FUNCTIONS &

OPERATIONS OF
CENTRAL BANK
FIN 011 – MONETARY POLICY & CENTRAL BANKING

PHINMA CAGAYAN DE ORO COLLEGE

 CHARACTERISTICS OF
CENTRAL BANK

The profit motive is only secondary in

the operations of central bank
The operations of central banks are
more extensively controlled by the
government laws than other financial
institutions.
In general, it is undesirable for central
bank to deal directly with the public.

PHINMA CAGAYAN DE ORO COLLEGE

 MONETARY TOOLS
1. OPEN MARKET OPERATIONS
• These involve the buy and sale of
government securities.
• The Repurchase Window is basically a
credit facility whereby banks and/or non-
banks temporarily sell their holdings of
Bangko Sentral Certificate of
Indebtedness (BSCI) and other
government securities to BSP.

PHINMA CAGAYAN DE ORO COLLEGE

 The BSP may place government
securities through the ff. channels:
• Direct sale to financial institutions and the
public;
• Outright sale to syndicate, brokers, dealers
for the purpose of resale to the public for
their own account
• Contract with brokers or banks to place
securities with the public for the account
of CB.
• Auction Method.

PHINMA CAGAYAN DE ORO COLLEGE

 MONETARY TOOLS
2. RESERVE REQUIREMENTS
• To control the volume of money created
in the operations of the banking system,
banks are required to maintain reserves
against their deposit liabilities.
• CB has the power to change, as the
economy requires, the percentage of
legal reserve requirements

PHINMA CAGAYAN DE ORO COLLEGE

EXAMPLE OF RESERVE
REQUIREMENTS
The reserve requirement is composed of 10%
cash which must be deposited with CB and
90% which may be in the form of cash in the
bank’s vault and/or government securities.

For Instance, total deposit liabilities of Bank X

is amounting to P 1,000,000.00 and the legal
reserve required is 20%. How much is the
reserve requirement?
PHINMA CAGAYAN DE ORO COLLEGE
 MONETARY TOOLS
3. INTEREST RATE POLICY
• The CB is given the power to fix or
regulate interest rates based on
prevailing credit conditions and the
thrusts of the monetary policy.
• Through this monetary tool, the CB can
encourage or discourage the expansion
of certain business activities.
• Effective July 1, 1981, floating interest
rates policy is instituted.
PHINMA CAGAYAN DE ORO COLLEGE
 MONETARY TOOLS
4. REDISCOUNTING
• Commercial banks and other accredited
financial institutions can borrow funds
through the rediscount window of the
CB. They turn over their qualified
promissory notes and commercial paper
which they have already discounted for
their customers.
• The Rediscount window of CB also
operates as “lender of last resort.”
 MONETARY TOOLS
5. SWAP FACILITY
• This refer to a swap transaction
between CB and firms engaged in
export-oriented or other preferred
activities.
• CB swaps pesos for foreign exchange
with an authorized agent bank at the
exchange rate prevailing on availment
day.
 MONETARY TOOLS
6. MORAL SUASION
• This is means of controlling credit or
money supply which is also referred to
as “moral influence.”
• The CB influences the direction and
conduct of business enterprises,
investors, and consumers.
• CB do consultation that contributes to
the efficient operations of monetary
policies.PHINMA CAGAYAN DE ORO COLLEGE
 MONETARY TOOLS
7. OTHER SELECTIVE REGULATIONS OF
BANK OPERATIONS
• Margin requirements against letter of
credit
• Security against bank loans
• Portfolio ceilings
• Minimum capital ratios

PHINMA CAGAYAN DE ORO COLLEGE

 ACTIVITIES OF THE
CENTRAL BANK
In the performance of its functions, BSP undertakes
various activities to ensure the steady growth of the
financial system, keep the external debt at a
manageable level and maintain a stable foreign
exchange position. These activities includes:
1.BANK SUPERVISION/PAWNSHOP REGULATION
 It actively uses its supervisory and regulatory
powers over the FI’s to guide the direction and pace
of the growth of the financial system.

