FINALS FLASHCARDS

Question 1

A financial entity that is authorized to
accept deposits and give credit.

Answer 1

Bank

Question 2

It refers to a network of institutions
that provide financial services to
customers.

Answer 2

Banking system

Question 3

The banking system’s goal

Answer 3

to give economic security and confidence.

Question 4

Earliest banking systems

Answer 4

• Grain, food, and livestock
• Banking was done before there were coins
  by exchanging grain and other commodities.

Question 5

Banking in the Roman Empire

Answer 5

Rome’s first banks were established in the
temples dedicated to the old Gods.

In ancient Rome, banking played a
significant role in the growth of trade and
commerce and the emergence of wealth.

Question 6

European Monarchs Discover Easy
Money

Answer 6

Due to multiple pointless wars, Philip II of
Spain managed to drown his kingdom in
debt in 1557, leading to the first national
bankruptcy and the second, third, and fourth.

Question 7

Big ___________ _______ gained significant
economic and political power, taking over
most national banking responsibilities and
providing loans and corporate finance. (Evolution of Banking System)

Answer 7

merchant banks

Question 8

In ______, the Bank Panic occurred due to the collapse of a copper trust, leading to a run on banks and stock sell-offs. (Evolution of Banking System)

Answer 8

1907

Question 9

The formation of the __________ ___________ ______ in 1913 marked the end of private bankers.

Answer 9

Federal Reserve Bank

Question 10

These were created in the 1960s to enable depositors to access their money after business hours.

Answer 10

Automated Teller Machine (ATM)

Question 11

It was a charitable foundation by laymen for charity works and religious activities. It was a banking institution run by the friars.

Answer 11

Obras Pias

Question 12

During the _______________ Spanish colonial era, the first organized credit institutions known as “Obra Pias” were established in the Philippines.

Answer 12

16th-century

Question 13

In ________, the opening of the Suez Canal facilitated trade between the Philippines and Europe.

Answer 13

1869

Question 14

1900 - ___________ was passed by the First Philippine Commission placing all banks under the Bureau of Treasury.

Answer 14

Act No. 52

Question 15

Banking History in the Philippines: February 1929

Answer 15

The Bureau of Banking under the Department of Finance took over the task of banking supervision.

Question 16

Banking History in the Philippines: 1933

Answer 16

A particular group of Filipinos were trying to conceptualize a central bank for the Philippines.

Question 17

The first US law passed setting a process and a date for the Philippines to gain independence from the United States.

Answer 17

Hare–Hawes Cutting Act

Question 18

Banking History in the Philippines: 1939

Answer 18

A bill establishing a central bank was drafted by Secretary of Finance Manuel Roxas and approved by the Philippine Legislature.

However, the bill was returned by the US government, without action, to the Commonwealth Government.

Question 19

Banking History in the Philippines: February 1948

Answer 19

President Manuel Roxas submitted to Congress a bill “Establishing the Central Bank of the Philippines, defining its powers in the administration of the monetary and banking system, amending pertinent provisions of the Administrative Code concerning the currency and the Bureau of Banking, and for other purposes.

Question 20

Banking History in the Philippines: 15 June 1948

Answer 20

The bill was signed into law as Republic Act No. 265 (The Central Bank Act) by President Elpidio Quirino.

Question 21

Banking History in the Philippines: 3 January 1949

Answer 21

The Central Bank of the Philippines (CBP) was inaugurated and formally opened with Hon. Miguel Cuaderno, Sr. as the first governor.

Question 22

Banking History in the Philippines: 3 July 1993

Answer 22

The Bangko Sentral ng Pilipinas (BSP) was established to replace the CBP as the country’s central monetary authority.

Question 23

It is the central bank of the Philippines, oversees the entire banking sector.

Answer 23

Bangko Sentral ng Pilipinas (BSP)

Question 24

The BSP was created by the Republic Act No. 7653, otherwise known as the ______ ___________ _______ _____ ___ ______.

Answer 24

New Central Bank Act of 1993

Question 25

These banks continue to account for the bulk of the total resources of the banking industry.

Answer 25

Commercial Banking

Question 26

Primarily engaged in mobilizing the small savings of the people. They provide funds for agriculture and industry at reasonable interest rates.

Answer 26

Thrift Banks

Question 27

To receive time deposits of different types and to invest its funds in long-term investment.

Answer 27

The Savings and Mortgages Banks

Question 28

It may either be a stock or non-stock corporation.

Answer 28

The Savings and Loan Association

Question 29

It is a government entity, formerly the Rehabilitation Finance Corporation.

Answer 29

The Private Development Banks

Question 30

It allows small farmers to finance their needs through the granting of loans for capital or other uses.

Answer 30

The Rural Banks

Question 31

Its principal commercial banking activities include deposit-taking, lending, bill discounting, trade finance, foreign exchange.

