C E NT R A L B A NK IN G A N D T H E

C O ND U C T OF M O NE TA RY
PO L I C Y FR AM E W OR K

CONCEPT OF
C E N T R A L B A N K I NG A ND
MO N E TA RY P O L I C Y

EARL LOUIE M. MASACAYAN, JD, LLM

DBA 721 - Monetary and Fiscal Policies
 CENTRAL BANK

• financial institution given privileged control over the production and

distribution of money and credit for a nation or a group of nations
• usually responsible for the formulation of monetary policy and the regulation
of member banks
• inherently non-market-based or even anti-competitive institutions
• Although some are nationalized, many central banks are not government
agencies, and so are often touted as being politically independent.
• Even if a central bank is not legally owned by the government, its privileges
are established and protected by law.
 CENTRAL BANKING

• a key role is to conduct monetary policy to achieve price stability (low and stable
inflation) and to help manage economic fluctuations
• conduct monetary policy by adjusting the supply of money, generally through open market
operations.
• may reduce the amount of money by selling government bonds under a “sale and
repurchase” agreement, thereby taking in money from commercial banks
• The purpose of such open market operations is to steer short-term interest rates, which in
turn influence longer-term rates and overall economic activity.
• In many countries, especially low-income countries, the monetary transmission
mechanism is not as effective as it is in advanced economies
• Before moving from monetary to inflation targeting, countries should develop a
framework to enable the central bank to target short-term interest rate.
 CENTRAL BANK VS. OTHER BANKS

• The critical feature of a central bank—distinguishing it from other banks—is

its legal monopoly status, which gives it the privilege to issue banknotes and
cash.
• Private commercial banks are only permitted to issue demand liabilities, such
as checking deposits.
 ACTIVITIES OF A CENTRAL BANK

• Monetary policy: by setting the official interest rate and controlling the money supply;

• Financial stability: acting as a government's banker and as the bankers' bank ("lender of
last resort");
• Reserve management: managing a country's foreign-exchange and gold
reserves and government bonds;
• Banking supervision: regulating and supervising the banking industry;
• Payments system: managing or supervising means of payments and inter-banking
clearing systems;
• Coins and notes issuance;
• Other functions of central banks may include economic research, statistical collection,
supervision of deposit guarantee schemes, advice to government in financial policy.
 GOALS OF A CENTRAL BANK

• Price Stability
• High Employment
• Economic Growth
• Climate Change
 BANKO SENTRAL NG PILIPINAS (BSP)

• It is the state’s central monetary authority.

• It is the government agency charged with the responsibility of administering
the monetary, banking and credit system of the country and is granted the
power of supervision and examination over bank and non-bank financial
institutions performing quasi-banking functions, including savings and loan
associations. (Busuego vs. CA, G.R. No. L-48955, June 30, 1987)
• The Banko Sentral is a government-owned corporation which enjoys fiscal and
administrative autonomy.
 BSP STATE POLICY

The State shall maintain a central monetary

authority that shall function and operate as an
independent and accountable body corporate in the
discharge of its mandated responsibilities
concerning money, banking and credit. (Sec 2, New
Central Bank Act)
 CREATION OF BSP

• It is established as an independent central monetary authority.

• Its capital shall be P50,000,000,000, to be fully subscribed by
the Philippine Government.
• The P10,000,000,000 of the capital shall be fully paid for by
the Government upon the effectivity of NCBA and the balance
to be paid for within a period of 2 years from the effectivity of
NCBA in such manner and form as the Government, through
the Secretary of Finance and the Secretary of Budget and
Management, may thereafter determine. (Sec. 2)
 RESPONSIBILITIES OF BSP

• To provide policy directions in the areas of money,

banking, and credit
• To supervise bank operations
• To regulate the operations of finance companies
and non-bank financial institutions performing
quasi-banking functions, and similar institutions.
(Sec. 3)
 PRIMARY OBJECTIVES OF BSP

• To maintain price stability conducive to

a balanced and sustainable growth of
the economy; and
• To promote and maintain monetary
stability and the convertibility of the
peso. (Sec. 3)
 FUNCTIONS OF BSP

