Banking and Financial Institution (Reviewer)

Principle of Savings

Collect fund by creating saving facilities.

Financial System

Composed of myriad markets and institutions which funds flow between lenders and borrowers.

Currency Issue

Considered as legal tender for private and public debts.

Obras Pias

a religious foundations organized by Fr. Juan Fernandez de Leon in 1594 that accumulated large funds from legacies of wealthy individuals who made out will before going out on dangerous expeditions

Financial Institution

Intermediary that channels the savings of individuals, businesses, and governments into loans or investments.

Power to regulate

Involves laying down of monetary and credited regulations as well as of safety requirements.

Indirect Lending

Involves lending by the lender to a financial intermediary who pools the funds of many lenders to reland a mark-up over the cost of funds.

Direct Lending

Involves the transfer of funds from the ultimate lender to the borrower, most oftern thru a third party.

Bangko Sentral ng Pilipinas

It has the sole right and authority to issue banknotes and establish bank reserves in the Philippines. It's the only institution that has an exclusive control over the supply of money in the country.

Power to sanction

Provides the supervisory authorities with the ability to revoke a license or to impose corrective actions.

Safe keeping/Certification of Value role

Safeguarding a customer's valuables and appraising and certifying their true market value.

Asymmetric information

Situations in which buyers and sellers are not equally well informed about the characteristics of goods and services for sale in the marketplace.

Diversification

Spreading out investments to reduce risk.

Guarantor role

Standing behind their customers to pay off customer debts when those customers are unable to pay.

Transaction costs

The costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services.

Liquidity

The ease with which an asset can be converted into the economy's medium of exchange.

Transactions/Transactions function

The economy needs the ability to make and receive payments accurately and efficiently to convert currencies across markets.

Information

The financial System provides market players more access to vital data about borrowers' and lenders' expectations, and what they have offer.

Risk Sharing

The financial system provides risk sharing by allowing savers to hold diversified assets.

financial intermediation

The process by which financial institutions accept savings from businesses, households, and governments and lend the savings to other businesses, households, and governments

Adverse Selection

The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction

Mergers

absorption of one or more corporations by another existing corporation which retains its identity and takes over rights, privileges, franchises and properties and assumed all liabilitues of absorbed corporations in the same manner

Agency role

acting on behalf of customers to manage and protect their property.

Derivative Deposit

created from the proceeds of loans.

American Period

during this period banks which already existing were allowed to continue operations and more banks were opened to finance the increasing demand of trade

Japanese Occupation

during this period three domestic banks namely Philippine National Bank, Bank of the Philippine Islands and Philippine Bank of Commerce, were allowed to resume operation

Banking Reforms of 1980

effected a revision in the Philippine banking structure including administrative regulations

Determination of Exchange Rate Policy

ensure orderly conditions in the market.

Principle of Solvency

having sufficient capital to run the business.

Financial supervision

regulatory powers performing quasi-banking functions.

Universal and Commercial Banks

represent the largest single group, reseource-wise financial institutions that offer widest variety of banking services.

Payment role

Carrying out payments for goods and services on behalf of customer.

Portfolio

A collection of financial assets.

Financial Market

A market place, where creation and trading of financial assets takes place.

Earnings or Income

A person places his money as deposit if he us after generating money.

Savings/Investment Advisor role

Aiding customers in fulfilling their long-range goals for a better life by building and investing savings.

Money Market

All institutions and procedures that provides for transactions in short-term.

Direct Deposit

An automatic deposit of a paycheck without having to take a physical check to the bank.

Deposits Function

An economy needs a safe house for surplus liquidity and a low-risk, low-return investment destination.

Risk Management role

Assisting customers in preparing financially for the risk of loss to property, persons, and financial assets.

Lending Function

Bank provide funding to the economy.

Competition for Other Bank Services

Banks and their affiliates offer many products and services in addition to deposits and loans

Economies of scale and diversification in the use of funds

Banks can use the combined savings of the small depositors to finance the large-scale investments of corporations.

Advisor Function

Banks provide advisory services by counselling retail customers on adjacent financial needs investment.

Accomodation

Businessmen deposit their money because of the special favors they want from banks.

Risk

Degree of uncertainty of return on an asset; in business, the likelihood of loss or reduced profit.

Safety

Depositors place their excess funds in the bank because they are aware that modern banks have fireproof and burglarproof safes vault.

Principle of Efficiency

Efficiency in management.

Principle of Services

Ensure best services to their customers.

Power to control

Exercised through the Central Bank's requiring the banks to submit regular reports and the analysis of such information.

Technical Expertise

Financial Institution maintain personel who are knowledgeable enough in their business activities.

