BusiFin 2 Flashcards
is primarily responsible for defining and regulating
the financial system.
The government
describes collectively the financial markets, the
participants, and the instruments and
securities that are traded in the said
markets.
Financial System
The functions of the financial systems are to:
1) Provide the funds from the savings units (lenders) to the deficit units (borrowers);
2) Provide a medium of exchange;
3) Provide a mechanism for risk sharing; and
4) Provide a channel through which the central bank can influence the economy, in general and the financial system in particular
Financial System Participants
- Households or consumers;
- Financial institutions
- Non-financial firms
- The government
- The central bank; and
- Foreign participants
are generally described as that group receiving income, majority of which typically come from wages and salaries. Such income is spent on goods and services and a part is saved (if there is enough to save).
Households or consumers
are equal to current income less current expenditures
Gross savings
are the firms that bridge the gap between the surplus units (SU) or INVESTORS/LENDERS and the deficit units (DU) or borrowers.
* They channel funds from the lender to borrowers. They include depository institutions and non-depository institutions.
Financial institutions
is meant the national, provincial, city, and barangays or towns compromising the Philippines as a whole.
The Government
is part of the government that we consider as participant in the financial system.
Philippine treasury
and all other central banks of the different countries are mandated to assure that their respective countries have a healthy and stable financial system.
- is the banker to banks
providing various services to banks.
- are the monetary policymakers of their respective countries.
The Central bank
refer to the participants from the rest of the world-households, governments, financial and non-financial firms, and central banks.
* International trade and International finance are parts of globalization. As globalization affects the entire world, the role of foreign participants in the financial system has become more important.
Foreign participants
is at the top of the structure, the one mandated to oversee the financial system of the country It is the agency that is tasked to ensure that the country has a healthy financial system and a healthy economy.
* It is the central monetary authority.
Banko Sentral ng Pilipinas and the Philippine financial system
- The government banking institutions include the:
- Philippine National Bank
- Development Bank of the Philippines
- Land Bank of the Philippines
- Amanah Islamic Bank
Non-bank financial institutions are:
- Private Non-Bank Institutions
- Government Non-Bank Financial Institutions
Example of Private non-bank financial institutions are:
Investment bank/houses, investment companies, finance companies, securities dealers and brokers, non-stock savings and loans associations, pawnshops, lending, fund managers, insurance companies.
Mamolde Financial
PAW WAN SHOP ALAWAN
MOLHUILLIER
COCOLIFE
CEBUANA
- Financial institutions not under BSP are the cooperatives that are handled by the
Cooperative development authority
- Private Insurance companies are under
Insurance commission
- Other financial institutions are also overseen by the
Securities and exchange commissions
Current BSP GOVERNOR
(July 3,2023-PRESENT)
Eli M. Remolona JR.
The powers and function of BSP are
exercised by its Monetary Board, which has
7 members appointed by the President of the
Philippines.
1 member of the monetary board must be a
member of the ________________ (under new
Central Bank Act) with with five full-time
members from the private sector.
Cabinet appointed by the
President of the Philippines
The Monetary Board meets at least
Once a week
The Board may be called to a meeting by
the Governor of the BSP or by 2 other
members of the Board.
Authority of the Monetary Board
Issue rules and regulations
Direct the management, operations, and administration of the BSP, reorganize its personnel , and issue such rules and regulations as it may deem necessary or convenient for this purpose.
Establish human resource management system.
Adopt annual budget for and authorized such expenditures by the BSP in the interest of the effective administration and operation of the BSP.
Indemnify its members and other officials of the BSP.
Measures or actions taken by the central
bank to regulate the supply of money in
the economy.
- actions of the BSP are
aimed at influencing the timing, cost and
availability of money credit , as well as
other financial factors , for the purpose of
stabilizing the price level.
Monetary Policy
If the BSP believes that money supply is in
excess of a desired level , then it can take
action to reduce the money supply. This is
referred to as
Contractionary monetary policy
On the other hand, if based on the BSP
assessment – the liquidity situation is tight
and there is a need to increase money supply
, it implements an
Expansionary monetary policy
How does BSP implements
monetary policy?
The BSP implements monetary policy
using various instruments to achieve the
inflation target set by the National
Government.
Raising /reducing the BSP’s policy interest rates;
Increasing/decreasing the reserve requirement ;
Encouraging / discouraging deposits in the special savings account
facility by banks and trust entities of BSP supervised financial institutions;
Increasing / decreasing the rediscount rate on loans extended by the BSP
to banking institutions on a short-term basis against eligible collaterals of
bank’s borrowers;
Outright sales/purchased of the BSP’s holdings of government securities.
The BSP’s primary monetary policy
instruments are its
overnight reserves repurchase (borrowing) rate and overnight
repurchase (lending) rate.
The Philippine Deposit Insurance Corporation
(PDIC) was established on
June 22, 1963 by RA 3591.
the maximum deposit
insurance coverage
P500,000.00 per
deposit per bank
To promote and safeguard the interest of the
depositing public by way of providing
permanent and continuing insurance
coverage on all insured deposits.
Depository Policy
To strengthen the mandatory deposit
insurance coverage system to generate
, preserve, maintain faith and
confidence in the country’s banking
system, and protect it from illegal
schemes and machinations.
Financial Stability
PDIC insures valid deposits in domestic offices of
its member- banks, as follows:
By Deposit Type:
Savings
Special Savings
Demand/Checking
Negotiable Order of Withdrawal (NOW)
Time Deposits
By Deposit Account
Single Account
Joint Account
Account “By” , “In Trust For” (ITF) or
“For the Account Of” (FAO) another
person
By Currency
Philippine peso
Foreign currencies considered as part
of BSP’s international reserves
Are all banks members of PDIC?
Membership of banks to PDIC is
mandatory; hence, all operating banks are
members of PDIC.
Shall the depositor pay any insurance
premium to PDIC?
No. Insurance premium is paid by the
banks, not by the depositors. The bank is
assessed 1/5 of 1% per annum of the
assessment base of the bank.