• Issuer of currency. (Sec. 49-60)

• Custodian of reserves. (Secs. 64-66, 94, 103)
• Clearing channel or house; especially where the PCHC does not operate .(Sec.
102)
• Banker of the government – the BSP shall be the official depository of the
Government and shall represent it in all monetary fund dealings (Secs. 110-
116)
• Financial advisor of the government (Secs. 123-124) – Under Article VII, Sec.
20 of the 1987 Constitution, the President may contract or guarantee foreign
loans but with the prior concurrence of the Monetary Board.
 FUNCTIONS OF BSP

• Source of credit (Secs. 61-63, 81-89, 109)

• Supervisor of the banking system (Sec. 25) which shall include the power to:
• Examine, which power extends to enterprises wholly or majority-owned or controlled
by the bank (Sec. 7, RA 8791); this power may not be restrained by a writ of injunction
unless there is convincing proof that the action of the BSP is plainly arbitrary (Sec. 25)
• Place a bank under receivership or liquidation (Sec. 30)
• Initiate criminal prosecution of erring officers of banks
• Government agent (Secs. 117-122)
 MONETARY BOARD

• It is the body through which the powers and functions of the Bangko Sentral are exercised. (Sec 6)
• Powers:
• Issue rules and regulations it considers necessary for the effective discharge of the responsibilities and
exercise of its powers
• Direct the management, operations, and administration of the Bangko Sentral, reorganize its personnel, and
issue such rules and regulations as it may deem necessary or convenient for this purpose
• Establish a human resource management system
• Adopt an annual budget for and authorize such expenditures by the Bangko Sentral as are in the interest of
the effective administration and operations of the Bangko Sentral in accordance with applicable laws and
regulations
• Indemnify its members and other officials of the Bangko Sentral, including personnel of the departments
performing supervision and examination functions against all costs and expenses reasonably incurred by
such persons in connection with any civil or criminal action. (Sec 15)
 MONETARY BOARD

• In the event of a settlement or compromise, indemnification shall be provided

only in connection with such matters covered by the settlement as to which the
Bangko Sentral is advised by external counsel that the person to be indemnified
did not commit any negligence or misconduct.
• The costs and expenses incurred in defending the aforementioned action, suit
or proceeding may be paid by the Bangko Sentral in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the member, officer, or employee to repay the amount advanced
should it ultimately be determined by the Monetary Board that he is not
entitled to be indemnified as provided in this subsection. (Sec 15)
 MONETARY BOARD - LIABILITIES

Members of the Monetary Board, officials, examiners, and employees of the

Bangko Sentral who:
• Willfully violate RA 7653 (New Central Bank Act)
• Who are guilty of negligence, abuses or acts of malfeasance or misfeasance or
• Fail to exercise extraordinary diligence in the performance of his duties
Shall be held liable for any loss or injury suffered by the Bangko Sentral or other
banking institutions as a result of such violation, negligence, abuse, malfeasance,
misfeasance or failure to exercise extraordinary diligence. (Sec 16 NCBA)
 HOW BSP HANDLES BANKS IN
DISTRESS

• Appointment of a conservator
• Appointment of a receiver
• Closure
 CONSERVATOR

• One appointed if the bank is in the state of illiquidity or the bank fails or
refuses to maintain a state of liquidity adequate to protect its depositors and
creditors. The bank still has more assets than its liabilities but its assets are not
liquid or not in cash thus it cannot pay its obligation when it falls due.
• The bank, not the BSP, pays for fees.
 CONSERVATOR - POWERS

• To take charge of the assets, liabilities, and the management thereof

• Reorganize, the management thereof
• Collect all monies and debts due to the said bank
• Exercise all powers necessary to restore its viability, with the power to overrule
or revoke the actions of the previous management and board of directors of the
bank or quasi-bank
• And such other powers as the monetary board deems necessary
• To bring court actions to assail or repudiate contracts entered into by the bank.
(First Philippine International Bank vs. CA, G.R. No. 115849, Jan. 24, 1996).
 CONSERVATOR – POWERS - EXTENT

