BFI LONG QUIZZZ

MODULE 1-3

SPANISH PERIOD

the Obras Pias was established during the 16th century and was considered as the first financial institution In the Philippines.

The religious Catholics decided to lend funds for its capital and have its resources loaned out with interest.

In 1820, its operations stopped and was completely inexistent in 1851.

SPANISH PERIOD

The Banco Español-Filipino started its operations on 1851 and performed general banking operations while partly financing foreign trade. It also had the privilege to issue notes on October 17, 1854. Up to this day, the bank still operates under the name “Bank of the Philippine Islands”.

SPANISH PERIOD

In 1873, the Chartered Banks of China, India and Australia were able to establish their

branches in the Philippines. And in 1875, they were followed by a branch of Hongkong

and Shanghai Banking Corporation. All these banks were more classified as exchange

banks rather than commercial banks because, aside from providing general banking

services, they were also engaged is buying and selling drafts and bills of exchange.

SPANISH PERIOD

There were only the Spanish Civil Code and the Code of Commerce regulating the banking

business. And since the supervision and regulations for banks were negligible, by the end

of the Spanish regime, there were only FOUR (4) banks in operation: THREE (3) Commercial banks and ONE (1) savings bank.

AMERICAN PERIOD

In 1906, the Postal Savings Bank was created as part and parcel of the Bureau of Posts to

inculcate the habit of thrift in the minds of people, particularly those in the low income groups

AMERICAN PERIOD

The first private bank named Philippine Bank of Commerce was established in 1938 with genuine Filipino capital.

AMERICAN PERIOD

During these times, foreign banks were still dominant in the Philippine banking system having both branches and main offices operate in the country. Due to this, the First Philippine Commission passed “Act 52” which carried out examinations and inspections of banks to safeguard the interest of stockholders and depositors.

JAPANESE PERIOD

During the Japanese occupation, only Filipino and Japanese-owned banks were allowed to operate.

NAMPO KAIHATSU / SOUTHERN DEVELOPMENT BANK

It acted as a fiscal agent of the Japanese government in the Philippines and was like a central bank who handled the issuance of military notes and clearing interbank balances.

POSTWAR PERIOD

After the liberation of the Philippines, the banks that started operating in the Japanese occupation were unable to reopen for business because they were not able to meet their obligations in Philippine currency.

ACCESS DEVICES

enable the withdrawal and depositing of cash, transfer of funds and payment of bills from their bank accounts without any physical transaction

CARD - BASED PRODUCTS

also called as Stored-Value Card; prepaid cards in which funds are stored in electronic form on an integrated circuit or computer chip embedded in the cards

PREPAID SOFTWARE PRODUCTS OR NETWORK MONEY

These involve funds kept in electronic form and are transmitted through communications networks to its partakers.

REPUBLIC ACT NO. 8971 OR THE “GENERAL BANKING LAW OF 2000

passed into law on May 23, 2000 Provides the regulation of the organization and operations of banks, quasi-banks, and trust entities.

REPUBLIC ACT NO. 9160 0R THE “ANTI - MONEY LAUNDERING ACT OF 2001

passed into law on September 29, 2001; it was amended by RA 9194, RA 10167 There are five salient features of the Anti-Money Laundering Law:

CIRCULAR NO.237

approved on April 19, 2000 by the Monetary Board

Consolidates and clarifies all existing rules and regulations on mergers and consolidations of banks and other financial institutions as well as improving the incentive package.

Done to foster banks, bring about more and better financial services at lower cost, and promote stability and efficiency in the Philippine banking sector

MERGER

absorption of one or more corporations by another existing corporation which retains

its identity and takes over the rights, privileges, franchises, and properties, and assumes all the

liabilities and obligations of the absorbed corporation(s) in the same manner as if it has itself

incurred such liabilities or obligations. The absorbing corporation continues its existence while the

life or lives of the other corporation(s) is/are terminated.

