CHAPTER 1

Commercial bank is a service type industry, that has 5 types. 1st is universal banks (also called

"expanded commercial banks"), thrift banks, rural banks, government-owned banks and

commercial banks. Commercial banks are the heart of our financial system. They hold the

deposit of millions of person, government, and business units. The ability of the commercial

banking system to perform its tasks efficiently and in harmony with our needs and economic

goals depends in large measure on efficient management.

The history of banking in the Philippines can best be reviewed by dividing into 3

periods Spanish era, American era and 4 years Japanese occupation and post-war and

independent era

THE SPANISH ERA

The first organized credit institution in the Philippines were known as “obra pias”

which began to be established in the late 16th century. The capital of these institution

came from pious Catholics, and the income was intended for charitable and religious

purposes. Most of the funds were lent out to traders who used the to finance their

commerce with Acapulco. This came to an end in 1820, and by 1851, they were almost

non-existent. The year 1851 saw the opening of the 1st important commercial bank in

the Philippines. This was the banco español-filipino at present (bank of the Philippine

island). Its charter was originally granted in 1828 but it was not until 1851 that this

institution commenced operations. The bank engage in general banking functions and

finance in a limited way the foreign trade of the island. It was also granted the privilege

of note issue by a royal decree on October 7, 1854. The opening of Suez Canal in 1869
made the European markets more accessible at lesser cost to Philippine products.

British capital began to be attracted towards the island and in 1873 the chartered bank

of India, Australia and china established an agency in the Philippines. Two years later,

the Hong Kong and Shanghai banking Corporation, another British-owned bank, put up

a branch. Both engaged in general banking business but confined most of their activities

to the buying and selling of drafts and bills of exchange, so that they were more of

exchange banks than commercial banks although they received deposits to a

considerable extent. They are operating today as commercial banks. In 1882, a savings

bank, known today as Monte Peninsular Ultramarino of Madrid was likewise opened in

the island in 1883 but halted operations 4 years later. At the end of Spanish regime,

therefore, there were 4 banks, 3 commercial and 1 saving bank doing business in the

Philippines.

The supervision and regulation of the banking business during the period were

negligible. The only laws then existing which had references to banking were contained

in general provisions of the Spanish civil; code and code of commerce. There were no

definite to banking commitments on the part of the government as to its responsibility

with respect to the banks and their clients. During this period, there was no significant

interest of Filipino capital and initiative in banking.

THE AMERICAN ERA

`Upon the coming of the Americans to the Philippines at the turn of the century,

the four banks established during the Spanish regime continued operating. Soon they

were joined by branches of the International Banking Corporation (subsequently

absorbed by and operated as a branch of the National City Bank of New York) and the

Guaranty Trust Company. The latter branch, however, stayed only a few years. In 1906,

the Postal Savings Bank was created as a division of the Bureau of Posts to promote

the habit of the thrift among people, particularly the low-income group and those who

could not be served by banks in the provinces. Two years later, the government-owned

Agricultural Bank was established with a capital of P1 million. It failed to render effective

service to the farmers, however, due to its meager capital.

Banking business in the Philippines was dominated by foreign interests until the

establishment of the Philippine National Bank in 1916 alleviated this situation to some

extent. It was capitalized at P20 million which was almost entirely subscribed by the

government. It was granted the privileged of note issue. The Philippines National Bank

was organized not only to grant short-term loans to merchants but also to long-term

credit to agriculture and industry. It absorbed the Agricultural Bank and also expanded

its facilities by operating branches, agencies, and sub-agencies in the provinces. In

1934, the Philippines National Bank had to undergo a reorganization and its capital was

reduced to P10 million.

After World War 1, several banks were established in the Islands. Among them were the

Yokohama Specie Bank (1919, the China Banking Corporation (1920), the People’s

Bank and Trust Company (1926), the Mercantile Bank of China (1926).