• The powers of a conservator cannot extend to post facto repudiation of

perfected transactions.
• Thus, the law merely gives the conservator power to revoke contracts that are
deemed to be defective- void, voidable, unenforceable or rescissible.
• Hence, the conservator merely takes the place of the bank’s board.
 CONSERVATOR – POWERS
RE: REVOCATION OF CONTRACTS

• The powers of a conservator cannot extend to post facto repudiation of

perfected transactions.
• Thus, the law merely gives the conservator power to revoke contracts that are
deemed to be defective- void, voidable, unenforceable or rescissible.
• Hence, the conservator merely takes the place of the bank’s board.
 CONSERVATOR – POWERS
TERMINATION

• Conservatorship is terminated when the Monetary Board is satisfied that the

bank can operate on its own.
• When the Monetary Board, on the basis of the report of the conservator or of
its own findings, determine that the continuance in business of the institution
would involve probable losses to its depositors or creditors, the bank will go
under receivership.
 RECEIVER

• One appointed if the bank is already insolvent which means that its liabilities
are greater than its assets.
• For banks, it would be the Philippine Deposit Insurance Corporation; for quasi-
banks, it could be any person of recognized competence in banking or finance.
(Sec. 30, NCBA)
 RECEIVER - DUTIES

• The receiver shall immediately gather and take charge of all the assets and liabilities of the
institution.
• Administer the same for the benefit of the creditors, and exercise the general powers of a receiver
under the Revised Rules of Court
• Shall not, with the exception of administrative expenditures, pay or commit any act that will
involve the transfer or disposition of any asset of the institution: Provided that the receiver may
deposit or place the funds of the institution in non-speculative investments.
• Within 90 days from the take-over, the receiver shall determine whether the institution may be
rehabilitated or otherwise placed in such a condition that it may be permitted to resume business
with safety to its depositors and creditors and the general public
• If the receiver determines that the institution cannot be rehabilitated or permitted to resume
business, then the Monetary Board shall notify in writing the board of directors of the institution of
its findings and direct the receiver to proceed with liquidation of the institution. (Sec 30, NCBA).
 AUTHORITY OF RECEIVER TO TRANSACT
BUSINESS RE: BANK’S ASSETS & PROPERTY

• No Authority.
• The receiver only has authority to administer the same for the benefit of its
creditors.  (Abacus Real Estate Development Center, Inc. v. Manila Banking
Corp, G.R. No. 162270,  Apr. 6, 2005)
 MONETARY BOARD VS. RECEIVER

• While resolutions of the Monetary Board forbidding a bank to do business on

account of a condition of insolvency and appointing a receiver to take charge of
the bank’s assets or determining whether the bank may be rehabilitated or
should be liquidated are by law “final and executory.”
• However, they can be set aside by the court on one specific ground - if the
action is plainly arbitrary and made in bad faith. Such contention can be
asserted as an affirmative defense of a counterclaim in the proceeding for
assistance in liquidation. (Salud v. Central Bank, G.R. No. L-17630, Aug. 19,
1986)
 CLOSURE

• Cash Flow test - Inability to pay liabilities as they become due in the ordinary course of
business (Sec. 30 [a] NCBA).
• Balance sheet test – Insufficiency of realizable assets to meet its liabilities (Sec 30 [b] NCBA).
• Inability to continue business without involving probable losses to its depositors and creditors
(Sec 30 [c] NCBA).
• willful violation of a cease and desist order under Section 37 that has become final, involving
acts or transactions which amount to fraud or a dissipation of the assets (Sec 30 [d] NCBA).
• Notification to the BSP or public announcement of a bank holiday (Sec 53, GBL).
• Suspension of payment of its deposit liabilities continuously for more than 30 days (Sec 53,
GBL).
• Persisting in conducting its business in an unsafe or unsound manner (Sec 56, GBL).
 CLOSE NOW HEAR LATE DOCTRINE