PHINMA CAGAYAN DE ORO COLLEGE

 ACTIVITIES OF THE
CENTRAL BANK
2. EXTERNAL DEBT REGULATION
 The foreign debts of the country are strictly
monitored by the CB to ensure that payments of
the principal and interest do not exceed the
statutory debt service ratio of 20% of gross
foreign exchange receipts of the preceding year
and that foreign obligations are promptly paid

PHINMA CAGAYAN DE ORO COLLEGE

 ACTIVITIES OF THE
CENTRAL BANK
3. MONEY MARKET INVOLVEMENT
 In coordination with SEC, money market reforms
were initiated by the old CB in 1981.
 Under the reform, the commercial paper market
in the country has been limited to prime paper
and to the issues of prime companies.
 To further protect the investors, corporate entities
which intend to borrow from the money market
are required to observe 3:1 DEBT-TO-EQUITY
RATIO.
PHINMA CAGAYAN DE ORO COLLEGE
 ACTIVITIES OF THE
CENTRAL BANK
4. FOREIGN EXCHANGE REGULATIONS.
 These are designed to mainly achieve the
objectives of the CB of maintaining the external
stability and ensuring that foreign exchange
resources are available at all times for the
foreign exchange requirements of the country.
 At present, the exchange rate policy is a
FLOATING RATE SYSTEM which means
exchange rate of the peso is determined by the
supply of and demand for foreign currencies.
PHINMA CAGAYAN DE ORO COLLEGE
 ACTIVITIES OF THE
CENTRAL BANK
5. EXPORT RELATED MEASURES
 The CB extends financial assistance to exporters
through its rediscount window in support of the
export promotion program of the government.
6. WORKER’S REMITTANCES
 The CB has taken steps to improve the earnings
of OFW through allowing banks to be channel in
the remittance process, put rediscount windows
for those manpower exporting firms and for loans
extended to overseas contract workers.
PHINMA CAGAYAN DE ORO COLLEGE
 ACTIVITIES OF THE
CENTRAL BANK
7. COMMODITY CLASSIFICATION
 In coordination with other government agencies,
the CB periodically reviews and revises the
Philippine Standard Commodity
Classification Manual which serves as the
standard reference in classifying commodities
affected under all modes of exchange.

PHINMA CAGAYAN DE ORO COLLEGE

 FUNCTIONS &
OPERATIONS OF
CENTRAL BANK
FIN 011 – MONETARY POLICY & CENTRAL BANKING

PHINMA CAGAYAN DE ORO COLLEGE

 CREDIT OPERATIONS
OF THE CENTRAL BANK
1. NORMAL CREDIT OPERATION
(A.) COMMERCIAL CREDIT – The CB may
rediscount, discount, buy and sell bills,
acceptance, promissory notes and other credit
instruments with maturities of not more than 180
days.
(B.) PRODUCTION CREDIT – extend credit with
maturities of not more than 360 days. Such
transactions are related to the production or
processing of agricultural, animal, mineral or
industrial products.
PHINMA CAGAYAN DE ORO COLLEGE
 CREDIT OPERATIONS
OF THE CENTRAL BANK

(C.) ADVANCES CREDIT – The CB may grant

advances against the ff. collaterals for periods
not to exceed 180 days: gold coins or bullions,
securities and negotiable bonds issued by the
government or any of its instrumentality with
maturities of not more than 10years.