CONSOLIDATION

union of two or more corporations into a single new corporation (consolidated corporations).

FOREIGN STOCKHOLDINGS

The percentage of foreign-owned voting stocks in a bank shall be determined by the citizenship of the individual stockholders in that bank.

TRANSACTING BUSINESS IN THE PHILIPPINES

The entry of foreign banks in the Philippines through the establishment of branches shall be governed by the provisions of the Foreign Banks Liberalization Act.

ACQUISTION OF VOTING IN A DOMESTIC BANK

Within seven (7) years from the effectivity of this act and subject to guidelines issued pursuant to the Foreign Banks Liberalization Act, the Monetary Board may authorize a foreign bank to acquire up to one hundred percent (100%) of the voting stock of only one (1) bank organized under the laws of the Republic of the Philippines.

LOCAL BRANCHES OF FOREIGN BANKS

In the case of a foreign bank which has more than one (1) branch in the Philippines, all such branches shall be treated as one (1) unit for the purpose of this Act, and all references to the Philippine branches of foreign banks shall be HEld to refer to such units.

PRIVATELY OWNED

it is organized and capitalized by private citizens for their profit; called “closed corporations” since the ownership resides in one family (However, due to the nature of the banking business, it is considered a quasi-public corporation)

PUBLICLY OWNED

organized by the state and sometimes has a minimum of private ownership.The charter is granted by the enactment of a special law to govern its operations.

DOMESTIC corporation

– incorporated under the laws of the Philippines; follows that majority of the stocks are owned by Filipinos in conformity with the Philippine Corporation Code

foreign corporation

incorporated under the laws of another country, although the bank might be doing business in the Philippines;

STOCK CORPORATION

when the corporation sell shares of stock to the general public to raise capital. The shares sold must have a par value. The purpose of organizing is for profit.

NON STOCK CORPORATION

the organization is on a membership basis. The purpose of such organization is for mutual benefits and service rather than for profit.

COMMERCIAL BANKS

receives demand deposits and gives out short-term loans; also attends to numerous services that is possible due to the process of departmentalization

TRUST COMPANIES

deals in fiduciary activities; was originally a legal function and was handled by a legal officer or lawyer

SAVINGS BANKS

primarily receives for safekeeping funds from persons who have no immediate need for cash and invests these funds in long-term investments

RURAL BANK

– primarily caters to the needs of small farmers, small businesses, small cottage industries, and cooperative associations; operation and organization is governed by Republic Act 720

DEVELOPMENT BANK

takes care of giving loans to be used for developing the economy and may therefore engage in medium and long-term lending; organization and operation of private development banks shall be under the control and supervision of the Development Bank of the Philippines

COOPERATIVE BANK

organized to furnish the credit needs of duly registered and operating cooperative associatiions of different kinds; example: Philippine National Cooperative Banks

INVESTMENT BANK

assists government bodies and newly organized corporations to raise funds for capital through the sale of stocks and bonds; handles a business of high risk and therefore necessitates a large amount capital; underwrites the sale of securities and also conducts an economic survey to determine the market for securities; example Private Development Corporation of the Philippines

CENTRAL BANK

the bank of banks; does not directly deal with the public; usually the supervisory and regulatory agency, which makes all banks “tow the line”.The Bangko Sentral ng Pilipinas is the Philippines’ central that is rather unique since it is purely government- owned and operated.

UNIT BANK

ownership is concentrated on one corporation which does banking business independent of others; has one place of business and its own board of directors

GROUP BANKING

when a majority portion of the stocks of two or more banks are held by a holding company; preventive measures had to be taken to discourage group banking, if not to entirely discard it, because of the element of monopoly.