• It is to prevent unwarranted dissipation of the bank’s assets and as a valid

exercise of police power to protect the depositors, creditors, stockholders and
the general public. The law does not contemplate prior notice and hearing
before the bank may be directed to stop operations and placed under
receivership. (Central Bank of the Philippines v. CA, G.R. No. 76118 Mar. 30,
1993)
• No prior hearing is necessary in appointing a receiver and in closing the bank.
It is enough that subsequent judicial review is provided for. Indeed, to require
such previous hearings would not only be impractical but would tend to defeat
the very purpose of the law. (Rural Bank of Lucena v. Arca, G.R. No. L-21146,
September 20, 1965)
 JUDICIAL INQUIRY OF CLOSURE AND
LIQUIDATION

• The validity of such exercise of police power is subject to judicial inquiry and
could be set aside if it is either capricious, discriminatory, whimsical, arbitrary,
unjust or a denial or due process and equal protection clauses of the
Constitution (Central Bank v. CA, G.R. No. L-50031-32, July 27, 1981).
 LIQUIDATION

• Acts of liquidation are those which constitute the conversion of the assets of
the banking institution to money or the sale, assignment or disposition of the s
to creditors and other parties for the purpose of paying debts of such institution.
(Banco Filipino v. Central Bank, G.R. No. 70054, Dec. 11, 1991)
 PROSECUTION AND DEFENSE BY THE
LIQUIDATOR

• It is allowed.
• Prosecution of suits collection and the foreclosure of mortgages against debtors
the bank by the liquidator and are among the usual and ordinary transactions
pertaining to the administration of a bank. (Banco Filipino v. Central Bank,
G.R. No. 70054, Dec. 11, 1991)
• A liquidator can foreclose mortgages for and in behalf of the bank even if the
issue on receivership and liquidation is still pending. (Supra)
 CLAIMS AGAINST INSOLVENT BANK

• All claims against the insolvent bank should be filed in the liquidation
proceeding. It is not necessary that a claim be initially disputed in a court or
agency before it is filed with the liquidation court. (Ong v. CA, G.R. No.
112830, Feb. 1, 1996). Where it is the bank that files a claim against another
person or legal entity, the claim should be filed in the regular courts.
• Reason: The judicial liquidation is intended to prevent multiplicity of actions
against the insolvent bank.
 RULE OF PROMISSORY ESTOPPLE

• The BSP may not thereafter renege on its representation and liquidate the bank
after majority stockholders of the bank complied with the conditions and parted
with value to the profit of CB, which thus acquired additional security for its
own advances, to the detriment of the bank’s stockholders, depositors and other
creditors. (Ramos v. Central Bank of the Philippines, G.R. No. L-29352, Oct. 4,
1971)
 COMPARISON

CONSERVATORSHIP RECEIVERSHIP LIQUIDATION

Grounds
     
1.Continuing inability 1. Inability to pay liabilities as they fall due e.g: 1. Insolvency
2.Unwilling-ness to bank run, rumors, etc. 2. Bank cannot be
maintain condition of 2. Assets are less than its liabilities rehabilitated
liquidity 3. Cannot continue business
without causing damage;
4. Violation of a cease and desist order
5. “Bank holiday” for more than 30 days. (Sec. 30)
Effects:
1.Juridical personality is 1. Juridical personality is retained Same with conservatorship
retained. 2. Suspension of operation /stoppage of business
  3. Assets deemed in custodia legis (Domingo v.
2.Perfected transactions NLRC, G.R. 156761, Oct 17, 2006)
cannot be repudiated
 LEGAL TENDER

• All notes and coins issued by the Bangko Sentral are fully guaranteed by the
Republic and shall be legal tender in the Philippines for all debts, both public
and private (Sec. 52)
• Legal tender power of coins
• 1-Peso, 5-Peso and 10-Peso coins: In amounts not exceeding P1,000.00
• 25 centavo coin or less: In amounts not exceeding P100.00 (Circular No. 537, 2006)
 RULES OF BSP’S AUTHORITY TO
REPLACE LEGAL TENDER