Answer 31

The Philippine National Bank

Question 32

The Philippine National Bank operates under the provision of

Answer 32

Executive Order No. 80

Question 33

Its primary objective is to provide banking services to cater to the medium and long-term needs of agricultural and industrial enterprises with an emphasis on small and medium-scale industries

Answer 33

The Development Bank of the Philippines

Question 34

The Development Bank of the Philippines' first mission

Answer 34

to coordinate and manage trust funds

Question 35

The Agrarian Reforms Code created the ________ _______ ____ ____ ___________ to finance the acquisition and distribution of agricultural estates for the division and reselling of these small landholders.

Answer 35

Land Bank of the Philippines (LBP)

Question 36

It was created under Republic Act No. 6848 to promote and accelerate the socio-economic growth of Mindanao.

Answer 36

The Al-Amanah Islamic Investment Bank of the Philippines

Question 37

They provide services related to claims, financial information, and advice, manage portfolios of financial assets.

Answer 37

Non-Bank Financial Institution

Question 38

The term “___________ ________” is defined to mean “any enterprise” which engages in the underwriting of securities of other corporations.

Answer 38

investment house

Question 39

It is the act or process of guaranteeing the distribution and sale of securities of any kind issued by another corporation.

Answer 39

Underwriting

Question 40

These are written evidence of ownership & interest.

Answer 40

Securities

Question 41

Under the provision of the Revised Securities Act, no broker, dealer, or salesman must engage in business in the Philippines as such broker, dealer, or salesman or sell any securities, including securities exempted under the said law.

Answer 41

Securities Brokers/dealers

Question 42

A type of savings institution that receives savings from members and lends funds to them.

Answer 42

Building and Loan Associations

Question 43

It also has for its purpose the inculcation of the habit of thrift, frugality, and the idea of helping one another

Answer 43

Credit Unions

Question 44

They contribute to the country’s socio-economic development as well as to the insured.

Answer 44

Private insurance companies

Question 45

Primary Functions of Banks

Answer 45

- Accepting Deposits (saving and recurring deposits...) - Granting Advances (loans...)

Question 46

Secondary Functions of Banks

Answer 46

- Agency Functions (transfer of funds, collection of cheques) - Utility Functions (drafts, project reports)

Question 47

Classification of Banks based on Ownership: Public Sector Banks

Answer 47

Governments use public funds as leverage to produce credit, which benefits the public in many ways (infrastructure development, small company loans, etc.) Ex: Landbank

Question 48

Classification of Banks based on Ownership: Private Sector Banks

Answer 48

A financial institution that is owned and operated by private individuals or companies, as opposed to the government; Ex: Security Bank

Question 49

Classification of Banks based on Ownership: Foreign Bank

Answer 49

Financial institutions that serve customers outside of their own country; Ex: Citibank

Question 50

It is also known as Single-Office Banks; they are small, independent financial institutions that operate a single-branch

Answer 50

Unit Banks (Ex: Cantilan Bank)

Question 51

it refers to a system in which a bank provides banking services through a wide network of branch offices

Answer 51

Branch Banks (Ex: BPI)

Question 52

A form of bank governance in which individuals or an entity takes control of, at least, three banks that are independently chartered.

Answer 52

Chain Banks (Ex: Union Bank)

Question 53

A third-party financial organization serves as a bridge between local and foreign institutions.

Answer 53

Correspondent Banks

Question 54

Classification of Banks based on Function: Commercial Banks

Answer 54

They contribute to the maintenance of economic stability and economic progress (ex. BPI)

Question 55

Classification of Banks based on Function: Industrial Banks

Answer 55

Specialized financial institutions that are primarily focused on providing financial services to industrial companies.

Question 56

A system that includes individuals and institutions, instruments, and procedures.

Answer 56

Financial Markets

Question 57

The primary role of financial markets

Answer 57

to facilitate markets in the flow from individual governments that need funds over their incomes.

Question 58

The sum of all cash inflows/outflows from and into different financial assets.

Answer 58

Flow of Funds

Question 59

Three financial phases

Answer 59

* Young adults borrow * Older working adults save * Retired adults use saving

Question 60

________ transfer of the money to saver or borrower, __________ transfer through investment banking house, and financial intermediates

Answer 60

Direct ; Indirect

Question 61

It assists both people and businesses in raising capital through underwriting. Act as intermediaries between security issuers and investors and help new firms go public.

Answer 61

Investment banking house

Question 62

An entity that facilitates a financial transaction between 2 parties.

Answer 62

Financial intermediaries

Question 63

Market Efficiency: Economic Efficiency

Answer 63

Funds are allocated to their optimal use at the lowest costs.

Question 64

Market Efficiency: Informal Efficiency

Answer 64

Investment prices are adjusted quickly to reflect current information.

Question 65

Market Efficiency: Weak-form

Answer 65

All information contained in past price movements is reflected in current market prices.

Question 66

Market Efficiency: Semi-strong-form

Answer 66

Current prices all publicly available information.

Question 67

Market Efficiency: Strong-form

Answer 67

Current prices reflect all pertinent information, both public and private.

Question 68

Money versus capital markets

Answer 68

a) Money market- used for short-term lending assets held 1 year or less. b) Capital- Long-term securities have a direct/indirect impact on the capital.