BRANCH BANKING

where there is a head office and two or more branches; the single corporate entity “fans out” its banking services to different strategic locations

CHAIN BANKING

when one or more persons control the activities of the banks; has not gained adherents due to the difficulties in operating the same on economical basis and also because of its instability or lack of continuance in existence.

economic justification for banks

The organizers must be armed with facts and figures such as degree of competition, degree of risk, potential customers, availability of manpower, businesses and products, habits and customs of the people, and such other matters which they have to analyze carefully before proceeding to their project and which will also contribute to the banks successful operation.

selection of stockholders

stockholders. This is an essential consideration in setting up a bank because on such choice may depend its success or failure.

Selection of Stockholders

Determination of the type of bank depends upon the economic survey. The chosen type of bank will determine the amount of capital to be raised.

Determination to the type of the capital to be raised

The organizers will find it easier to determine the amount of capital to be raised after they have agreed on the type of the bank. In a nutshell, there must be enough capital to see the bank through until it has gained prominence and has become profitable.

organization

The Monetary Board may authorize the organization of a bank or quasi-banksubject to the following conditions:

8.1 That the entity is a stock corporation;

8.2 That its funds are obtained from the public, which shall mean twenty (20) or more persons; and

8.3 That the minimum capital requirements prescribed by the Monetary Board for each category of banks are satisfied.

section 9. issuance of stocks

The Monetary Board may prescribe rules and regulations on the types of stock a bank may issue, including the terms thereof and rights appurtenant thereto to determine compliance with laws and regulations governing capital and equity structure of banks; Provided, That banks shall issue par value stocks only.

section 10. treasury stock

No bank shall purchase or acquire shares of its own capital stock or accept its own shares as a security for a loan, except when authorized by the Monetary Board: Provided, That in every case the stock so purchased or acquired shall, within six (6) months from the time of its purchase or acquisition, be sold or disposed of at a public or private sale.

section 11. foreign stockholdings

Foreign individuals and non-bank corporations may own or control up to forty percent (40%) of the voting stock of a domestic bank. This rule shall apply to Filipinos and domestic non-bank corporations.

section 12. stockholdings of family groups of related interests

Stockholdings of individuals related to each other within the fourth degree of consanguinity or affinity, legitimate or common-law, shall be considered family groups or related interests and must be fully disclosed in all transactions by such corporations or related groups of persons with the bank.

section 13. Corporate Stockholdings

Two or more corporations owned or controlled by the same family group or same group of persons shall be considered related interests and must be fully disclosed in all transactions by such corporations or related group of persons with the bank.

Section 14. Certificate of Authority to register

The Securities and Exchange Commission shall not register the articles of incorporation of any bank, or any amendment thereto, unless accompanied by a certificate of authority issued by the Monetary Board, under it seal. Such certificate shall not be issued unless the Monetary Board is satisfied from the evidence submitted to it.

Section 15. Board of Directors

The provisions of the Corporation Code to the contrary notwithstanding, there shall be at least five (5), and a maximum of fifteen (15) members of the board or directors of a bank, two (2) of whom shall be independent directors.

Section 26. fit and proper rule

To maintain the quality of bank management and afford better protection to depositors and the public in general the Monetary Board shall prescribe, pass upon and review the qualifications and disqualifications of individuals elected or appointed bank directors or officers and disqualify those found unfit.

Section 17.Directors of merged or consolidated banks

In the case of a bank merger or consolidation, the number of directors shall not exceed twenty-one (21).

Section 18. Compensation and other Benefits of Directors and Officers

To protect the finds of depositors and creditors the Monetary Board may regulate the payment by the bark to its directors and officers of compensation, allowance, fees, bonuses, stock options, profit sharing and fringe benefits only in exceptional cases and when the circumstances warrant, such as but not limited to the following:

18.1. When a bank is under comptrollership or conservatorship; or

18.2. When a bank is found by the Monetary Board to be conducting business in an unsafe or unsound

manner; or

18.3. When a bank is found by the Monetary Board to be in an unsatisfactory financial condition.

Section 19. Prohibition on public officials

Except as otherwise provided in the Rural Banks Act, no appointive or elective public official whether full-time or part-time shall at the same time serve as officer of any private bank, save in cases where such service is incident to financial assistance provided by the government or a government owned or controlled corporation to the bank or unless otherwise provided under existing laws.