• Notes and coins called in for replacement shall remain legal tender for a period
of one year from the date of call.
• After that period, they shall cease to be legal tender during the following year
or for such longer period as MB may determine.
• After the expiration of this latter period, the notes and coins which have not
been exchanged shall cease to be a liability of BSP and shall be demonetized.
(Sec. 57)
Note: Checks representing demand deposits do not have legal tender power and
their acceptance in the payment of debts, both public and private, is at the option
of the creditor. However, a check which has been cleared and credited to the
account of the creditor shall be equivalent to a delivery to the creditor of cash in
an amount equal to the amount credited to his account (Sec. 60).
 PERIOD OF REPLACEMENT OF LEGAL
TENDER

• Notes for any series or denomination – More than 5 years old

• Coins – More than 10 years old
 EXERCISE OF BSP’S POWER TO
DETERMINE EXCHANGE RATES

• The Monetary Board shall determine the rates at which the Bangko Sentral
shall buy and sell spot exchange, and shall establish deviation limits from the
effective exchange rate or rates as it may deem proper.
• The Monetary Board shall similarly determine the rates for other types of
foreign exchange transactions by the Bangko Sentral, including purchases and
sales of foreign notes and coins, but the margins between the effective
exchange rates and the rates thus established may not exceed the corresponding
margins for spot exchange transactions by more than the additional costs or
expenses involved in each type of transactions.(Sec. 74)
 BSP’S ACTION TAKES WHEN INTERNATIONAL
STABILITY OF PESO IS THREATENED

• Take such remedial measures as are appropriate and within the powers granted
to the Monetary Board, and the Bangko Sentral
• Submit to the President of the Philippines and the Congress, and make public a
detailed report which shall include, as a minimum, a description and analysis
of:
• The nature and causes of the existing or imminent decline;
• The remedial measures already taken or to be taken by the Monetary Board
• The monetary, fiscal or administrative measures further proposed
• The character and extent of the cooperation required from other government agencies
for the successful execution of the policies of the Monetary Board (Sec. 67).
 SECRECY IN BANK DEPOSITS (R.A. 1405)
PURPOSE

• To encourage deposit in banking institutions; and

• To discourage private hoarding so that banks may lend such funds and assist in
the economic development of the country.
 SECRECY IN BANK DEPOSITS (R.A. 1405)
PROHIBITED ACTS

• Examination/inquiry/looking into all deposits of whatever nature with banks or

banking institutions in the Philippines (including investment in bonds issued by
the government) by any person, government official or office (Sec. 2)
• Disclosure by any official or employee of any banking institution to any
authorized person of any information concerning said deposit (Sec. 3)
 SECRECY IN BANK DEPOSITS (R.A. 1405)
DEPOSITS COVERED

• All deposits of whatever nature with banks or banking institutions found in the
Philippines; or
• Investments in bonds issued by the Philippine government, its branches, and
institutions. (Sec. 2, R.A. 1405)
• Trust Funds - the money deposited under the trust agreement is intended not
merely to remain with the bank but to be invested by it elsewhere. To hold that
this type of account is not protected by R.A. 1405 would encourage private
hoarding of funds that could otherwise be invested by banks in other ventures,
contrary to the policy behind the law. (Ejercito v. Sandiganbayan, G.R. No.
157294-95, Nov. 30, 2006)
• Despite such pronouncement that trust funds are considered deposits, trust funds
remain not covered by PDIC.
 SECRECY IN BANK DEPOSITS (R.A. 1405)
FOREIGN DEPOSITS

• Foreign currency deposits are covered by R.A. 6426 otherwise known as the
Foreign Currency Act. Under the same law, all authorized foreign currency
deposits are considered of an absolutely confidential nature and, except upon
the written permission of the depositors, in no instance shall be examined,
inquired or looked into by any person, government official, bureau or office
whether judicial or administrative private. that trust funds are considered
deposits, trust funds remain not covered by PDIC.
 SECRECY IN BANK DEPOSITS (R.A. 1405)
EXCEPTIONS

• Upon written consent of the depositor. (Sec. 2)

