Banking Banking InstitutionsInstitutions

What are Banks?What are Banks?• Origin of the word:Origin of the word:• Banco – Italian word meaning Banco – Italian word meaning

desk/bench.desk/bench.• Macella – roman word means Macella – roman word means

bench.bench.• Trapeza- greek word of Trapeza- greek word of

banker’s table.banker’s table.

What are Banks?What are Banks? Officially chartered institutions empowered to Officially chartered institutions empowered to

receive deposits, make loans, and provide receive deposits, make loans, and provide checking and savings account services, all at a checking and savings account services, all at a profit.profit.

a financial intermediary that accepts deposits a financial intermediary that accepts deposits and channels those deposits into lending and channels those deposits into lending activities, either directly or through capital activities, either directly or through capital markets. A bank connects customers with capital markets. A bank connects customers with capital deficits to customers with capital surpluses.deficits to customers with capital surpluses.

financial institutions given the responsibility of financial institutions given the responsibility of accepting deposits from the general public and accepting deposits from the general public and lending these to those in need.lending these to those in need.

an institution whose current operations consist an institution whose current operations consist of granting loans and receiving deposits from of granting loans and receiving deposits from the public.the public.

Classification of BanksClassification of Banks• As to:As to:– OwnershipOwnership

• Private BanksPrivate Banks• Public BanksPublic Banks

– Place of IncorporationPlace of Incorporation• DomesticDomestic• ForeignForeign

– StructureStructure• Stock CorporationStock Corporation• Non-stock CorporationNon-stock Corporation

Classification of BanksClassification of Banks• As to:As to:–FunctionsFunctions• Commercial BankingCommercial Banking• Trust CompanyTrust Company• Savings BankingSavings Banking• Rural BankingRural Banking• Development BankingDevelopment Banking• Cooperative BankingCooperative Banking• Investment BankingInvestment Banking• Central BankCentral Bank

Classification of BanksClassification of Banks

• As to:As to:–ManagementManagement•Unit BankingUnit Banking•Group BankingGroup Banking•Branch BanksBranch Banks

Classification of BanksClassification of Banks As to:As to:– Structure (Base on BSP MORB)Structure (Base on BSP MORB)

Universal BanksUniversal Banks Commercial BanksCommercial Banks Thrift BanksThrift Banks Rural BanksRural Banks Specialized government banksSpecialized government banks Offshore banking unitsOffshore banking units

BSP MORB (Manual of Regulations for BSP MORB (Manual of Regulations for Banks)Banks)-A compilation of banking regulations -A compilation of banking regulations and policy issuances of the Bangko and policy issuances of the Bangko Sentral ng Pilipinas (BSP). It is a Sentral ng Pilipinas (BSP). It is a convenient reference and guide for convenient reference and guide for banks in the conduct of their operations.banks in the conduct of their operations.

Classification of BanksClassification of Banks• As to Ownership:As to Ownership:

1. Private Banks1. Private Banks-Organized and capitalized by -Organized and capitalized by private citizens and investors for private citizens and investors for profits.profits.2. Public Banks2. Public Banks-Organized by the state and -Organized by the state and sometimes with minimum private sometimes with minimum private ownershipownership

Classification of BanksClassification of Banks• As to Place of Incorporation:As to Place of Incorporation:

1. Domestic1. Domestic-Incorporated under the Philippine -Incorporated under the Philippine laws, in conformity with the laws, in conformity with the corporation codecorporation code2. Foreign2. Foreign-Incorporated under the laws of -Incorporated under the laws of another country although the bank another country although the bank is doing business in the Philippinesis doing business in the Philippines

Australia and New Zealand Banking GroupBangkok BankBank of America, N.A.Bank of ChinaChinatrust Commercial BankCitibank, N.A.Deutsche Bank AGHongkong and Shanghai Banking CorporationING GroupJPMorgan ChaseKorea Exchange BankMega International Commercial BankMizuho Corporate BankStandard Chartered BankThe Bank of Tokyo-Mitsubishi UFJ, Ltd.

List of Foreign Banks doing business in the List of Foreign Banks doing business in the Philippines:Philippines:

Classification of BanksClassification of Banks• As to Structure:As to Structure:

1. Stock Corporation1. Stock Corporation-Capitalization is derived -Capitalization is derived

from shares of stocksfrom shares of stocks2. Non-Stock Corporation2. Non-Stock Corporation

-Organization is on the -Organization is on the membership basis for mutual membership basis for mutual benefits.benefits.

