Bank

O An entity duly authorized by the Monetary Board of the

Central Bank that may engage in the lending of funds
obtained from the public through the receipts of deposits of
any kind and all entities regularly conducting such
operations.
General Banking Act
 Role of Banks
O Depository of idle funds
O Major source of loanable funds
O Give counsel on financial matters
 Brief History

2000 B.C. Temples of Babylon

lending of gold, silver, and
other items of wealth were left
for safekeeping
O The Taula de la Ciutat
is the first official bank
in the world. It was
opened in Barcelona in
1401.
Bank of Venice, 1587

Bank of Amsterdam,
1609

Bank of Hamburg, 1619

Bank of England, 1694
Bank of France (1800)
BANK OF AMERICA (1781) - FIRST
became the dominant IMPORTANT BANK IN THE UNITED STATES
financial institution in France
O Greenbacks irredeemable paper money during civil war in 1865
O Federal Reserve System the central bank in the US established under the
Federal Reserve Act of 1913.
 Banking in the Philippines
O Obras Pias religious foundation organized by Father Juan Fernandez de
Leon in 1594
O El Banco Espanol-Filipino de Isabel II (Bank of the Philippine Islands) first
commercial bank organized in the far east
O Monte de Piedad and Savings Bank first savings bank
O Philippine Bank of commerce first private commercial bank wholly owned
by filipinos
O Central Bank Act in 1948 allowed the establishment of the Central Bank
of the Philippines
 CLASSIFICATION OF BANKS
COMMERCIAL BANK
THRIFT BANK
RURAL BANK
 Commercial Bank
Banks which accepts or creates demand deposits subject to withdrawal by
check
Banks that have, in addition to the general powers incident to corporations,
all such powers as may be necessary to carry on the business of
commercial banking.
Commercial banks are members of the clearinghouse.
O E.g.
O Bank of Commerce, Citibank, Maybank Phil., PBC, Veterans, BDO Private
Bank
 Kinds of commercial bank
O Universal Commercial bank
O Ordinary Commercial bank
 Universal Commercial Bank
O -Multiple service bank
O -It does the commercial bank functions as well as the investment
house functions
O Universal Banks have a wider scope of activities than Commercial
Banks.
In addition to commercial banking activities, universal banks are
authorized to:
- engage in underwriting
- and in other activities of investment houses
- and to invest in equities of non-allied institutions.
O E.g. BDO Unibank, Inc., BPI, RCBC, SBC, Union Bank, UCPB, Al-
Amanah, DBP, LBP, ANZ Banking, HSBC
 Ordinary Commercial Banks
A commercial bank confined to the simple functions of a
commercial bank
Capitalized 2.8 Billion pesos-Clients are mostly businessmen
Specializes in:
O Accepting demand deposits which are withdrawable by means
if checks
O Granting short term loans
 Thrift Banks
O -Established to encourage thriftiness, industry, frugality and the
accumulation of savings among the people
O Thrift Banks banks that include:
O savings and mortgage banks,
O private development banks, and
O stock savings and loan associations.
O E.g.
O Allied Savings Bank, Bank of Makati, BPI Direct Savings Bank,
Century Savings Bank, Express Savings Bank, Malayan Bank, Win
Bank
 Classifications of Thrift Banks
O Savings and Mortgage Banks
O Stock Savings and Loan Associations
O Private Development Banks
 Savings and Mortgage Banks
O These banks are organized for the purpose of accumulating
the savings of individuals and invests and loans them to
equities which the monetary board may determine as
necessary in the furtherance of their economic objectives
O Specializes in granting industrial loans
Savings and Mortgage Banks may:
O Issue mortgage and chattel mortgage certificates, buy and
sell them for their own account or for the account of others,
and accept and receive them in payment or as amortization
of loans
O Purchase, hold and convey real estate under the same
conditions as those governing commercial banks
Issue mortgage and chattel mortgage
certificates shall be:
O Issued exclusively in national currency
O Issued exclusively for financing equipment loans, mortgage
loans, acquisition of machinery and other fixed installations,
conservation, improvement of productive properties
Stock Savings and Loan Associations
O Engaged in the business of accumulating the savings of
depositors and together with its accumulated capital, give
these out for loans and for investment in securities of the
government.
O Issues domestic letters of credit
 Private Development Banks
O Bank organized to expand, develop, and rehabilitate
our agriculture and industry
O Exercises all the powers and assumes all the
obligations of a stock and mortgage bank except
otherwise provided
 Private Development Banks
O Formed as a stock corporation and its paid up capital shall
not be less than 400 Million
O For Class A not more than 4 Million
O For Class B - not more than 2 Million
O For Class C not more than 1 Million
 Private Development Banks

O At least 75% of the aggregate par value of the preferred

stocks held by the Development Bank of the Philippines
shall be invested in medium and long-term loans for
economic development purposes
 Rural Banks