After the establishment of the Commonwealth in 1935, more banks entered the

Philippines scene. The Nederlandsch Indische Handelsbank opened a branch in Manila

in 1937. In 1938, The Philippines Bank of Commerce, perhaps the first bank with

genuine Filipino private capital, was founded. In the same year, the Bank of Taiwan was
granted permission to operate a Manila branch. In 1939, the Philippine Bank of

Communications and the Bank of the Commonwealth began commercial banking

operations. Likewise, the government-owned Agricultural and Industrial Bank

commenced operations that year.

Prior to the second World War, The Philippines was serviced by 17 banks with 17

Manila offices, 22 provincial branches, 54 provincial agencies and 1,000 sub-agents.

Two of the banks, the Philippine National Bank and the Agricultural and Industrial Bank,

were government-owned; seven were domestic banks and trust companies, two were

savings and mortgage bank, six were branches of foreign banks. Of the seven domestic

banks, two were under the control of the ecclesiastical corporations; two were Chinese-

owned; two were Filipino-owned and one predominantly of American capitalization. Of

the six foreign banks, one was American; two were British; two were Japanese and the

one was Dutch.

During the period, definite shape were taken to supervise and regulate the business of

banking so as to provide a measure of safety to bank depositors and creditors as well

as the banks themselves. In 1900, the first Philippine Commission passed Act No. 52

providing for the regular examination and inspection of banks. The Bureau of Banking

was created in 1929, transferring the power of supervision over these institutions from

the Insular Treasurer of the Bank Commissioner. The following year saw the

establishment of the Manila Clearing House. It was organized by the domestic banking

corporations, while branches of foreign banks stayed out of the association. An

indication of the stability of the business during this period can be found in the fact that
the Philippine territory was exempted by the President of the United States from the

observance of the Banking Holiday in March 1933.

The second world war wrought havoc on the Philippine banking. During the Japanese

occupati0n , only Filipino-owned and Japanese banks were allowed to operate. The

southern development bank (nampo kaihatsu kinko) opened a branch in manila in 1942.

It acted as fiscal agent of the functions of central bank, issuing military notes, taking

custody of the clearing balances of the banks and receiving deposits from the banks.

Prior to the Japanese invasion, however, most banks were able to increase

substantially their dollar balances in the united states and placed part of their security

holding in the U.S. correspondence on a safekeeping basis. Moreover, in December

1941, the united states high commissioner carried into effect a financial ”scorched

earth” policy. Over Php.8 million of till cash, clearing house balances of almost Php.20

million and large amounts of securities and other valuables were turned over by the

banks to the high commissioner who arranged for their transfer to Corregidor and

eventually by submarine to the united states.

THE POSTWAR AND INDEPENDENCE ERA

Liberation found every domestic bank which operated during the Japanese

occupation unable to reopen for business. They could not meet their obligation in

Philippine currency since great part of their assets consisted of enemy war notes, bonds

and obligation of the Japanese-sponsored republic and balances with Japanese banks.

The banks had acquired these assets which became worthless as a consequence of the

war. The banks turned to the government for aid. Accordingly, the president of the
Philippines issued executive order no.96 invalidating all occupation deposits. War time

payments on bank loans with scrip, however, were declared valid by courts. The

promulgation on executive order no.48 in June 1945 paved the way for the reopening of

pre-war banks. The first license to re open was granted during the same month to the

national city bank of new York. The approval of commonwealth act no.726 in January

1945 enabled other domestic banks to reopen for business in march 1946. This act

provided a sum of 10 million to rehabilitate domestic banks by investing the funds in

preferred shares of the bank. The year 1946 saw the expansion of postal savings bank

facilities in cities, provinces and municipalities.

On January 2,1947, the rehabilitation finance corporation , created by republic act no.

85, commenced operations. It absorb the government-owned agricultural and industrial

bank. It was organized primarily to provide financial aid in the rehabilitation of the war-

ravaged country and to help in the rehab of the war-ravage country and to help in the

broadening and in the diversification of the economic structure.

