OVERVIEW OF THE PHILIPPINE FINANCIAL SYSTEM

Financial System- institutional units and markets that interact for the purpose of
mobilizing funds from lenders to borrowers.
ELEMENTS OF FINANCIAL SYSTEM
1 .Financial claims- money and the right to receive money under specific
circumstances.
2. Financial institution- private and government organization whose assets consist
primarily of claims or income is primarily derived from providing services in
connection with claims.
3 .Financial intermediaries- institution that deal with creation and issuance of claims
against themselves and use the proceeds to acquire and hold claims against others.
4. Financial Markets- market in which people and identities can trade financial
securities, commodities and other fungible items of value at low transaction cost
and at prices that reflect supply and demand.
5. Government agencies- i.e. Central Bank, maintains internal and external stability
of peso
6. Law and policies- formulated to ensure that the desired levels of investment,
employment, production, income and consumption.
FUNCTIONS OF FINANCIAL INSTITUTIONS
The general function is to facilitate the transfer of funds from the savers and the
users.
1. Investigation and credit analysis
2. Matching the supply and demand for funds
3. Provision for liquidity
DEVELOPMENT OF THE PHILIPPINE FINANCIAL SYSTEM

Obras Pias- means pious works; the first credit institutions in the Philippines
started by Father Juan Fernandez de Leon in 1754.
10 years later Francisco Rodriguez organized the Rodriguez Bank
Banco Espanol-Filipino de Isabella de II- first Philippine bank established in
1851
1869- opening of the Suez Canal resulted in expansion of Philippine trade
1873- Chartered Bank of India, Australia and China set up manila branch
British banks dominated the economy during the Spanish colonization
1882- Spain was able to put up their first savings bank, Monte de Piedad,
despite of British domination
1898- US acquired Philippines through Treaty of Paris which gave way to free
trade between US and the Philippines provided by the Payne Aldrich Act.

1902- International Banking Corporation of New York set up an office in the

country but was acquired in 1915 by the National City Bank of New York.It is
now called First National City Bank.
1904- Postal Savings Bank
1906- First Agricultural Bank of the Philippine Government: In 1916, its assets
were transferred to the Newly organized Philippine National Bank (PNB)
Chinese Banks were formed in 1920s
PNB closed its doors with the coming of the Japanese Imperial Forces in 1942
but was forced to open few months later.It was supervise by Japanese Military
Advisers
Southern Development Bank ,a Japanese bank put up a branch in the country
and perform the role of the Central Bank.
War notes were printed and circulated which resulted to the worst inflation so
far in the country.
1946- Rehabilitation Finance Corporation was established to provide credit
facilities for the rehabilitation of commerce, industry and the reconstruction
of the war-damaged properties.It later became the Development Bank of the
Philippines.
1948- creation of the Central Bank of the Philippines

STRUCTURE OF THE PHILIPPINE FINANCIAL SYSTEM

Central Bank of the Philippines
Banking Institutions
1. Private Banking Institutions
a. Commercial Banking Institutions
Expanded commercial banks
Ordinary commercial banks
b. Thrift Banks
Savings and mortgage banks
Private development banks
Stock savings and loan associations
c. Rural banks
2. Government Banking Institutions
a. Philippine National Bank
b. Development Bank of the Philippines
c. Land Bank of the Philippines
d. 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 saving and loan
association
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. Government Service
Insurance System
b. Social Security System
c. National Investment and
Development Corporation