ILOCOS SUR POLYTECHNIC STATE COLLEGE
Tagudin Campus
MODULE 1
THE MODULE
TITLE: PHILIPPINE FINANCIAL SYSTEM
WHAT IS THE MODULE ALL ABOUT?
Module 1 focuses on the overview of financial system in the country.
LIST OF TOPICS TO BE STUDIED IN THE MODULE
⮚ Lesson 1. Monetary System
⮚ Lesson 2. Financial Institutions
⮚ Lesson 3. Financial Market
INTENDED LEARNING OUTCOMES (ILO)
At the end of this module, the students would be able to:
1) Learn and understand the current Philippine Financial System.
2) Identify the different financial institutions and financial market.
Course Code: Fin 153
Descriptive Title: MONETARY POLICY AND
CENTRAL BANKINGInstructor: Mary Rose Supsup Abaniz
ILOCOS SUR POLYTECHNIC STATE COLLEGE
Tagudin Campus
MODULE 1
LEARNING CONTENT
PHILIPPINE FINANCIAL SYSTEM
INTRODUCTION
Money has major and minor functions. Its use in any of these capacities
brings a variation in the volume and direction of business activities. Some factors
like size of the population, extent of education, the technical competence of
industrial leaders, the availability of natural resources, accumulation of natural
equipment, standard of living, one way or another affect the direction and volume of
production, distribution and consumption of goods. But, it is money that really plays
a distinct role in the determination of the volume of output, its production, its
distribution of the factors of production and the level of consumption. The study of
which seeks to discover and explain how the use of money in its different functions
affect the production, distribution and consumption of goods is called monetary
theory.
The Financial System of the Philippines serves as catalyst in the country’s
growth and development. It is the custodian of the of the country’s liquid reserves
and based essentially on trust and confidence of the public.
Financial institutions, particularly banks, perform two major roles: as
participants, particularly in the money creation process and as intermediaries in the
Savings-Investment process.
Banks accept deposits from the general public and provide these depositors
with reasonable earnings as well as access to their funds. Through their lending
mechanism, they are able to create money and provide finance to investors and
entrepreneurs who in turn utilize this fund to provide goods and services.
Indeed, banks and other financial institutions perform a vital role in the
financial system more especially the Central Bank of the Philippines or the Bangko
Sentral ng Pilipinas.
Lesson 1 – MONETARY SYSTEM
In the Philippine economy, the private and the government financial
institutions perform related financial functions, one of which is the monetary system.
The monetary system is responsible for creating and transferring money. The
monetary system creates money which serves as a medium of exchange. This
money can be used by individuals and businesses to buy goods and services.
Course Code: Fin 153
Descriptive Title: MONETARY POLICY AND
CENTRAL BANKINGInstructor: Mary Rose Supsup Abaniz
ILOCOS SUR POLYTECHNIC STATE COLLEGE
Tagudin Campus
MODULE 1
In accordance with Republic Act No. 265, The Bangko Sentral ng Pilipinas or BSP is
the central monetary authority of the Republic of the Philippines. It provides policy
directions in the areas of money, banking and credit and exists to supervise
operations of banks and exercises regulatory powers over non-bank financial
institutions. It keeps aggregate demand
from growing rapidly with resulting high
inflation, or from growing too slowly,
resulting in high unemployment.
The primary objective of BSP's
monetary policy is to promote price
stability because it has the sole ability to
influence the amount of money circulating
in the economy. In doing so, other
economic goals, such as promoting financial stability and achieving broad-based,
sustainable economic growth, are given consideration in policy decision-making.
Creating Money
Monetary System
Tra
nsferring Money
Lesson 2 – FINANCIAL INSTITUTIONS
The financial institutions accumulate or gather savings. When deposits are
accumulated, they can be used for loans and investments. Financial institution means
a bank that provides investment and depository services to
customers.
Accumulating Savings
Financial Institutions
Lending/Investing Savings
A financial institution is responsible for the supply of money to the market
through the transfer of funds from investors to the companies in the form of loans,
deposits, and investments. Large financial institutions such as JP Morgan Chase,
HSBC, Goldman Sachs or Morgan Stanley can even control the flow of money in an
economy.
