An overview of the
Philippine Financial
System
Money – used in buying goods
and services
We borrow money from banks, pawnshops or credit
unions to satisfy our needs.
Nature and necessity of Finance
Financial system
- a network of various institutions which generates,
circulates and controls money and credit.
- provides intermediation between the suppliers and users
of credit.
- these arises a need for financial institutions where
individuals have surplus incomes.(*)
Elements of Financial System
1. Financial claims- the money and the rights to receive money
evidenced by financial instruments which specify the terms of the
claims.
Broad categories:
a. debts – the debtor has an obligation to pay his loan plus interest.
b. Equities – conveys ownership rights; investments like shares of
stock which earn dividends.
2. Financial Institutions
These are private or government organizations whose assets consist primarily of
claims or incomes primarily derived from dealing in/or performing services in
connection with claims
examples: banks, finance companies
3. Financial Markets
These are institutions which expedite transactions in financial claims.
examples: Stock exchange
4. Government Agencies
The monetary board is the policy making body of BSP. Laws on
money, credit and banking are legislated by the congress and through
the executive orders issued by the President.
5. Laws and Policies
These control the whole financial system that ensure the desired
levels of investment, employment, production, income and
consumption. These regulate and supervises the behaviour of the whole
economy.
Specific Functions of Financial Institutions
General function: to facilitate the transfer of funds from the savers to
the users.
Specific functions:
1. Investigation and credit analysis
An individual who lends his money through financial institution is
assured of a minimum risk. A careful investigation and credit analysis
about the application of the borrower is conducted. This is to ensure
that the funds will be used efficiently by the borrower and to protect
the interest of both the lender and the financial institution.
2. Matching the supply and demand for funds
specialized in matching the supply of savings to the demand for funds
3. Provisions for liquidity
Development of the Philippine Financial
System
Obras Pias – the first credit institutions established in the Philippines.
- literally mean “ pious works”
- started by Father Juan Fernandez de Leon in 1754
- funds from Catholics
- trade and channelled for charitable works and also to finance the
Galleon trade
- under the control of friars and eventually became commercial
banks or marine insurance companies.(*)
The First Philippine Bank
Banco Españo- Filipino de Isabela II in 1851 but granted a charter in
1528.
Started business when several Phil. Ports were opened to foreigners
Postal Savings Bank in 1904
Frist Agricultural Bank of Philippine Government in 1906
In 1916 the assets and liabilities were transferred to PNB
Structure of Philippine Financial System
BSP
Banking Institutions
1. Private banking institutions
a. Commercial Banking Institutions
b. Thrift Banks
c. Rural Banks
2. Government banking Institutions
d. PNB
e. DBP
f. LBP
g. Philippine Amanah Bank
Non- Bank Financial Institutions
1. Private non-bank financial Institutions
a. Investment houses
b. Investment companies
c. Financing companies
d. Securities dealers/brokers
e. Non-stock savings and loan associations
f. Building and loan association
g. Pawnshops
h. Lending investors
i. Fund managers
j. Trust companies/departments
k. Insurance companies
l. Venture capital corporations
2. Government non-bank financial institutions
a. GSIS
b. SSS