PHINMA CAGAYAN DE ORO COLLEGE

 CREDIT OPERATIONS
OF THE CENTRAL BANK
2. SPECIAL CREDIT OPERATION
(A.) LOANS TO LONG-TERM LENDING
INSTITUTIONS – The Monetary Board grant
loans or advances to said institutions against
pledge and installments of their borrowers.
(B.) LOANS TO DEVT. BANK OF THE PHIL. – The
Monetary Board may grant loans or advances to
DBP to be used in the purchase of shares of
stocks of a banking institution or distressed
industrial firm for resale to the general public.
PHINMA CAGAYAN DE ORO COLLEGE
 CREDIT OPERATIONS
OF THE CENTRAL BANK
2. SPECIAL CREDIT OPERATION
(C.) LOANS TO NON-BANK FINANCIAL
INSTITUTION – The CB extend credit to non-
bank FI’s performing quasi-banking functions to
promote their medium and long term operations.
3. EMERGENCY CREDIT OPERATIONS
(A.) EMERGENCY LOANS & ADVANCES – The
CB may extend credit and advances during
periods of emergency or imminent financial panic
which directly threatens the monetary & banking
stability.
PHINMA CAGAYAN DE ORO COLLEGE
 CREDIT OPERATIONS
OF THE CENTRAL BANK
4. CREDIT OPERATIONS WITH THE GOVERNMENT
(A.) PROVISIONAL ADVANCES TO THE GOV’T
– The CB may extend direct provisional advances to
the government or to any of its political subdivisions
to finance expenditures authorized in the annual
appropriation of the borrowing entity.
– The advances must be paid before the end of the
first quarter following the end of the fiscal year of
the government.

PHINMA CAGAYAN DE ORO COLLEGE

THE SECURITY PLANT
COMPLEX OF BANGKO
SENTRAL
THE BSP'S ORGANIZATIONAL STRUCTURE
AS OF MAY 2017

The Security Plant Complex

1. Banknotes and Securities Printing
Department
• Performs the printing of banknotes, judicial
forms, and other security documents
2. Banknotes and Securities Production
Management Department
• Handles various control and support functions
in relation to the printing of banknotes and other
security documents

THE SECURITY PLANT COMPLEX

3. Mint and Refinery Operations Department
• Manages and performs the minting of coins and
commemorative medals, and the refinery of gold
purchased from local panniers and miners.
4. Department of General Services
• Manages the procurement of supplies, equipment, and
services for the SPC, client affairs and information
programs, development/implementation of SPC
construction/renovation projects, and general
maintenance and upkeep of its facilities.

THE SECURITY PLANT COMPLEX

 5. Financial Services Group
• Prepares financial statements and
records financial receipts /
disbursements, and processes bills
for payment

THE SECURITY PLANT COMPLEX

  On September 7, 1978, the Security Plant
Complex started its operations.
 Composed of : Security Printing Plant and
the Mint and Gold Refinery
 The complex is the first of its kind in
Southeast Asia.
 Prior to 1978, our country depended on
England, USA, Germany and other
countries for its supply of coins and
banknotes as well as refining our gold
bullion.

THE SECURITY PLANT COMPLEX

  The Security Printing Plant produces
banknotes and securities. Its annual
capacity:
 is 600 million pieces of banknotes
 4 million pieces of cigarette strip stamps
and wine labels
 120 million checks and other security docs
 1.5 million passports

THE SECURITY PLANT COMPLEX

  The Mint and Gold Refinery has an annual
capacity of:
 600,000 troy ounces of refined gold
 450,000 troy ounces of refined silver
acceptable in the international market
 850 million coins a year

THE SECURITY PLANT COMPLEX

 After 10 years of operations, here are the
ACHIEVEMENTS of our Security Plant
Complex:
 It has supported increasing monetization in
the country and produced 3.6 billion pesos of
bank notes of various denominations and 4.3
billion pieces of coins.
 The SPP has supplied the security printing
requirements of the country. It produced an
additional currency notes and bills of 920,152
million regular and special checks, bonds,
land titles, and other govt. securities.

THE SECURITY PLANT COMPLEX

 ACHIEVEMENTS of our Security Plant Complex:
 The Gold refinery was able to satisfy the
standards set by the LONDON GOLD MARKET
and resulted to be formally accredited by the
said organization as a smelter and assayer of
“GOLD DELIVERY” of gold bars.
 The Gold Refinery has produced gold grains
and karat gold which are available for sale to
jewellers in the local market.

THE SECURITY PLANT COMPLEX

GOLD & SILVER
RESERVE
MANAGEMENT
 ITS OPERATIONS:
 The Mint & Gold Refinery is a department in
the BSP which sends gold to the accounts of
the Central Bank at the Bank of England and
Federal Reserve Bank of New York.
 Such shipment is intended to increase the
MARKETABILITY of its gold reserves for
investment.
 BSP also sells its gold reserves to be able to
meet its foreign exchange obligations. This is
called Gold Monetization.
 -END-
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