During the same period, a branch of the bank of America was granted a permit to

conduct business in manila. Concurrently, the existing bank embarked on an expansion

of banking facilities by putting up branches elsewhere in manila and in some provinces.

In 1948, the general banking act was passed, providing definite rules and regulations

regarding the organizations and operation of banks. The following year, the central bank

of the Philippines was inaugurated. The compelling reasons for the establishment of this

institution stemmed from two basic problems facing the postwar Philippines. one

problem was of adjustment, the transition of a colonial raw material-producing economy

to an agricultural- industrial structure providing a reasonable degree of self-sufficiency

that befits a free nation. This task required a monetary system adequate flexible to

finance the economic adjustment. The rigid 100 per cent reserve system was

abandoned in favor of a managed currency system. The other problem was enlist the

resources of the banking system in this major economic endeavor. Bankers generally

ran their business independently of each other, without unified action in respect to the

effect of their decisions on the general economy. This attitude and practice have no

place in a economy struggling for development. Accordingly, the central bank was

establish to administer both the monetary and the banking systems.

The industry makes funds available through their lending and investing activities

to borrowers individuals, business firms and government. In so doing, they facilitate

both the flow of goods and services from producers to consumers and the financial

activities of government. They provide a large portion of our medium of exchange, and

they are the media through which monetary policy is affected. And they are system of

the nation and important to the functioning of our economy

 The most significant person that saved the commercial bank industry during the

global economic recession is the central bank’s governor Amando M. Tetangco. He has

an A.B economics degree at Ateneo De Manila University, cum laude and M.A in public

policy and administration, university of Wisconsin, Madison Wisconsin, USA . He eased

monetary policy, let loose credit into productivity sectors, reined in inflation, suspended

the crippling market-to-market asset valuation rule, and would be there in case

somebody need help.1

1
Philippines - Location and size, Population, Services, Retail, Tourism,
Communications http://www.nationsencyclopedia.com/economies/Asia-and-the-
Pacific/Philippines.html#ixzz0yxKFa1me

Bangko sentral ng pilipinas: Banking in the Philippines

Gregorio s. Miranda PHD: Non-commercial banking
Irvin Tucker: microeconomics for today

Gregorio s. Miranda PHD: Non-commercial banking

Irvin Tucker: microeconomics for today
BizNews asia vol.7 no.41.
 Chapter 2
Currently there are 36 commercial and universal banks who are operating in

the Philippines.

BANK NAME

1 BANCO DE ORO UNIBANK INC

2 METROPOLITAN BANK & TCO

3 BANK OF THE PHIL ISLANDS

4 LAND BANK OF THE PHILIPPINES

5 PHIL NATIONAL BANK

6 DEVELOPMENT BANK OF THE PHIL

7 RIZAL COMM'L BANKING CORP

8 UNION BANK OF THE PHILS

9 CHINA BANKING CORP

10 CITIBANK, N.A.

11 ALLIED BANKING CORP

12 UNITED COCONUT PLANTERS BANK

13 SECURITY BANK CORP

14 HONGKONG & SHANGHAI BANKING CORP

15 BANK OF COMMERCE

16 PHIL TRUST COMPANY

17 EAST WEST BANKING CORP

18 STANDARD CHARTERED BANK

19 PHILIPPINE VETERANS BANK

20 PHIL BANK OF COMMUNICATIONS

21 ASIA UNITED BANK CORPORATION

22 DEUTSCHE BANK AG

23 THE BNK OF TOKYO-MITSUBISHI UFJ LTD

 24 BDO PRIVATE BANK, INC.

25 MIZUHO CORPORATE BANK LTD-MANILA BR

26 CHINATRUST(PHILS) CBC

27 JP MORGAN CHASE BANK NATIONAL ASSN.

28 MAYBANK PHILIPPINES INC

29 INTERNATIONALE NEDERLANDEN GROEP BK

30 ANZ BANKING GROUP LTD

31 KOREA EXCHANGE BANK

32 MEGA INT'L COMM'L BANK CO LTD

33 BANK OF AMERICA N.A.

34 THE ROYAL BANK OF SCOTLAND (PHILS)

35 BANGKOK BANK PUBLIC CO LTD

36 BANK OF CHINA LIMITED-MANILA BRANCH

2
http://www.bsp.gov.ph/banking/universal.asp
The commercial bank industry’s total resources rose by 10.1% in the third quarter of