Section 20. Bank Branches

Universal or commercial banks may open branches or other offices within or outside the Philippines upon prior approval of the Bangko Sentral. Branching by all other banks shall be governed by pertinent laws.

Section 21. Banking Days and Hours

- Unless otherwise authorized by the Bangko Sentral in the interest of the banking public, all banks including their branches and offices shall transact business on all workingdays for at least six (6) hours a day. In addition, banks or any of their branches or offices may open for business on Saturdays, Sundays or holidays for at least three (3) hours a day:

Section 22. Strikes and Lockouts

The banking industry is hereby declared as indispensable to the national interest and, notwithstanding the provisions of any law to the contrary, any strike or lockout involving banks, if unsettled after seven (7) calendar days shall be reported by the Bangko Sentral to the secretary of Labor who may assume jurisdiction over the dispute or decide it or certify the sane to the National Labor Relations Commission for compulsory arbitration.

Section 75. Head Office Guarantee

In order to provide effective protection of the interests of the depositors and other creditors of Philippine branches of a foreign bank, the head office of such branches shall fully guarantee the prompt payment of all liabilities of its Philippine branch.

section 76. Summons and legal process

In order to provide effective protection of the interests of the depositors and other creditors of Philippine branches of a foreign bank, the head office of such branches shall fully guarantee the prompt payment of all liabilities of its Philippine branch.

section 78. revocation of License of a foreign bank

The Monetary Board may revoke the license to transact business in the Philippines of, any foreign bank, if it finds that the foreign bank is insolvent or in imminent danger thereof or that its continuance in business will involve probable loss to those transacting business with it.

Board of Directors

composed of a number agreed upon as contained in the by-laws, but in no case should it exceed the number allowed by law. It is headed by a chairman whose duty is to preside over the meeting of the board.

the executive committee

This commitee deals with administrative matters. It often meets to prepare the groundwork for board meetings. It acts as an advisory body to the board. Some of the policies it prepares are eventually approved by the board.

The loans and discount Committee

All matters pertaining to loans and discount to lines of credit and others related to the loaning functions of a bank are deliberated on by this committee.

The investment committee

The committee concerns itself with the banks investment portfolio it passes judgment on what securities the bank should purchase in what amounts, how to diversify investment and related matters.

The trust committee

The fiduciary function of the bank will be the main concern of this committee. It will thresh out how the trust funds shall be invested, how much charge clients, how to administer trust agreements and others.

The Examination Committee

In order that the bank will always be in shipshape condition regarding its operations the internal examination and audit of its accounts is an essential feature of good management. It is the duty of this committee to improvise methods to conduct such internal examinations and supervision.

The President

In case the position of chairman of the board and president are held by one person, the president also presides the board meeting. If these positions are held by separate persons, however the chairman presides at the board meeting while the presidents becomes the chief executive or the general manager of the bank.

The Vice President

assist the president when the latter is present. However,when the president is absent or incapacitated,he or she takes over his duties and responsibilities.

the cashier

cashiers. He take care of all the monetary transactions of the bank. He is also responsible for the reports presented to the regulatory and supervisory agencies.

other officers

may be the comptroller and the auditor. The former takes care of all the accounting and statistical work of a bank while the latter verifies the accounts resulting from banking operations. The auditor also conducts bank examinations as often as possible.

Bank Operation

These are the executive functions, the teller functions and the bookkeeping functions. This holds true whether the bank is managed by one or two persons or by a greater number of persons.

the executive functions

the banker must be a man of creative managerial ability. He should possess a charming personality. He should be prudent and patient and must possess an above average intelligence if possible.

The Teller Function

he changes big bills with smaller denominations, he releases the checks or cash representing loans, he receives payment for loans

The Bookkeeping Function

He may also be called upon to summarize and interpret the facts and figures. This letter position requires accounting ability.