Classification of BanksClassification of Banks As to Management:As to Management:

1. Unit Banking1. Unit Banking-ownership is concentrated on one -ownership is concentrated on one

corporation which does banking business corporation which does banking business independent of others.independent of others.2. Group Banking2. Group Banking

-majority portion of the stocks of -majority portion of the stocks of two or more banks are held by a holding two or more banks are held by a holding company. The members of the group may company. The members of the group may be unit banks or branch banksbe unit banks or branch banks3. Branch Banks3. Branch Banks

-There is a head office and two or -There is a head office and two or more branches.more branches.

Classification of BanksClassification of Banks As to StructureAs to Structure

1. Universal Banks1. Universal Banks-A Universal Bank shall have the authority to -A Universal Bank shall have the authority to exercise, in addition to the powers and exercise, in addition to the powers and services authorized for a Commercial Banks services authorized for a Commercial Banks and those provided by other and those provided by other laws which are laws which are the following:the following:

a) Power of an Investment Housea) Power of an Investment Houseb) Power to invest on non-allied enterprisesb) Power to invest on non-allied enterprisesc) The power to own up to 100% of equity in a c) The power to own up to 100% of equity in a Thrift Banks, and Rural Banks, and Financial Thrift Banks, and Rural Banks, and Financial Allied Enterprise,Allied Enterprise,d) The power to own up to 100% voting stock of d) The power to own up to 100% voting stock of only one other UB or KBonly one other UB or KB

Classification of BanksClassification of Banks• As to Structure (base on BSP MORB)As to Structure (base on BSP MORB)

2. Commercial Banks2. Commercial Banks-Corporations engaged regularly in the -Corporations engaged regularly in the lending of funds obtained from the public lending of funds obtained from the public through the receipt of deposits and which through the receipt of deposits and which accept or create demand deposits subject accept or create demand deposits subject to withdrawal. to withdrawal. -Exercise the general powers incident to a -Exercise the general powers incident to a corporation and carry the business of a corporation and carry the business of a commercial bank such as:commercial bank such as:

Classification of BanksClassification of Banks As to StructureAs to Structure

22. Commercial Banks. Commercial BanksBusiness of Commercial Banks:Business of Commercial Banks:-accepting drafts-accepting drafts-issuing letters of credit-issuing letters of credit-discounting and negotiating promissory notes, drafts, -discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt bills of exchange, and other evidences of debt -accepting or creating demand deposits;-accepting or creating demand deposits;-receiving other types of deposits and deposit substitutes-receiving other types of deposits and deposit substitutes-buying and selling foreign exchange and gold or silver -buying and selling foreign exchange and gold or silver bullionbullion-acquiring marketable bonds and other debt securities-acquiring marketable bonds and other debt securities-extending credit, subject to such rules as the Monetary -extending credit, subject to such rules as the Monetary Board may promulgate.Board may promulgate.

Classification of BanksClassification of Banks As to StructureAs to Structure

2. Commercial Banks2. Commercial BanksOther Authorize Business of Commercial Banks:Other Authorize Business of Commercial Banks:- invest in the equities of allied enterprises- invest in the equities of allied enterprises- purchase, hold and convey real estate- purchase, hold and convey real estate- receive in custody funds, documents and valuable - receive in custody funds, documents and valuable objectsobjects- act as financial agent- act as financial agent- make collections and payments for the account of - make collections and payments for the account of others and others and perform such other services for their perform such other services for their customerscustomers- act as managing agent, adviser, consultant or - act as managing agent, adviser, consultant or administrator of investment management/ administrator of investment management/ advisory/consultancy accountsadvisory/consultancy accounts- rent out safety deposit boxes- rent out safety deposit boxes

Functions of Commercial Functions of Commercial and Universal Banksand Universal Banks

1.1. Deposit functionDeposit function2.2. Loan FunctionLoan Function3.3. Exchange FunctionExchange Function4.4. Trust FunctionTrust Function5.5. Advisory FunctionAdvisory Function

Classification of BanksClassification of Banks• As to StructureAs to Structure

3. Thrift Banks3. Thrift Banks-Established primarily to -Established primarily to

mobilize small savings and mobilize small savings and provide loans generally longer provide loans generally longer and easier terms. They cater to and easier terms. They cater to small and medium enterprises.small and medium enterprises.

