the
dangers of theft, fire, robbery, misplacement, or loss.
PAYROLL SERVICES
• This service facilities payment of the correct amount of salaries and wages.
Understandably, a bank is in a proposition to fill in the necessary
denominations in a pay envelope, not to mention the fact that it could also
make safe delivery of the payroll to the offices concerned. Furthermore, the
amount withdrawn will be reflected in one single check rather than numerous
checks of different amount.

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COMMERCIAL BANKING

VI. COMMERCIAL BANKING

• Is a Central Banks would not want banks to expose themselves to excessive

The main four types of risk are:

strategic risk – a competitor coming on to the market.

Compliance and regulatory risk – introduction of new rules or legislation.

Financial risk – interest rate rise on your business loan or a non-paying

Is Government institutions or private sources could have a choice on the type

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