• In cases of impeachment. (Sec. 2)
• Upon order of competent court in cases of bribery or dereliction of duty of
public officials. (Sec. 2)
• In cases where the money deposited or invested is the subject matter of the
litigation. (Sec. 2)
• Upon order of the Commissioner of Internal Revenue in respect of the bank
deposits of a decedent for the purpose of determining such decedent’s gross
estate. (Sec. 6[F][1], NIRC)
 SECRECY IN BANK DEPOSITS (R.A. 1405)
EXCEPTIONS

• Upon the order of the Commissioner of Internal Revenue in respect of bank deposits
of a taxpayer who has filed an application for compromise of his tax liability by
reason of financial incapacity to pay his tax liability. (Sec. 6[f][1],NIRC)
• In case of dormant accounts/deposits for at least 10 years under the Unclaimed
Balances Act. (Sec. 2, Act No. 3936).
• When the examination is made by the BSP to insure compliance with the Anti-
Money Laundering Law in the course of a periodic or special examination
• With court order:
• In cases of unexplained wealth under Sec. 8 of the Anti-Graft and Corrupt Practices Act
(PNB v. Gancayco, L-18343, Sept. 30, 1965)
• In cases filed by the Ombudsman and upon the latter’s authority to examine and have access
to bank accounts and records (Marquez v. Desierto, GR 138569, Sept. 11, 2003)
 SECRECY IN BANK DEPOSITS (R.A. 1405)
GARNISHMENT

• The prohibition against examination or inquiry does not preclude its being
garnished for satisfaction of judgment.
• The disclosure is purely incidental to the execution process and it was not the
intention of the legislature to place bank deposits beyond the reach of judgment
creditor. (PCIB v. CA, G.R. No. 84526, Jan. 28, 1991)
 GENERAL BANKING ACT (R.A. 8791)

• The State recognizes the vital role of banks in providing an environment

conducive to the sustained development of the national economy and the
fiduciary nature of banking that requires high standards of integrity and
performance.
• In furtherance thereof, the State shall promote and maintain a stable and
efficient banking and financial system that is globally competitive, dynamic
and responsive to the demands of a developing economy. (Sec 2, RA 8791)
 BANK

• A bank is an entity engaged in the lending of funds obtained from the public in
the form of deposits.
• Elements:
• The entity is engaged in the lending of funds
• Funds obtained from the public with at least 20 depositors
• Funds are in the form of deposits
 EXTENT OF OWNERSHIP OF BANKS

• General Rule: A corporation may only own 40% of the bank.

• Exceptions:
• A universal bank can own up to 100% of a thrift bank
• A corporation whose shares are listed in the stock exchange can own up to 60% of the bank. This
privilege can be exercised only once.
• If the corporation is in existence for 10 years it can own up to 60% of the bank. This privilege can
only exercised once
• Under Foreign Bank Liberalization Law (RA 7721), the Monetary Board may authorize foreign
banks to operate in the Philippines.
• The percentage of foreign-owned voting stocks in a bank shall be determined by the
citizenship of the individual stockholders in that bank. The citizenship of the corporation
which is a stockholder in a bank shall follow the citizenship of the controlling
stockholders of the corporation, irrespective of the place of incorporation.(Sec 2)
 QUASI-BANK

• These are entities engaged in the borrowing of funds through the issuance,
endorsement or assignment with recourse or acceptance of deposit substitutes
for purposes of re-lending or purchasing of receivables and other obligations
(Sec 4). Unlike banks, quasi-banks do not accept deposits.
 TRUST ENTITIES

• These are entities engaged in trust business that act as a trustee or administer
any trust or hold property in trust or on deposit for the use, benefit, or behoof
of others (Sec. 79). A bank does not act as a trustee.
 FINANCIAL INTERMEDIARIES

• Persons or entities whose principal functions include the lending, investing, or

placement of funds on pieces of evidence of indebtedness or equity deposited
with them, acquired by them or otherwise coursed through them, either for
their own account or for the account of others.
 DEPOSIT SUBSTITUTES