O Privately-owned banks
O Lends out to cooperatives within reasonable terms
O Loans may be granted on security of land
O Organized to promote and expand the rural economy by
providing farmers and small businessmen with means of
facilitating and improving their productive facilities
Services Performed by Rural Banks
O Accept savings and time deposits
O Act as a correspondent bank for other financial institutions
O Act as a collection agent
O Act as Official depository of municipal, city or provincial
funds where it is located
O May act as trustee over estates or properties of farmers and
merchants
O Extend financial assistance to private and public employees
in accordance to Sec. 5 of R.A 3779
 NOTE:
O All rural banks shall be exempted from the payments of
taxes or fees except corporate income tax and local taxes for
5yrs from the date of the commencement of operations
 Land Bank of the Philippines,
Development Bank of the Philippines or
any government-controlled banks

O shall subscribe within 30 days to the capital stock of any rural bank an
amount equal to the total investment of the private share holders until a
rural bank has accumulated enough capital of its own has stimulated
economic development
Specialized Government Banks of the
Philippines

O Land Bank of the Philippines

O Development Bank of the Philippines
O Al-Amanah Islamic Investment Bank of the Philippines
 Land Bank of the Philippines
O Established as a corporate and government instrumentality
O Main purpose:
-To help the land reform in the Philippines known as the
Comprehensive Agrarian Reform Program (CARP)
Development Bank of the Philippines
O The government counter-part of the private development
banks
O Main purpose:
Develop, expand construct and rehabilitate our
agricultural industry.
Al- Amanah Islamic Invesmtent Bank of
the Philippines
O Established to promote and accelerate the socio-economic
development of the autonomous region of Mindanao
Performs the Islamic concept o banking, subject to the rules
of Islamic shariaHas an authorized capital of 1 Billion
divided into ten million par value shares of 100 pesos each
Al- Amanah Islamic Investment Bank of
the Philippines
O Subscription of ownership shall be limited to persons and
entities to the concept of Islamic banking
O The Islamic Bank has the capacity of an agency or attorney
and shall act with full authority on behalf of the group of
depositors in general.
 Offshore banking unit (obu)
Four commercial banks allowed to operate:
O Hongkong and Shanghai Banking Corporation
O Bank of America
O City Bank
O Standard Chartered Bank

Jan. 23, 1976 , Central Bank of the Philippines approved 28

offshores bank
 FUNCTIONS OF OBU
CB Circular No. 546 regulates the establishment of offshore banking
in the Philippines. OBU were allowed to engage in the following
transactions:
1. Transactions with non-residents and or with other OBU
2. Transactions with foreign currency deposit units
3. Transactions with residents other than FCDU and other OBU
subject to prior approval when required under Central Bank
regulations, and offshore banking unit may invest in foreign
currency dominated debt insurance of residents (other than
FCDU and other OBU) and or extend foreign currency loans and
advances to such residents.
 Classification according to form of
organization
O Unit Bank a single banking corporation, which
makes and implements its
own policies
-Has only one place of business
O Branch Banking System multiple office banking
system
 Classification according to form of
organization
O Group Banking unit banks or branch banks whose
majority shares of stocks are held
by a holding company.
O Chain Banking- independent unit banks which are
owned by a group of people
-Monopoly of banking system is its main
objective
Traditional classifications of banks
1. Privately Owned Banks- banks owned by a private
individual
-provide needed banking system and
commensurate returns of the
investors capital
2. Government Owned Banks- banks owned by a state or
banks with minimum private capital
According to place of incorporation
1. Domestic Bank- incorporated under the laws of the country
where it is doing business
2. Foreign Bank- incorporated under the laws of other country
that do business in the Philippines
- RA 7721, the Monetary board allow six foreign
banks to enter the banking system as a branch
within a period of five years.
- Foreign banks will be allowed a total of six
branches with a capital requirement of P210
million for the first three branches
 Functions of a bank
a. Depository Function
b. Trust Function
c. Collection and Remittance Function
d. Loans and Discount Function
e. Advisory Function
 Depository Function
-banks accept deposits from the public and lends these funds
to those that need them.

a. Primary Deposits- deposits in the form of cash, checks,

money orders and items for collection
b. Derivative Deposits- deposits created out of proceeds of
loans and interest on deposits
 Classification according to different
criterion
O Deposits from the Private Sector deposits made for the
account of private individuals, partnerships and corporation

O Deposits from the Government - public funds deposited for

the account of the government
 ACCORDING TO FORM OF
WITHDRAWAL
O Savings Deposits
O Demand Deposit
O Negotiable Order of Withdrawal Accounts
O Term Savings Account
O Special Time Deposit
O Time Certificate of Deposit
 Savings Deposit
O Savings Deposit

