Chapter 3 Flashcards
An institution authorized by a a government to accept deposits, pay interest, clear checks, make loans, act as an intermediary in financial transactions and provide other financial services to its customers
bank
business activity of accepting and safeguarding money owned by individuals or instituions and lending them out to earn profit
banking
Essential elements of Banking
- Accept Deposit
- Pay interest
- Clear checks - PCHC
- Make loans
- Act as intermediary in financial transactions
- Provide other financial services
Classification of Banks
- Universal bank
- Commercial Bank
- Thrift Bank
- Rural nd Cooperative Bank
expanded commercial banks and has the same powers as a commercial bank
Universal Bank
Required Capitalization of Universal Bank
Php 4.95 B
Having the powers of a thrift bank such as accept drafts letters of credit, promissory notes, discount, bills of exchange & other evidences of debt, accept or create demand deposits, receive types of deposits & deposit substitutes, buy and sell forex, gold, silver bullion.
Commercial Banks
Acquire marketable bond, and other debt securities, extend credit.
Commercial Banks
Required capitalization of commercial banks
Php 2.4 Billion
Power to accept savings & time deposits such as correspondent with other financial insititutions and as a collection agent for government(issue mortgages, engages in real estate transactions and extend credit).
Thrift Bank
May also maintain checking accounts such as depository for government entities and LGU’s
Thrift Bank
Required Capitalization of thrift bank
Php 325M
Their role is to promote and expand the rural economy in an orderly and effective manner by providing people in the rural communities with basic financial services.
Rural and Cooperative bank
help farmers through the stages of production, from buying seedlings to marketing of their produce
Rural Bank
are privately owned and managed
Rural Banks
Are organized owned by cooperatives or federation if cooperative
Cooperative banks
Required capitalization of rural banks
Php 100M
Required capitalization of cooperative banks
Php 10M
Provide policy directions in the areas of money, banking, and credit
BSP
It shall have supervision over the banks and exercise such regulatory powers as provided in this act and other pertinent laws over the operations of finance and non-finance companies performing quasi-banking functions, hereafter referred to as quasi-banks and institutions and institutions performing similar functions.
BSP
Primary objective is to maintain price stability conducive to a balanced and sustainable economic growth. I
BSP
It shall also promote and maintain monetary stability and convertibility of the peso.
BSP
Functions of BSP
- Liquidity Management
- Currency Issue
- Lender of Last Resort
- Financial Supervision
- Management of Foreign Currency Resources
- Determination of FOREX Rate Policy
- Banker, finanical advisor, and official depository of the Philippine Governmen and GOCC
Implemented through ____________________ as the central monitoring and implementing council for money laundering as prescribed by the act as a criminal offense, prescribed penalties for such crimes committed.
Anti Money Laundering Council
Is the process of concealing the existence, illegal source or application of income derived from criminal activities and subsequently disgusing the source of income to make it appear legitimate or changing the form or moving the funds to a place where they are not likely to attract attention.
Money Laundering
Was assigned to Sept 29, 2001 and effect on Oct. 17, 2001.
RA 9160 (The Anti-Money Laundering Act of 2001)
Was signed into law and effect on March 23, 2003
RA 9194 (An Act Amending RA no. 9160)
Salient Features
- criminalizes Money Laundering
- Creates a finanical intelligence unit
- imposes requirements on customer identification record keeping and reporting of covered and suspecious transactions
- Relaxes strict bank deposits secrecy laws
- Provides for bank inquiry and freezes paste petition / seizure / forfeiture / recovery of duty money / property
- provides for international cooperation
Unlawful activities inculdes
- Kidnap for ransom
- Drug related offenses inculding trafficking
- Graft and corruption
- plunder
- Robbery
- Illegal Gambling
- Piracy in high seas
- qualified Theft
- Swindling
- Smuggling
- Hijacking arson and murder
- Violation of the securities and regulations act
- Felonies
Purposes in the prevention on Money Laundering
- Customer identification and due diligence
- Record -keeping
- Reporting of covered and suspicious transaction
A government agency responsible for the registration licensing, regulations and supervision of corporation and partnerships organized in the PH, including foreign corporations licensed to engage in business or to establish branch offices in the PH
SEC
Four Functions of SEC
- Capital market development & regulations
- Company registration and monitoring
- Enforcement
- Support services
It is a government agency task to protect depositors through the insurance on deposit which will be paid in the event of bank closure. It also helps in the promotion of a sound and stable banking system and foster public confidence in the banking system.
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC)
Promote the growth and finanical stability of insurance companies
Insurance Commission (IC)
Professionalize insurance services and develop insurance consciousness among the general populize
Insurance Commission
Establish sound national insurance market; Safeguard the rights and interest of the insuring people.