• It is an alternative form of obtaining funds from the public, other than deposits,
through the issuance, endorsement, or acceptance of debt instruments, for the
borrower's own account, for the purpose of relending or purchasing of
receivables and other obligations.
• These instruments may include, but need not be limited to, banker’s
acceptances, promissory notes, participations, certificates of assignment and
similar instruments with recourse, and repurchase agreements.
 CORPORATE POWERS OF A BANK

All powers provided by the corporation code, like

issuance of stocks and entering into merger or
consolidation with other corporation or banks.
 GENERAL POWERS AND FUNCTIONS
OF A BANK
• Accepting drafts and issuing letters of credit
• Discounting and negotiating promissory notes, drafts, bills of exchange and
other instrument evidencing debt
• Accepting or creating demand deposits, receiving other types of
deposit and deposit substitutes
• Buying and selling FOREX and gold or silver bullion
• Acquiring marketable bonds and other debt securities
• Extending credit
• Determination of bonds and other debt securities eligible for
investment including maturities and aggregate amount of such
investment, subject to such rules as the Monetary Board may
promulgate.
• And all other powers as may be necessary to carry on the business of a
bank.(Sec. 29)
 P HILIP PINE DEP OSIT I NSURANCE CORPORATION
(PDIC )
(RA 35 8 1 AS AME NDED BY RA 93 0 2 )

PDIC shall promote and safeguard the interests of the

depositing public by way of providing permanent and
continuing insurance coverage in all insured deposits. (As
Amended by Sec. 1, R.A. 9302)
 P HILIP PINE DEP OSIT I NSURANCE CORPORATION
(PDIC )
COVERAGE

• The deposit liabilities of any bank or

banking institution, which is engaged in
the business of receiving deposits, shall be
insured with PDIC.
• The coverage is compulsory.
 INSURED DEPOSITS

• Insured deposit means the amount due to any bona fide depositor for legitimate
deposits in an insured bank net of any obligation of the depositor to the insured
bank as of the date of closure, but not to exceed P500,000.00. Such net amount
shall be determined according to such regulations as the Board of Directors
may prescribe. (As amended by Sec. 3, R.A. 9576)
 DEPOSIT LIABILITIES REQUIRED TO
BE INSURED WITH PDIC

• The unpaid balance of money or its equivalent received by a bank in the usual course of
business and for which it has given of is obliged to give credit to a commercial, checking,
savings, time or thrift account, or issued in accordance with Banko Sentral rules and
regulations and other applicable laws. (PDIC v. CA, 283 SCRA 462); and
• Subject to the approval of the Board of Directors, any insured bank which is incorporated
under the laws of the Philippines which maintains a branch outside the Philippines may
elect to include for insurance its deposit obligations payable only at such branch. (As
Amended by Sec. 2 R.A. 9576)
NOTE: The approval of the Board shall be final and executory, and may not be restrained or
set aside by the court, except on appropriate petition for certiorari on the ground that the
action was taken in excess of jurisdiction or with such grave abuse of discretion as to amount
to a lack or excess of jurisdiction. The petition for certiorari may only be filed within 30 days
from notice of denial of claim for deposit insurance. (As Amended by Sec. 2 R.A. 9576)
 DEPOSITS NOT COVERED

• Investment products such as bonds and securities, trust accounts, and other
similar instruments
• Deposit accounts or transactions which are unfunded, or that are fictitious or
fraudulent
• Deposit accounts or transactions constituting, and/or emanating from, unsafe
and unsound banking practice/s, as determined by the Corporation, in
consultation with the BSP, after due notice and hearing, and publication of a
cease and desist order issued by the Corporation against such deposit accounts
or transactions
• Deposits that are determined to be the proceeds of an unlawful activity as
defined under R.A. 9160,
 PROCESS IN DETERMINING AMOUNT
OF INSURANCE