The most common types of financial institutions include commercial banks,
investment banks, brokerage firms, insurance companies, and asset management
funds. Other types include credit unions and finance firms.
Financial
Course Code: Fin 153
Descriptive Title: MONETARY POLICY AND
CENTRAL BANKINGInstructor: Mary Rose Supsup Abaniz
ILOCOS SUR POLYTECHNIC STATE COLLEGE
Tagudin Campus
MODULE 1
institutions are regulated to control the supply of money in the market and protect
consumers.
A financial institution (FI) is a
company engaged in the business of dealing with
financial and monetary transactions such as
deposits, loans, investments, and currency
exchange. Financial institutions encompass a
broad range of business operations within the
financial services sector including banks, trust
companies, insurance companies, brokerage
firms, and investment dealers. Financial institutions can vary by size, scope, and
geography.
Lesson 3 –
FINANCIAL MARKETS
A financial market is a
market
where buyers and sellers trade
commodities, financial
securities, foreign
exchange, and other freely
exchangeable
items (fungible items) and derivatives of
value at low transaction costs and at
prices that are determined by market
forces.
The money markets, where large-scale, short-term debts are arranged, and capital
markets, where longer-term debts are traded, make up the financial market.
Securities include bonds and shares, while commodities might be gold, silver and
other metals, or agricultural products such as coffee, cocoa, wheat, corn, etc.
Financial markets refer broadly to any marketplace where the trading of
securities occurs, including the stock market, bond market, forex market, and
derivatives market, among others. Financial markets are vital to the smooth operation
of capitalist economies.
The financial markets are where financial instruments and securities created
and sold in the primary market securities. Several types of financial institutions
facilitate or assist in the process of buying and selling securities.
Marketing Financial Assets
Financial Markets
Transferring Financial Assets
Course Code: Fin 153
Descriptive Title: MONETARY POLICY AND
CENTRAL BANKINGInstructor: Mary Rose Supsup Abaniz
ILOCOS SUR POLYTECHNIC STATE COLLEGE
Tagudin Campus
MODULE 1
SUMMARY OF MODULE 1 – PHILIPPINE FINANCIAL SYSTEM
The Philippine Financial System comprises of three factors, namely:
1) Monetary System – responsible of creating and transferring of
money. One definite example is the Bangko Sentral ng Pilipinas.
2) Financial Institutions – they accumulate savings and lend/invest
savings. Examples are commercial banks, investment banks,
brokerage firms, insurance companies, and asset management
funds, credit unions and finance firms
3) Financial Markets – market and transfer financial assets. Examples
are stock market, bond market, forex market, and derivatives market,
etc.
References:
Pagoso, Cristobal M. (2010), Money, Credit and Banking,
Miranda, Gregorio S, (2004): Essentials of Money, Credit and Banking (Revised
Edition)
You may now
proceed to the
next module of
this course. I
hope you have learned some information if not a lot in the
lessons discussed earlier.
Course Code: Fin 153
Descriptive Title: MONETARY POLICY AND
CENTRAL BANKINGInstructor: Mary Rose Supsup Abaniz
ILOCOS SUR POLYTECHNIC STATE COLLEGE
Tagudin Campus
MODULE 1
Name: _______________________________ Score: _______ Year and Section:
__________ Date: ________
INTENDED LEARNING ACTIVITY
By observing your environment, how did the COVID-19 Pandemic affect
the Philippine Financial System today?
Instruction: Write your reflection in not less than 300 words. Give concrete
examples.
Scoring Rubrics:
26-30 points The answer is well-written, organized and the idea is
very relevant to the question and has no grammatical
or spelling errors.
16-25 points The answer is fairly written, and the idea is almost
relevant to the question and has one grammatical
or spelling error.
11-15 points The answer is somewhat relevant to the questions
and has two to three grammatical or spelling errors.
6-10 points The answer is unclear and has four grammatical
or spelling errors.
1-5 points The answer does not address the question and
has more than five grammatical or spelling
errors.
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Course Code: Fin 153
Descriptive Title: MONETARY POLICY AND
CENTRAL BANKINGInstructor: Mary Rose Supsup Abaniz