Non-Banking Institutions

Financial Institution whose principal functions include lending, investing or placement of funds acquired for their own account of for others.

Monitoring

Happens after the loan has made.

Screening

Happens before a loan is made.

Liquidity Management

Implements monetary policy aimed at influencing money supply consistent w/ its primary objective to maintain price stability.

Secondary Market

In this market previously issued securities are traded among investors.

Banking Institutions

Include all financial institutions engaged in the lending of funds obtained from the public through receipt of deposits of any kind.

Information costs

Include the costs that savers incur to determine the credit worthiness of borrowers.

Power to license

Provides the ability to take preventive action against insufficiently funded or ill-prepared institutions.

Principle of Secrecy

Keep secret about customer's account information.

Principle of Location

Locate branched where many customers are available.

Principle of Profitability

Main objective is to earn profit.

Principle of Loan and Investment

Main source of profit is granting loans to any individual or firms.

Management of Foreign Currency Reserves

Maintain sufficient int'l reserves to meet any net demands for foreign currencies in order to preserve stability and convertability of phil. peso.

Moral Hazard

Occurs when the lender is subject to the risk that the borrower will engage in risky activities that jeopardize repayment while seeking high returns.

Bank Management

Process of managing the Bank's statutory activity.

Intermediation role

Transforming savings received from household into credit for business firms and others in order to make investments.

Investment House Function

Underwriting functions such as buying & selling securities & bonds.

Term Transformation

When banks finance long-term loans to companies through the short-term deposit liabilities.

Convenience

When depositor is prompted by the good quality service offered through depositing.

Primary Market

Where securities are created. In this market firms sell (floated) new stocks and bonds to the public for the first time.

Microfinance bank

a bank that provides loans to very poor people, usually in developing countries

demand deposit

a deposit of money that can be withdrawn without prior notice.

Increased Competition

bankers now compete directly in price, product offerings and service

thrift banks

banking institutions that offer deposit accounts and focus on offering home mortgage loans; also called thrifts, or savings and loan associations

Foreign banks

banks established at other countries but have opened operations in the Philippines and allowed to acquire up to 100% of voting stock of existing bank within seven years

One-Stop Banking

expanded commercial or unibank may acquire 100% of equity of an investment house, thrift banks, rural banks and other financial undertakings.

Lender of Last Resort

extend discounts, loans and advances to banks.

El Banco Espanol Filipino de Isabel II

first commercial bank organized in the Far East and also known as Bank of the Philippine Islands

Philippine Bank of Commerce

first private commercial bank in the country wholly owned nlby Filipinos and was opened for business in 1938

Joint IMF/WB Mission

group composed of representatives from the International Monetary Fund and the World Bank to study the Philippine Financial System with dynamic pace of growing society

Circular No. 237

issued by Monetary Board on April 19, 200 consolidating and clarifying all existing rules and regulations on mergers and acquisitions of banks and other financial institutions as well as improving the incentive package

BP Nos. 61-67 and Implenting Circulars Nos. 739-742

laws issued by CBP intended to develop increased competition and more use of funds for debt and equity financing

Principle of Liquidity

making the money available anytime.

Rural and Cooperative Banks

more popular type of banks in the rural communities that promote and expand rural economy by providing basic financial services to people

Universal Banking

new concept of banking that involves commercial banking (full domestic and international banking) and investment house (underwriting, securities dealership and equity investments)

Competition for Payment Services

once the exclusive domain of banks and other depository institutions the nation's payment system has become highly competitive

Republic Act 9160

otherwise known as the Anti-Money Laundering Act of 2001 that was passed into law on September 29, 2001

Competition for Loans

put downward pressure ob loan yields and interest spreads over the cost of bank funds; high quality corporate borrowers have always the option to issue commercial papers/ long-term bonds rather than borrow from banks

Competition for Deposits

range of deposit products is much broader that what was previously available; advances in technology means that businesses and consumers have substantially greater choices than before.

Policy Role

serving as a conduit for government policy in attempting to regulate the growth of the economy and pursue social goals.

Financial Innovation

the catacyst behind the eevolving financial services industry and the restructuring of financial markets

General Banking Law of 2000

the passage into law of RA 8791 that provides regulation of the organization and operations of banks, quasi-banks and trust entities.

Deregulation

the process of eliminating regulations

Reregulations

the process of implementing new restrictions or modifying existing controls on individuals and activities associated with banking

Consolidation

union of two or more corporations into a single new corporation

Central Bank Act

upon enactment of this act in 1948 banking system in the country continued to grow and expand and Philippine Financial System grow in size, become complex and sophisticated

Rehabilitation Finance Corporation

when banks became worthless in Japanese notes, immediate rehabilitation of banking system was made through this