O Deposit accepted for safekeeping

O Evidenced by a passbook
O Has interest rate, but not as high as time deposits
 Demand deposit
O Demand deposits
O The depositor can take out his funds any time.
O No interest is paid by the bank
O The depositor can withdraw the money he deposited on the
very same day.
O Other names:
current account deposit
checking account deposit
commercial account deposit
Negotiable order of withdrawal accounts
O Negotiable order to withdraw
O Negotiable Order of Withdrawal (NOW) Account is an interest-
bearing deposit account that combines the payable on demand
feature of checks and investment feature of savings accounts.
O A savings deposit which can be withdrawn by a negotiable
withdrawal slip
O Has interest rate, but not as high as time deposits
 Term savings account
O Term Savings Account
O Savings account that is not to be withdrawn for a considerable
period of time
O Earns a much higher interest than ordinary savings account
 Special time deposit
O Special Time Deposit
O Deposit required by the government for a depositor to maintain
for a particular purpose.
O Most often, it is for the importation of some commodities
 Time certificate of deposit
O Time certificate of deposit
O Deposit evidenced by a maturing certificate at a definite future
time.
O Has a fixed term
O Money deposited cannot be withdrawn within a certain period
O Has a higher rate of interest than saving account.
O Most often, these funds are used for longer-term investments
 Automated teller machine
O Automated teller machine
O a machine that dispenses cash or performs other banking
services when an account holder inserts a bank card.
O The Philippine National Bank was the first to adopt the system
followed by The Bank of the Philippine Islands
 Types of bank Accounts
O Single-Name Individual Account
O Joint Account
O Sole Proprietorship Account
O Partnership Account
O Corporate Account
O Fiduciary Account
O Unincorporated Group of Account
O Single-Name Individual Account
O Simplest type of bank account
O An individual transacts with the bank under its own name

O Joint Account
O Opened by two or more individuals
O Joint and account all depositors have to affix their signatures in all
transactions with the bank
O Joint or account any one of the depositors is allowed to transact with the
bank

O Sole Proprietorship Account

O Opened by an individual for his own business
O Partnership Account
O Opened by a partnership.
O An organization composed of two or more owners who agreed to conduct business
and divide the profit among themselves.

O Corporate Account
O Opened by corporations

O Fiduciary Account
O Opened by a trustee in behalf of another person
O a legal person authorized to take title to and administer properties for the benefit of
others.
O Informal trust self-appointed
O Formal trust appointed by a court order
O Unincorporated Group of Accounts
O Opened by associations, social clubs, civic organizations,
professional, charitable organizations
O Not registered with the Securities and Exchange Commission
Inactive deposit account (dormant
Account)
O Does not have any activity through deposits or withdrawals for
a certain period of time.
O if the deposit is below the minimum amount required, the bank
will charge a service fee
O if the deposit is more than minimum requirement, the bank will
not charge a service fee
O If the account is dormant for ten years, the deposit will be
transferred to the Philippines Treasury
 b. Trust function
O A bank can be authorized to engage in the business of a trust company
O Trusteeship involves three parties:
O Trustor holds legal title to the funds or properties of a trust
O Beneficiary person for whose benefit the trust is created
O Trustee manages the property entrusted

Safe Deposit Boxes

- rented out to a client who would like to have a safe place to put his important
documents and jewelry. E.g. Swiss Bank
C. Collection and remittance function
O A bank acts as a collection agent and in return for its
services rendered, the banks collects a service fee from its
clients. One way of doing this function is through
concentration banking.

O Concentration Banking system that spreads collection of

companys receivables among a number of banks.
 D. Loans and discount function
O Banks do not only accept deposits but also extends loans.
O They are the most substantial source of credit not only for individual and private
businesses but also for the government.

O Types of loans granted by banks:

1. Demand or Callable Loan does not have a definite maturity date
2. Time Loan may be short-term, medium term or long term
O Payable at a specified future time
O Character Loan extending loans based on the general credit standing of a borrower
O Collateralized loan loans where the bank requires collaterals.
O *Collateral - is a property or other asset that a borrower offers as a way for a lender to
secure the loan.
 Other classifications of banks loans
1. According to purpose
O Commercial or mercantile credit
O Investment Credit
O Agricultural Credit
O Real estate Credit
O Personal Credit
2. According to form on how the credit is gained
O Direct Loan
O Discount and Rediscount loan
O Overdraft Line
3. According to maturity
O Short- term Loan
O Medium-term loan
O Long term loan
4. According to security
O Secured loan or collateralized loan
O Unsecured loan or character loan
5. According to release of the loan
O Lump sum release
O Installment release as the project progresses
6. According to manner of repayment
O Lump sum basis
O Installment Basis
 E. Advisory Function
O Many enterprises seek the help of banks with regards to
refinancing their business
O The banks employ experts to assist businessman in their
needs