2009. The increase in three months, from June 2009 to September 2009, was 1.75%.

the top five banks are: BDO Unibank Inc.(P 808.5billion), Metropolitan Bank and Trust

Co. (P 780.9 billion), Bank of the Philippine Island (P 641.09 billion), Land Bank

(P 512.9 billion) and Philippine National Bank (P286.4 billion)

Metro bank reported the biggest market share in terms of equity at 13.98%. BDO came

in second, displacing BPI, whose equity declined by P397.56 million. Return on equity

of the industry averaged 8.34%during the quarter. BPI’s assets decreased from

P695.97 billion from last quarter to P641.10 billion this 2009 3rd quarter. Total

investment securities of the commercial banking industry grew by 7.95% from last

quarter of June 2009.

The industry’s deposit liabilities stood at P4.10 trillion as of end- September

2009, a1.71% and 12.45% rise from the previous quarter and from the same period last

year, respectively. Metrobank overlook BPI as the second biggest bank in terms of

deposit, after BDO. BPI’s deposit decreased by 8.93% from last quarter. Likewise the

industry’s trust assets continued to expand, recorded at 7.03% from last quarter.

BDO maintained its lead in terms of trust assets, accounting for 25.31% of the total trust

assets of the industry, followed by BPI at 25.02%. the commercial banking industry’s

total equity stood at P527.80 billion , up by 5.38%.

The U.S-led financial crisis that erupted in 2008 compelled Philippine banks to

go back to their basic business, it’s lending. As a result the commercial banks gross

loan portfolio increased by 5.22% to 5.88% during the 3rd quarter of 2009. The battle cry
of the industry is core banking or “back to basics”, which naturally points to loan portfolio

build-up which must be tempered with prudent lending activities. With the challenging

environment facing banks, this is the best time for introspection and to rebrand, it is also

timely and necessary to strengthen partnership with their consumers, because they are

all in this together. 3

4
The market structure of a commercial bank industry is a MONOPOLISTIC

COMPETITION which characterized by the following:

MANY SELLERS because there are 36 firms in the industry, the many-sellers condition

is met when each firm is small relative to the total market that its pricing decision have

negligible effect on the market price.

DIFFERENTIATED PRODUCT because it has close but not perfect substitute with the

other firm’s product, it offers differentiated services and it has some control over price.

PRODUCT DIFFERENTIATION, it’s a process of creating real or apparent differences

between goods and services. There are different types bank which offer different types

of services, for example Security Bank offers Cash Card that has access to any

BancNet outlet with no amount of maintaining balance needed while BDO on the other

hand also offers Cash Card that can be used through Circus or Visa but strictly require

maintaining balance.

According to Irvin tucker, a monopolistic competitive firm is a price maker. The primary

reason is that its product is differentiated. This give a monopolistic competitive firm a

BizNews Asia Vol. 7 no. 41

4

Irvin Tucker: microeconomics for today 3rd edition.

limited control over its price, the loyalty ensures some costumers will remain steadfast.

The advertisement of each firm gives consumer assurance that their money is at the
5

right place and believes at the power of the firm to compete and be the best.

And the demand curve of a commercial bank is inelastic. The quantity demanded is less

responsive to change in price, because even if there is a change in the interest they

implement in their transaction consumers will still pursue there services. Brand loyalty

ensures the firm that consumers trust their services.

