REGULATION OF THE FINANCIAL SYSTEM

A well-functioning financial system is vital for the economy, businesses and consumers. To make sure
that the financial sysytem performs its mandated task, the government, through it's various mechanisms,
monitor and control the activities of the different components of the system.

Financial regulation is part of ensuring the safety and soundness of the financial system and protecting
consumers.

Financial regulation refers to the rules and laws firms operating in the financial industry, such as banks,
credit unions, insurance companies, financial brokers and asset managers must follow.

However financial regulation is more than just having rules in place – it’s also about the ongoing
oversight and enforcement of these rules.

FINANCIAL INTERMEDIARIES AND THEIR SOURCES OF FUNDS

Type of Intermediary

Sources of Funds

Commercial Banks

Savings and Loan Association

Mutual Savings Bank

Credit Union

Deposits (checking, savings, and time)

Life Insurance Companies

Nonlife Insurance Companies

Premiums from policyholders

Pension Fund Companies, GSIS, SSS

Employer and employee contributions

Finance Companies

Issues of commercial paper, stocks, bonds

Mutual Funds

Money Market Mutual Funds

Issues of Shares

The enactnent of laws comprises the first area for government control. A specific instance of regulation
for example, is provided under the Financing Company Act of 1998 which makes real estate an asset
that can be the subject of financial leasing.

The second area for monitoring and controlling the financial system is through government regulatory
agencies. Various memoranda anf circulars are issued by these agencies whenever circumstances
require such actions. An example is the approval of the IRR of the R.A. no 8556.

WHAT ARE FINANCIAL MARKETS

Financial markets, from the name itself, are a type of marketplace that provides an avenue for the sale
and purchase of assets such as bonds, stocks, foreign exchange, and derivatives.

Businesses and investors can go to financial markets to raise money to grow their business and to make
more money, respectively.
To state it more clearly, let us imagine a bank where an individual maintains a savings account. The bank
can use their money and the money of other depositors to loan to other individuals and organizations
and charge an interest fee.

The depositors themselves also earn and see their money grow through the interest that is paid to it.
Therefore, the bank serves as a financial market that benefits both the depositors and the debtors.

There are many things that financial markets make possible, including the following:

Financial markets provide a place where participants like investors and debtors, regardless of their size,
will receive fair and proper treatment.

They provide individuals, companies, and government organizations with access to capital.

Financial markets help lower the unemployment rate because of the many job opportunities it offers.

Financial markets provide a permanent venue for savers and borrowers: the savers have a place to go
when they want to invest their savings, and the borrowers have a convenient place to go when they
want to borrow.

Financial markets are beneficial in the sense that funds are directed to DSU's that can use them most
efficiently, and they provide liquidity to savers.