On June 15, 1948, the Central Bank Act or the

Republic Act No. 265 was approved. This act

provides for creation of the Central Bank of
the Philippines, which finally opened its doors
to the public on January 3, 1949.
The capital of the bank, as provided by the
Act, shall be ten billion pesos
(P10,000,000,000), with the initial
subscription coming from the liquidated
assets of the Exchange Standard Fund.
The Central Bank has the responsibility of
administering the monetary, banking and
credit system of the Republic. Therefore the
bank should have achieved the following
objectives:

Primarily to maintain internal and external monetary stability in
the Philippines.
To preserve the international value of the peso and convertibility
of the peso into other freely convertible currencies.
To foster monetary, credit and exchange conditions conducive to
a balanced and sustainable growth of the economy.
To maintain price stability in the economy.
The BSP is tasked with maintaining price stability. It
uses its policy tools to keep inflation low and create
the environment for sustained and inclusive growth.
Price stability preserves the purchasing power.

The BSP supervises all banks. It monitors and
examines the operations of banks and quasi-banks
all over the country. It also regulates under special
laws other financial institutions such as non stock
savings and loan association as well as pawnshops. If
the banks are strong, people are encouraged to save
and, in the process, help finance economic activities.
Jobs are created and Income is earned.
The BSP manages the countrys international
reserves. These are foreign assets mostly
composed of investments in foreign issued
securities, gold and foreign exchange. The
BSP maintains adequate international reserves
to meet the economys foreign exchange
requirements. This also helps keep the value
of the Philippine peso stable.
Chairman of the Board
Secretary of Finance
Director General of the National Economic
Development Authority (NEDA)
Chairman of Board of Investments
Secretary of Budget and Management
Two appointed representatives from private
sector
The chairman of the Old Monetary Board has
a term of 6 years while the representatives
from the private sector have four years.
The person to be appointed to the Board
must be a person of good moral character
and unquestionable integrity and
responsibility. He must also be competent in
economics, banking, finance, commerce,
agriculture or industry.
All members of the Monetary Board must be a
natural born Filipino citizen.
Republic Act 7653 is known as the New
Central bank Act. Section I of RA7653 states
that the state shall maintain a Central
Monetary Authority (CMA) that shall function
and operate as an independent body in the
discharge of its mandated responsibilities
concerning money, banking and credit.
This established independent Central
Monetary Authority shall be a corporate body
known as the Bangko Sentral ng Pilipinas
hereafter referred to as the Bangko Sentral.
The BSP determines the countrys exchange
rate policy. The current policy allows market
forces to determine the exchange rate. This
flexibility ensures that the true level of
scarcity of foreign exchange is reflected and
induces a more efficient allocation of
resources in the economy.
The BSP is the banker of the banks.
The BSP is the banker, financial advisor, and
official depository of the Philippines
Government.
The Bangko Sentral shall be capitalized at
fifty billion pesos to be fully subscribed by
the Government of the Republic of the
Philippines.
Ten Billion of which shall be fully paid for by
the Government upon effectivity of this Act
and the balance to be paid for within a period
of two years from the effectivity of this act.
The BSP shall provide policy directions in
areas of money, banking and credit. It shall
have supervision over the operations of banks
and exercise such regulatory powers as
provided in this Act and other pertinent laws
over the operations of finance companies and
non-bank financial institutions performing
quasi-banking functions.
1. The powers and functions of the Bangko Sentral
shall be exercised by the Bangko Sentral Board
composed of seven members appointed by the
President of the Philippines for a term of 6 years.

The Governor of the Bangko Sentral who shall be
the Chairman of the Monetary Board. Shall be head of
a department and his appointment shall be subject to
confirmation by the Commission on Appointments.
Whenever the Governor is unable to attend a meeting
of the Board, he shall designate a Deputy Governor to
act as an alternate provided that in such event, the
Monetary Board shall designate one of its members
as Acting Chairman.
2. A member of the Cabinet is to be designated
by the President of the Philippines. Whenever
the designated Cabinet Member is unable to
attend a meeting of the board, he shall
designate an Undersecretary in his
Department to attend as his alternate.
3. Five members who shall come from the
private sector, all of whom shall serve full-
time.
The members of the Monetary Board must be
a natural born citizen of the Philippines.
At least 35 years of age, with exception of the
Governor who shall at least 40 years of age
Of good moral character
Of unquestionable integrity
Of known probity and patriotism
Recognized competence in social and
economic disciplines.
The Bangko Sentral is the only bank authorize
to manufacture and issue money. As the bank
of issue, it has the monopoly of note issue.
Thus, anyone who makes money without the
authority given by the Bangko Sentral is guilty
of counterfeiting.

Counterfeiting is the manufacture of money
without due authority. This offense is criminal
offense and is therefore punishable by law.
In case banks need funds for lending to their
clients, they may avail of the rediscount facilities
of the Central bank.
Through the rediscount window of the Central
Bank, banks may borrow funds by using their
notes and having them rediscounted.
The Bangko Sentral charges interest on money
lent to borrowing banks. When bank are
distressed, the Bangko Sentral comes to their
rescue by lending to them extra ordinary loans
so as to prevent banks from losing the
confidence of the general public.
In order to maintain monetary stability within
and out of the country, the Bangko Sentral
endeavors to control the expansion or
contraction of the money supply. The level of
credit, or any rise or fall in prices. Monetary
authorities are empowered to institute a
number of devices for purposes of proper
regulations of the volume of the money
supply.
The devises may be as follows:
1. Control of legal reserve requirement
2. Control of discount and rediscount rates
3. Open Market Operation
4. Control of Collaterals Required
5. Imposition of Portfolio Ceiling
6. Minimum Capital Ratio
7. Margin Requirements for L/C
8. Moral Suasion
Some of these devices may be needed to
induce expansion or contraction of money
supply. However, certain devices may only be
applied to induce decrease in money supply
such as the imposition of portfolio ceiling
and minimum capital ratio, and the control of
maturities of bank loans.
Price Stability
Financial Institutions Stability
Payments and Settlements System Efficiency