Degree of competition in a commercial bank industry. BDO, Metro bank, and BPI are

the top 3 banks in the Philippines. A monopolistically competitive firm engages in

nonprice competition by using expensive ads to differentiate its product. Instead of

raising the deposit liabilities, the firm's goal is to convince customers that its financial

services are better from its rival's services. They are frequently running ads that feature

lower prices, a higher quality of service or a new product to win customers. The ads

proclaim that their product is the best way to maximize their utility. That’s why they are

at the top list in the industry. Profit rises when advertising increases t not need, ads also

increase price competition among firms.

Does monopolistic competition lead to lower prices, greater output and better informed

consumers? Or does this market structure simply raise prices and annoy consumers

with useless and often misleading information.

In some scenario ads mislead consumers with bad information that is not up to the

standards of their product. That why some products cant survive in the long run

Irvin Tucker: microeconomics for today 3rd edition.

because consumers don’t believe in the standard of their product. The brand loyalty

makes the firm stronger and survives in the long run.

One advantage of big commercial bank is that the consumers believe that big banks will
6

not be bankrupt. They think that their money is in the right place and it’s the best place

to invest their money.

How about the small firms, how do they survive and compete with the big firms like

BDO, Metrobank and BPI?

One disadvantage of using a large, commercial bank can easily be seen if you're trying

to get a loan. Unlike a local bank, or a relatively small bank, a larger, commercial bank

will have to put a loan through several different departments. Beyond that, you may

have to have dozens of people sign off on a single loan. This can lead to many more

people getting involved in saying yes or no to your loan, and it may lead to a lot more

negotiation than you were hoping to conduct. This is especially true for a simple,

relatively straightforward home or business loan. Small banks has a simpler way of

attracting consumers, and some small banks can’t even afford an advertisement

because they are keeping a tight budget. So keeping simpler ways helps small firms to

survive and compete with other firms.

THE THREE FUNDAMENTAL ECONOMIC QUESTIONS

7

WHAT TO PRODUCE?

Irvin Tucker: microeconomics for today 3rd edition.

7

Irvin Tucker: microeconomics for today 3rd edition.

Commercial bank industry produces a service typed product. Loans are their primary

product, the interest they earn from their loans are the typed of service they produce.

Their income comes from their eared interest.

HOW TO PRODUCE?

Educations plays an important role in answering the how question. Education improves

the ability of workers to perform their work. They need professionals like accountant,

lawyers, financial analyst and economist. These professionals improve the services they

give to the consumers.

FOR WHOM TO PRODUCE?

The for whom question means that society must have a method to decide who will be

“rich and famous” and who will be “poor and unknown”. The rich and middle class are

the one who consume the services of the banks. They know that their best costumer is

the big names with big business, that are creating jobs for people to depend on.

The total opportunity cost of a firm is the sum of explicit cost and Implicit cost.

Explicit cost includes the wages paid to labor, the rental charges for a plant, the cost of

electricity and the materials use in the business. The banking industry pays many

laborers for their work, buys many machine for their operation and pay many expenses

to run the firm. Implicit cost is when a person uses his own money or resourses to

operate his business

Chapter 3
Public attitude towards banking, the general public is composed of potential savers,

investors and borrowers upon whom banking thrives. The character, Habits, and

customs of the general public, therefore , affect and determine to some extent the

development and success of banking.

Limited use of banking facilities, the general public had a different attitude towards

savings and banking facilities. Banking habits are not widespread among the people.

The use of savings accounts is not prevalent especially in the provinces as evidenced

by the concentration of the deposits in manila and urban areas. For most people,

savings take the form of cash hoards or investments in real estate and jewellery.

Because of the limited use of banking and credit, the use of checks as a means of

payment is n0t a common practice.

