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MODULE 1 Report

The banking and finance sector in the Philippines is primarily responsible for mobilizing domestic savings and converting these funds into productive investments to sustain long-term economic growth and job creation. It is composed of banks and non-bank financial institutions. Banks such as universal banks and rural/cooperative banks accept deposits and offer credit services. Non-bank financial institutions like insurance companies and pension funds encourage investments but do not accept deposits. Auditors must understand the nature and regulations of these specialized industries.

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MAMBA, MIERMAY JEAN P.
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60 views2 pages

MODULE 1 Report

The banking and finance sector in the Philippines is primarily responsible for mobilizing domestic savings and converting these funds into productive investments to sustain long-term economic growth and job creation. It is composed of banks and non-bank financial institutions. Banks such as universal banks and rural/cooperative banks accept deposits and offer credit services. Non-bank financial institutions like insurance companies and pension funds encourage investments but do not accept deposits. Auditors must understand the nature and regulations of these specialized industries.

Uploaded by

MAMBA, MIERMAY JEAN P.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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MODULE 1

Overview

The Philippines' banks are classified into three types: universal and commercial banking, rural and
cooperative banking, and thrift banking. Of these segments, universal and commercial banks that
accepted domestic deposits and offered checking account services had dominated the Philippines'
banking industry, with its total deposits valued at approximately 12 trillion Philippine pesos.

-The banking and finance sector performs a critical function in the Philippine economy as it is
primarily responsible for the mobilization of domestic savings and the conversion of these funds into
directly productive investments. Financing the needs of firms which desire to raise productive capacity
by purchasing additional capital equipment, acquiring, or leasing idle property, building, and expanding
factories, and increasing inventory are responsible for sustaining economic growth in the long term,
alongside the creation of new jobs.

-Well learn more of the functions of the bank and other financial institutions as we go on this
chapter.

Module Objectives:

• Know the nature and background of the particular specialized industry;

• Learn the overview, statistics, and updates of the specialized industry in the Philippine setting;

• Identify the different audit considerations and trends for the industry

Nature and Background of Specialized Industry

The banking and finance sector is primarily responsible for mobilizing domestic savings and converting
these funds into directly productive investments.

-Financing the needs of firms which desire to raise productive capacity by purchasing additional
capital equipment, acquiring or leasing idle property, building and expanding factories, and increasing
inventory are responsible for sustaining economic growth in the long term, alongside the creation of
new jobs.

Banks perform the function of safekeeping money and valuables and extending loans, credit and
payment services in the form of checking accounts, money orders, cashier’s checks as well as the
issuance of debit and credit cards.

The financial system is composed of two general groups namely: banks and non-bank financial
institutions. Banking institutions include: universal banks, commercial banks, thrift or savings banks and
the rural and cooperative banks.

-These institutions are allowed to collect savings and time deposits to fund loans and also
perform the function of providing credit and payment services. Large banks, particularly the universal
and commercial banks, can engage in other intermediation activities such as investment banking and
may offer other forms of portfolio investment instruments and insurance products.

Non-bank financial institutions on the other hand, are composed of insurance companies, pension fund
institutions, investment banks, financing companies, pawnshops and mutual fund institutions.

-These institutions are not allowed to collect deposits but may encourage the general public to
invest household savings in various financial instruments. Premium payments for term insurance
policies, regular contributions to pension funds, investment into mutual funds or purchases of shares of
stock in financing companies and pawnshops are some of the ways by which non-bank financial
institutions can source funds to finance lending and or investment operations.

Universal and commercial banks have the largest resources and offer the widest variety of banking
services outside of collecting deposits and providing loans. Thrift banks include savings and mortgage
banks, private development banks, stock savings and loan associations and microfinance thrift banks.
Rural and cooperative banks promote and expand the rural community by 5 mobilizing savings and
extending loans and other financial services to farmers to help with the purchase of seeds, livestock,
fertilizers, and other farm inputs and the marketing of their produce.

Non-bank financial institutions, on the other hand, are composed of insurance companies, pension fund
institutions, investment banks, financing companies, pawnshops, and mutual fund institutions.

-There are several types of non-bank financial institutions offering a wide variety of services
such as investment houses, financing companies, investment companies, securities dealers/brokers,
lending investors, government non-bank financial institutions, venture capital corporations, non-stock
savings and loans associations, pawnshops and credit card companies.

Bank’s basic operational model

Fundamentally, the business model of a bank is simple: it is about granting credit and collecting
deposits.

AUDIT CONSIDERATIONS

BANKING LAWS

PD 114

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