Insurance Commisiion
Oranizational hierarchy & structure
- Board of Directors
- President
- Controller
- Treasury
- marketing
Guardians of the bank policies
Internal:
- Internal Audit
- Risk Mgt. Unit
- Compliance Officer
External:
- External Auditor
- Regulatory Bodies
- BIP circular members
-
Conducts operations and financial audit
Internal Audit
Measures, monitors, and control risk exposure
Risk Management Unit
Oversees, coordinates compliance with gov’t regulations
Compliance Officer
Other departments of the banks
- Accounting Department
- Human Resource Department
- Treeasury
- Systems and Procedure
- Information Technology
- International Remittance Department
- Corporate Security
- Retail Banking Group
- Institutional Banking Group
Traditional Products of Bank
- Savings Account
- Current Account/ Checking Account / Demand Deposit
- Time Deposit
A deposit account held at a bank or other finanical institution that provides principal security and a modest interest rate.
Savings Account
are considered one of the most liauid investments outside of demand accounts and cash
Savings account
Evidenced by a passbook or automated card
Savings Account
It is a low cost account like a savings account also a very liquid account
Current Account
Withdrawal can be drawn through an issuance of a check
Current Account
Usually used by businessmen because of the conscience that come along with the account
Current Account
Problems associated with checks
- Drawn against insufficient funds (DAIF)
- Drawn against uncleared Deposit (DAUD)
- Words and figures differs
- Post dated
- Stale dated
- Signature differs
- Cross checks
- Second endorsed checks
The movement of a check from the depository institution at which it was deposited back to the institution on which it was written; the movement of funds in the opposite direction and the correspondence credit and debit to the involved accounts.
Check Clearing process
The process in which a bank collects the funds on a check deposit from the issuing institution.
Check Clearing process
involves the bank in which the check was deposited mailing the check to the issuing bank, the issuing bank then credits the deposit bank the funds on the check, assuming the check writer had the funds in his/her account.
Check Clearing Process
Is an interest-bearing bank deposit that has a specified date of maturity
Time Deposit
Usually evidenced through a certificate of time deposit
Time Deposit
Interest computed
Interest = principal x rate x time/360 subject to 20% withholding tax
Non-traditional products
- Government Securities
- Treasury Bill
- Fixed rate treasury notes (FXTN)
- Retail Treasury Bonds (RTB)
- Zero Coupon Notes - Bond Issued by GOCC
- Philippine Corporate Issues
- Euro Bonds
Short-term debts, issued at a discount
T-Bills
Longer term, semi-annual coupon payment
Fixed Rate Treasury Notes
Similar to FXTN except they are designed for small investors , quarterly coupon payments
Retail Treasury Bonds
Similar to T-bill longer than one year, discount
Zero coupon notes
Dominated in a currency different from the issuer’s country and issued in ternational market
EURO bonds
A fiduciary relationship or argument whereby a person or financial institutions (TRUSTEE) is appointed by a second party (TRUSTOR) to handle, administer and manage funds and/or properties with an equal obligation for the benefit of another (beneficiary)
Trust
Trustor; Trustee
debtor; Creditor
To get the best deal for the client with the due consideration of the capital
Trust
To return the depositors money with agreed interest on agreed maturity dates
Bank
The interest is fixed or guaranteed income
Trust
In investment, Investee has knowledge
TRUST
In investment, depositors are not aware where funds will be used
bank
What documentation is supported in Trust companies
Trust agreement
What documentation is supported in Bank
Passbook, CTD
What are trust ransactions
- BSP
- Unit Trust Investment Fund
- ESCROW
- Retirement Plans
- Investment Mgt. Account
- Directed Investment Mgt. Account
- Mutual Funds
A written instrument whereby a bank as ________ agent acts as mediator to two parties involved in business transactions
ESCROW
A plan getting aside money to be spent after retirment
retirement plans
Under this arrangement, you can create a portfolio by choosing from among several available investment outlets that banks offer daily.
Investment Managment Account
These investment outlets may be in the form of government securities, investment grade Corporate bonds and promissory notes or time deposits
Investment management Account
Is an arrangement wherein the bank (investment mgr) invest funds in varies Peso and USD denominated securities through direct matching of an investor’s investment preference with available securities.
Directed Investment Management Account
An investment vehicle that is made up of a prol of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.
Mutual Funds
Are operated by _______________, who invest the fund’s capital and attempt to produce capital gains and income for the fund’s investors.
Mutual Funds; Money Managers
A ________________ portfolio is structured and maintained to match the invest. objectives stated in this prospectus.
Mutual Funds
Other bank products
- Credit cards
- Cash Mgt. Solutions
- Debit Card
- Loans
- Guarantees
- Consumer Loan
Bank Services
- Manager’s Checks
- Demand Draft
- Gift Checks
- Cashiers Checks
5.Night Depository - Safety Deposit Box (SDB)
- Deposit Pick Up (DPU)
- Telegraphic Transfer (TT)