Absence of organised money and capital market, A major obstacle to the efficient use of

monetary instruments of control is the absence of an organized and integrated money

and capital market. Trading on commercial paper has been limited to those credit

instruments related to foreign trade financing which is largely concentrated in the urban

areas. Moreover, the market for government securities operates mainly on an

institutional level. Government bonds and treasury bills find their way mainly to the

central bank and the government-owned Philippine national bank.

Increased public borrowing, The increasing trend of public borrowing to finance

development projects of the government constitutes another factor that hampers the

efficacy of money controls. Motivated by the strong desire to accelerate economic

development, the government relies heavily on central bank credit. As a result,

borrowings from the banking system and fr0m abroad greatly exceed the funds obtained
from taxes, borrowing from private entities and other non-inflationary sources. This

dependence of the government on central bank credit has, therefore, created

complementary problems in the fiscal area that impair the efficacy of control on the

supply of money and credit.

The biggest problem that the commercial banking industry faced is the global economic

recession last 2009. The industry thought that the Global Economic Recession will

affect export and investment that depends largely on world demand. This resulted to

lose of resources for business people to be capable of getting and paying loans from

banks. And since businesses shut down, people lost their jobs which also made them

incapable of getting and paying loans. It is a chain effect on every aspect of life.

Two heroes saved the Philippines from the precipice of a recession in 2009. The

first is the Filipino expat. There are ten million overseas contract workers (OCWs).

Together, they remitted at least $17 billion in 2009. At that time the dollar cost P47.7 ,

the $17 billion is equivalent to P811 billion, which in turn propelled the phenomenal

growth of mall’s and other services, the commercial bank industry dominates the

remittance business that offers easy dollar account for consumers working aboard.

Second was the stability of commercial bank with the help of BSP. The BSP was a big

factor in preventing a recession, they revised market-to-market policies which help

banks avert huge paper loses which could have caused a systematic shock similar to

the U.S. the market values of securities returned to stabilized level within three months.
That policy preserve capital and liquidity levels of banks. Also they lowered the reserve

requirement on banks deposits by 2%. By the third quarter of 2009 thus, the philippine

Commercial banking system was in better shape than it was when the global financial

crisis began. It expanded its resources, regained its lending pace, values of the financial

assets that the amount of assets available for sale declined, return to huge profitability

and much sounder stability. 8

Banking Laws
R.A. No. Date Description

29 Jan
P.D. 114 Regulating the establishment and operation of pawnshops
1973
15 Feb
P.D. 129 Governing the establishment, operation and regulation of Investment Houses
1973
30 Sep
P.D. 1034 Authorizing the establishment of an offshore banking system in the Philippines
1976
R.A. 3591, as An act establishing the Philippine Deposit Insurance Corporation (PDIC
amended Charter)
02
An Act Providing for the Creation, Organization and Operation of Rural Banks,
R.A.7353 April
and For Other Purposes
1992
10 Jun
R.A. 7653 The New Central Bank Act
1993
18
An Act liberalizing the entry and scope of operations of foreign banks in the
R.A. 7721 May
Philippines and for other purposes
1994
23 Feb An Act providing for the regulation of the organization and operation of Thrift
R.A. 7906
1995 Banks, and for other purposes
21 Oct
R.A. 8367 Revised Non-Stock Savings and Loan Association Act of 1997
1997
26 Feb An Act amending R.A. 5980, as amended, otherwise known as the Financing
R.A. 8556
1998 Companu Act
R.A. 8791 12 Apr General Banking Law of 2000, an act providing for the regulation of the

