Bangko Sentral ng Pilipinas

Central Banks Regulatory Role over NBFIs: The Philippine Experience

Mr. Ricardo P. Lirio Managing Director, SE II

FINANCIAL INSTITUTIONS UNDER BSP SUPERVISION/REGULATION As of March 31, 2002

Type of Financial Institution I. Banks Commercial Banks Thrift Banks Rural and Cooperative Banks II. Non-Bank Financial Institutions A. With Quasi-Banking Functions Investment Houses Financing Companies B. Without Quasi-Banking Functions Investment Houses Financing Companies Investment Companies Securities Dealers/Brokers Lending Investors Government NBFIs Venture Capital Corporations Non-Stock Savings and Loan Associations Pawnshops * Credit Card Companies III. Offshore Banking Units
*As of December 31, 2001

Total 7,587 4,326 1,342 1,919 9,687 31 17 14 9,656 30 50 9 26 9 2 9 117 9,397 7 12

Head Office 925 44 100 781 5,243 12 7 5 5,231 26 40 9 26 9 2 9 85 5,018 7 11

Other Offices 6,662 4,282 1,242 1,138 4,444 19 10 9 4,425 4 10

32 4,379 1

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Banks with NBFI Subsidiaries/Affiliates

Name of Bank Bank of the Philippine Islands Metrobank Equitable-PCI Bank Philippine National Bank RCBC 1 1 with QB without QB Invest. Financing Inv. Financing Securities Credit Venture Invest. House Company House Company Dealers Card Capital Company 1 2 2 1 1 2 2 2 1 2 1 3 2 1 1 1 1 1 1 1 1 1 1 1

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REGULATORY and SUPERVISORY AUTHORITY

The New Central Bank Act Supervision and examination of banks and quasi-banks including their subsidiaries and affiliates engaged in allied activities The General Banking Act 2000 Regulation of the organization and operations of banks, trust entities and for other purposes

RA 7653

RA 8791

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Banks
Demand Deposits/ Checking Accounts Time Certificat e of Deposits Savings Deposits (Passboo k)

NBFIs
Promisso ry Notes Repurchas e Agreement Certificates s of Participatio n/Assignme nt

Deposit Instruments

Deposit-Substitute Instruments

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Non-Bank Financial Institutions

With Quasi-Banking Function

Entity is borrowing from 20 or more persons or entities

Without Quasi-Banking Function

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Issuance of deposit substitutes or borrowing instruments by an NBFI to 20 or more persons or entities irrespective of outstanding amounts is considered borrowing from PUBLIC

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NBFIs Regulatory Framework

1970s

Development and growth of NBFIS

REQUIRED GOVERNMENT INTERVENTION

1971

Formation of Joint Central Bank of the Philippines & IMF Banking Survey Commission NBFIs should be under the authority of the Central Bank for effective administration of credit

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1972 to 1974

Central Bank of the Philippines required all NBFIs to register

1973

PAWNSHOPS placed under regulatory authority of CBP granted exclusive authority to all INVESTMENT HOUSES to underwrite SECURITIES

PD 114 Pawnshop Regulation Act

PD 129 Investment Houses Law

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NBFIs Regulatory Framework

1982

Rules governing operations of NBFIs were consolidated as Book IV of the Manual of Regulations Intensified competition among financial institutions Increased availability of long term funds through direct and indirect financing to increase stability of the financial system

1980s

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1990s
Foreign Investments Act

1991

Greater leeway and fewer restrictions for foreign investors

Full liberalization of foreign exchange

1992

Unification of 2 Stock Exchanges

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1990s
1993

Entry of foreign banks

1993

Entry of foreign insurance firms

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1990s
1997

RA 8366 RA 8367

Increased foreign equity participation and minimum capitalization for IHs

NSSLA ACT

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1997

INCREASED CAPITALIZATION
Aids in ensuring strong solvency positions and automatically weeds out weak players in the industry

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1990s
1998

RA 8556 FINANCING COMPANY ACT OF 1998

An Act amending RA 5980, as Amended Otherwise Known as the Financing Company Act (1969)

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2000

Anti-Money Laundering Bill

Issuance of Circulars providing rules and regulations to combat money-laundering

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NBFI Quasi-Banks Investment House Financing Company Trust Entities Investment House Financing Company Other Trust Entities

Governing Law RA 8791 - The General Banking Law RA 7653 - The New Central Bank Act

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NBFI Governing Law Subsidiaries/Affiliates of a Bank/QB RA 8791 - The General Banking Law Investment House w/o QB RA 7653 - The New Central Bank Act Financing Company w/o QB Investment Companies Securities Dealers/Brokers Lending Investors Venture Capital Corporation Enterprise Wholly or Majority Owned by a Bank Non-Financial Allied Undertaking Non-Stock Savings and Loan Associations Pawnshops TIDCOR SBGFC

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NBFI Investment House Financing Company Governing Law PD 129 The Investment Houses Law RA 8556 Financing Company Act of 1988

Non-Stock Savings and Loan Associations RA 8367 Revised NSSLA Act of 1997 Pawnshops TIDCOR PD 114 Pawnshop Regulation Act RA 8494 An act further amending Presidential Decree #1080, as amended, by reorganizing and renaming the Philippine Export and Foreign Loan Guarantee Corporation, expanding its primary purpose

SBGFC

RA 6977 Magna Carta for SMEs

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Bangko Sentral ng Pilipinas

Central Banks Regulatory Role over NBFIs: The Philippine Experience
Mr. Ricardo P. Lirio Managing Director, SE II