Classification of Banks As to Structure

3. Thrift BanksServices offered by Thrift Banks:- grant secured and unsecured loans- extend credit facilities to private and government employees- accepts savings and time deposits- accepts foreign currency deposits- act as a correspondent to other financial institutions- purchased, hold, and convey real estate.- open current or checking account- act as a collection agent for government agencies- act as official depository of national agencies and of municipal where the TB is located

Classification of BanksClassification of Banks• As to StructureAs to Structure

4. Rural Banks4. Rural Banks-Largely privately owned that -Largely privately owned that

provide credit facilities to provide credit facilities to farmers and merchants or their farmers and merchants or their cooperatives and in general, to cooperatives and in general, to the people of rural communities.the people of rural communities.

Classification of Banks As to Structure

4. Rural BanksServices offered:- extend loans and advances primarily for the purpose of meeting the normal credit needs of farmers, fishermen, cooperatives, merchants, private and public employees- accepts savings and deposits- act as a collection agent- accepts current or checking accounts- act as trustee over estates or properties of farmers and merchants-act as official depository of municipal, city or provincial funds in the municipality, city or province where it is located

Classification of BanksClassification of Banks• As to StructureAs to Structure

5. Coop Banks5. Coop Banks-Coop Bank shall be -Coop Bank shall be

organized organized primarily to provide primarily to provide financial and financial and credit services to credit services to cooperatives and cooperatives and may perform may perform any or all of the services any or all of the services offered by RBs.offered by RBs.

Classification of BanksClassification of Banks• As to StructureAs to Structure

6. Specialized Government Banks6. Specialized Government Banks-Banks organized by the -Banks organized by the government government to serve a special to serve a special purpose.purpose.

a.a. Islamic BankIslamic Bankb.b. Land Bank of the PhilippinesLand Bank of the Philippinesc.c. Development Bank of the Development Bank of the

PhilippinesPhilippines

Classification of BanksClassification of Banks• Islamic BanksIslamic Banks

-A bank that religiously abides by the -A bank that religiously abides by the Shariah, zeroing in on its transaction rules. Shariah, zeroing in on its transaction rules. Most people bridge this type of banking to Most people bridge this type of banking to the concepts of prohibited interests (usury) the concepts of prohibited interests (usury) and profit sharing.and profit sharing.

Ex.Ex.Al-Amanah Islamic Investment Bank of the Al-Amanah Islamic Investment Bank of the

Philippines (1974)Philippines (1974)• Provides credit, commercial, development and Provides credit, commercial, development and

savings facilitiessavings facilities• Caters primarily Muslim provinces of Mindanao Caters primarily Muslim provinces of Mindanao

including Palawan.including Palawan.• Based on the Islamic concept of banking Based on the Islamic concept of banking

following the no-interest and partnership following the no-interest and partnership principles.principles.

Classification of BanksClassification of Banks• Development Bank of the PhilippinesDevelopment Bank of the Philippines

- established in 1946 (Rehabilitation - established in 1946 (Rehabilitation Finance Corporation)Finance Corporation)- created by the government with - created by the government with specific function of providing long-specific function of providing long-term credit to finance development term credit to finance development projects and promoting projects and promoting establishment of private development establishment of private development banks.banks.

Classification of BanksClassification of Banks• Land Bank of the PhilippinesLand Bank of the Philippines

-Established to be the financial arm -Established to be the financial arm of the land reform program (1963)of the land reform program (1963)-Bank use to finance the -Bank use to finance the acquisition by the government of acquisition by the government of landed estates for division and landed estates for division and resale of small landholders, and the resale of small landholders, and the eventual purchase of the eventual purchase of the landholding by the tenant-lesseelandholding by the tenant-lessee

Classification of BanksClassification of Banks• As to StructureAs to Structure

8. offshore banking unit8. offshore banking unit-refers to a branch subsidiary -refers to a branch subsidiary

or affiliate of a foreign banking or affiliate of a foreign banking corporation which is duly corporation which is duly authorized by the BSP to authorized by the BSP to transact banking business in the transact banking business in the Philippines.Philippines.

Required Minimum Required Minimum CapitalizationCapitalization

• Universal BankUniversal Bank– 5.4Billion5.4Billion

• Commercial BankCommercial Bank– 2.8Billion2.8Billion

• Thrift BankThrift Bank– 1Billion1Billion

• Rural BankRural Bank– .5Billion.5Billion

Bank ServicesBank Services1.1. Rental of safety deposit boxesRental of safety deposit boxes2.2. Sale of drafts and cashier’s Sale of drafts and cashier’s

checkschecks3.3. Sale of traveler’s checkSale of traveler’s check4.4. Collection agentCollection agent5.5. Credit informationCredit information6.6. PayrollsPayrolls