Question 69

Debt versus equity markets

Answer 69

a) Debt market- Market where debt instruments were traded. b) Equity market- Market from trading equity instruments.

Question 70

Primary versus secondary markets

Answer 70

a) Primary- Where securities are created. b) Secondary- Where to those securities traded by investors.

Question 71

Financial markets for derivatives, financial instruments like futures contracts or options, are derived from other forms of assets. (Example: Currency future)

Answer 71

Derivatives markets

Question 72

It is a place where shares of publicly listed companies are traded.

Answer 72

Stock Market

Question 73

A decentralized market in which market participants trade stocks, commodities, currencies, or other instruments directly between two parties and without a central exchange or broker.

Answer 73

Over-the-counter Market

Question 74

It is often called the debt market, fixed income market, or credit market—is the collective name given to all trades and issues of debt securities.

Answer 74

Bond Market

Question 75

It refers to trading in very short-term debt investments.

Answer 75

Money Market

Question 76

A type of financial contract whose value is dependent on an underlying asset, group of assets, or benchmark

Answer 76

Derivative Market

Question 77

It allows participants, such as banks and individuals, to buy, sell, or exchange currencies for both hedging and speculative purposes. It is the largest financial market in the world.

Answer 77

Forex Market

Question 78

It is a marketplace for buying, selling, and trading raw materials or primary products.

Answer 78

Commodities Market

Question 79

It is a digital or virtual currency secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.

Answer 79

Cryptocurrency Market

Question 80

Functions of the Markets: Puts savings into more productive use

Answer 80

Financial markets like banks open it up to individuals and companies that need a home loan, student loan, or business loan.

Question 81

Functions of the Markets: Determines the price of securities

Answer 81

Investors aim to make profits from their securities. However, unlike goods and services whose price is determined by the law of supply and demand, prices – of securities are determined by financial markets.

Question 82

Functions of the Markets: Makes financial assets liquid

Answer 82

Buyers and sellers can decide to trade their securities anytime. They can use financial markets to sell their securities or make investments as they desire.

Question 83

Functions of the Markets: Lowers the cost of transactions

Answer 83

In financial markets, various types of information regarding securities can be acquired without the need to spend.

Question 84

3 GENERAL STOCK MARKET ACTIVITIES

Answer 84

* The secondary market - trading in the outstanding, previously issued share of established, publicly owned companies * The primary market - additional shares sold by established, publicly owned companies * IPO market - new public offerings by privately held firms

Question 85

This is the regulation of national securities exchanges exchange. They have the power to prohibit manipulation of securities' prices and control over stock trades by corporate insiders.

Answer 85

Securities and Exchange Commission (SEC)

Question 86

Special segment of Banking operation that helps individuals/ organizations raise capital + provides financial consultancy services to them.

Answer 86

Investment Banking

Question 87

* Helps corporations design securities attractive to investors * Buys these securities from the corporation * Resells the securities to investors

Answer 87

Investment Banker

Question 88

A syndicate of investment firms formed to spread the risk associated with the purchase and distribution of a new issuance of securities.

Answer 88

Underwriting Syndicate

Question 89

The member of an underwriting syndicate who manages the distribution and sale of a new security offering.

Answer 89

Lead or Managing Underwriter

Question 90

A network of brokerage firms formed to distribute a new issuance of securities.

Answer 90

Selling Group

Question 91

Shelf Registrations on SEC

Answer 91

* Securities registered with the SEC for sale at a later date * Held "on the shelf" until the sale

Question 92

Maintenance of the Secondary Market

Answer 92

* When a company is going public for the first time, the investment banker is obligated to maintain a market for the shares after the issue has been completed. * The lead underwriter agrees to "make a market" in the stock and keep it reasonably liquid.

Question 93

THE ROLE OF FINANCIAL INTERMEDIARIES

Answer 93

1. Facilitate the transfer of funds from those who have funds (savers) to those who need funds (borrowers). 2. Manufacturing a variety of financial products that take the form of either loans or savings instruments.

Question 94

The probability of an asset declining in value which then results in unanticipated fluctuations in interest rates. Occurs when interest rates affect the values of bonds and stocks in the market.

Answer 94

INTEREST RATE RISK

Question 95

Risk that a financial institution will be unable to reinvest at a rate that corresponds to the current rate of return.

Answer 95

REINVESTMENT RISK

Question 96

Refers to the potential loss due to exchange rate fluctuations wherein the rate of a certain currency is not in line with the favor of the financial institution.

Answer 96

FOREIGN EXCHANGE RISK

Question 97

It is associated with any investment decision. It is brought about by the price volatility which often arises due to fluctuations that commonly affect the financial instruments.

Answer 97

MARKET RISK/ PRICE RISK

Question 98

The probability of loss due to the borrower’s failure to pay its loan or debt.

Answer 98

CREDIT RISK

Question 99

This risk talks about the possibility of a firm not meeting its obligation or running out of cash to pay bills and keep the firm operating.

Answer 99

LIQUIDITY RISK