• PDIC shall commence the determination of insured deposits due the depositors of a
closed bank upon its
• Actual takeover of the closed bank.
• PDIC shall give notice to the depositors of the closed bank of the insured deposits due them by
whatever means deemed appropriated by the Board of Directors.
• PDIC shall publish the notice once a week for at least 3 consecutive weeks in a newspaper of
general circulation or, when appropriate, in a newspaper circulated in the community or
communities where the closed bank or its branches are located. (Sec 16 R.A. 3591, as amended)
• The PDIC in its discretion, may require proof of claims to be filed before paying the
insured deposits, and that in any case where PDIC is not satisfied as to the viability of a
claim for an insured deposit, it may require final determination of a court of competent
jurisdiction before paying such claim. (Sec. 14 R.A. 3591, as amended)
 PROCESS IN DETERMINING AMOUNT
OF INSURANCE

• PDIC shall commence the determination of insured deposits due the depositors of a
closed bank upon its
• Actual takeover of the closed bank.
• PDIC shall give notice to the depositors of the closed bank of the insured deposits due them by
whatever means deemed appropriated by the Board of Directors.
• PDIC shall publish the notice once a week for at least 3 consecutive weeks in a newspaper of
general circulation or, when appropriate, in a newspaper circulated in the community or
communities where the closed bank or its branches are located. (Sec 16 R.A. 3591, as amended)
• The PDIC in its discretion, may require proof of claims to be filed before paying the
insured deposits, and that in any case where PDIC is not satisfied as to the viability of a
claim for an insured deposit, it may require final determination of a court of competent
jurisdiction before paying such claim. (Sec. 14 R.A. 3591, as amended)
 MONETARY POLICY

• Monetary policy, the demand side of economic policy, refers to the

actions undertaken by a nation's central bank to control money supply
and achieve macroeconomic goals that promote sustainable economic
growth.
• Monetary policy consists of the management of money supply and
interest rates, aimed at meeting macroeconomic objectives such as
controlling inflation, consumption, growth, and liquidity. This is
achieved by actions such as modifying the interest rate, buying or
selling government bonds, regulating foreign exchange (forex) rates,
and changing the amount of money banks are required to maintain as
reserves.
 MONETARY POLICY

• Economists, analysts, investors, and financial experts across the globe eagerly await
monetary policy reports and the outcome of meetings involving monetary policy decision-
makers.
• Such developments have a long-lasting impact on the overall economy, as well as on
specific industry sectors or markets.
• Monetary policy is formulated based on inputs gathered from a variety of sources.
• For instance, the monetary authority may look at macroeconomic numbers such as gross
domestic product (GDP) and inflation, industry/sector-specific growth rates and associated
figures, as well as geopolitical developments in international markets—including oil
embargos or trade tariffs.
• These entities may also ponder concerns raised by groups representing industries and
businesses, survey results from organizations of repute, and inputs from the government
and other credible sources.
 TYPES OF MONETARY POLICY

• Expansionary
• Contractionary
 EXPANSIONARY

• If a country is facing a high unemployment rate during a slowdown or a recession, the

monetary authority can opt for an expansionary policy aimed at increasing economic
growth and expanding economic activity.
• As a part of expansionary monetary policy, the monetary authority often lowers the
interest rates through various measures, serving to promote spending and make money-
saving relatively unfavorable.
• Increased money supply in the market aims to boost investment and consumer spending.
• Lower interest rates mean that businesses and individuals can secure loans on convenient
terms to expand productive activities and spend more on big-ticket consumer goods.
• An example of this expansionary approach is the low to zero interest rates maintained by
many leading economies across the globe since the 2008 financial crisis
 CONTRACTIONARY

• Increased money supply can lead to higher inflation, raising the cost of living
and cost of doing business.
• Contractionary monetary policy, increasing interest rates, and slowing the
growth of the money supply, aims to bring down inflation.
• This can slow economic growth and increase unemployment, but is often
necessary to cool down the economy and keep it in check.
• In the early 1980s when inflation hit record highs and was hovering in the
double-digit range of around 15%, the Fed raised its benchmark interest rate to
a record 20%.
• Though the high rates resulted in a recession, it managed to bring back
inflation to the desired range of 3% to 4% over the next few years.
THANK YOU