BizNews Asia Vol.7 No.41

 organization and operations of banks, quasi-banks, trust entities and for other
2000
purposes
29 Sep
R.A. 9160 Anti-Money Laundering Act of 2001
2001
13 Nov An Act to promote the establishment of Barangay Micro Business Enterprises
R.A. 9178
2002 (BMBEs), providing incentives and benefits therefor, and for other purposes
An act granting tax exemptions and fee privileges to special purpose vehicles
18 Dec
R.A. 9182 which acquire or invest in non-performing assets, setting the regulatory
2002
framework therefore, and for other purposes
R.A. 9182 19 Mar
Implementing Rules and Regulations of R.A. 9182
IRR 2003
07 Mar An act amending Republic Act No. 9160, otherwise known as the "Anti-Money
R.A. 9194
2003 Laundering Act of 2001"
R.A. 9194 06 Aug
Implementing Rules and Regulations of R.A. 9194
IRR 2003
An Act amending certain sections of the National Internal Revenue Code of
1997, as amended, by excluding several services from the coverage of the
5 Feb
R.A. 9238 value-added tax and re-imposing the gross receipts tax on banks and non-
2004
bank financial intermediaries performing quasi-banking functions and other
non-bank financial intermediaries beginning January 01, 2004
An Act restoring the tax exemption of OBUs and FCDUs, amending for the
28 Apr
R.A. 9294 purpose Section 27 (D) and Section 28, Paragraphs (A) (4) and (A) (7) (b) of
2004
the National Internal Revenue Code as amended.
22 Aug An Act Establishing a Provident Personal Savings Plan, known as the Personal
R.A. 9505
2008 Equity and Retirement Account (PERA)
21 Oct
R.A. 9505 IRR Implementing Rules and Regulations of R.A. 9505
2009
9

Loans and Credit Operations

Rediscounting

Rediscounting is a standing credit facility provided by the BSP to help banks meet

temporary liquidity needs by refinancing the loans they extend to their clients. Through

the facility, the BSP also makes possible the timely delivery of credit to all productive
9

http://www.bsp.gov.ph/regulations/laws.asp
sectors of the economy. Moreover, rediscounting is one of the monetary tools of the

BSP to regulate the level of liquidity in the financial system. The BSP’s rediscounting is

administered by the Department of Loans and Credit.

Overdraft Credit Line

The BSP also makes available an overdraft credit line (OCL) to banks participating

directly in the clearing operations of the Philippine Clearing House Corporation to cover

shortfalls in the banks' demand deposit account with the BSP arising from clearing

operations. Effective 01 January 2011, the BSP will impose a ceiling on the amount of

overdraft a bank may incur due to failure to cover clearing losses through interbank

borrowings and/or repurchase agreements with BSP. The ceiling is defined as the sum

of clean OCL equivalent to 15% of rediscounting line with the BSP, and the

collateralized OCL that will be extended by the BSP. Banks may apply for collateralized

OCL in an amount equivalent to at least 5% of their demand deposit liabilities as of end

of month, two months prior to the date of application with the Department of Loans and

Credit, BSP.

10
Emergency Loans

The BSP also extends financial assistance to banking institutions in the form of fully

secured liquidity (emergency) loans as a temporary remedial measure to help solvent

banks overcome their liquidity problems arising from causes beyond their control,

pursuant to Section 84 of R.A. No. 7653. The maximum assistance shall be limited to

10
http://www.bsp.gov.ph/loans/loans.asp
http://www.bsp.gov.ph/regulations/laws.asp
the amount needed by the applicant bank to overcome the emergency or financial 11

predicament but shall not exceed 50% of its outstanding deposits and provided that any

emergency advance should be collateralized by first-class collateral (primarily real

estate).

Since the bank industry is the biggest remittance business, I think that they should

improve their ads and raise the deposits interest so they can attract more consumers to

peruse their services. They dominated the international remittance business but not the

domestic remittance business, because there are alternative ways of transferring your

money. Their biggest competitors are the easy money transfer like LBC; it offers chipper

and easier way of remitting money to the consumers. The other competitor of banks is

the pawnshop, they can be great substitute for a bank loan and you don’t have to sign

and fill up many papers. The exchange of things for money is the type of service they

give. Nowadays, with our economic and globally problems more people are willing to go

to alternative and easier way of getting a loan. Pawnshops offers easy payment and low

interest rate for an average employee they would rather prefer this than a loan in a

commercial bank.

11