CHAPTER 2: BANKING INSTITUTIONS

BANKING INTITUTIONS
- refer to establishments that conduct financial transactions such as investment, loans, and
deposits.
- The banking institution in the Philippines can be categorized as private banking and government
banking.
- The private banking institutions are comprised of commercial banking such as universal banks
and ordinary commercial bank; thrift banks like savings and mortgage banks, private
development banks, and stock savings and loan associations; rural bank; and the offshore banks.
- The government banking institutions on the other hand consist of Development Bank of the
Philippines, Land Bank of the Philippines and the Philippine Al-Amanah Bank.

PRIVATE BANKING INSTITUTION

a. Universal Bank (Expanded Commercial Bank)
- operate on a national level
- considered as a one stop commercial bank performing functions of more than one kind of
banking. Its functions included depositing of money, lending, loans, investing and insurance. This
type of banking caters Wholesale banking, retail banking, investment banking, development
banking, and insurance to encompass a wider variety of services.
 ASIA UNITED BANK CORP (AUB)
 RIZAL COMMERCIAL BANKING CORP (RCBC)
 SECURITY BANK CORP (SBC)
 UNION BANK OF THE PHILIPPINES (UBP)
 BANK OF THE PHILIPPINE ISLANDS (BPI)
 BDO UNIBANK, INC (BDO)
 CHINA BANKING CORPORATION (CBC)
 EAST WEST BANKING CORP (EWBC)
 METROPOLITAN BANK AND TRUST COMPANY (METROBANK)
 PHILIPPINE NATIONAL BANK (PNB)

b. Commercial Bank
- operate on a national level
- are privately-owned and profit-banking institution that performs certain functions including
acceptance of deposits and lending loans to the public. . They also offer personal, business, and
mortgage loans, checking account services, and basic financial products like savings accounts
and certificate of deposit to individuals and businesses. The only difference it has against
Universal Bank is that it has no Investment Banking.
 BANK OF COMMERCE (BOC)
 PHILIPPINE BANK OF COMMUNICATIONS (PBCOM)
 PHILIPPINE VETERANS BANK
 ROBINSONS BANK CORPORATION
 CTBC BANK (PHILIPPINES) CORP
 MAYBANK PHILIPPINES, INCORPORATED
 CITIBANK, N.A.

c. Rural Bank
 - operate on a much smaller scale, either in their own municipality, provincial level or regional
level but not on a national level
- are privately owned banks that specialize in the extension of small loans for agricultural
purposes as well as for retail traders or the resident of the rural communities. These are meant
to help promote and expand the local economy in an orderly and effective manner.
 BDO NETWORK BANK
 EASTWEST RURAL BANK
 BANK OF FLORIDA (BOF INC)
 AMA RURAL BANK

d. Thrift Bank
- operate on a much smaller scale, either in their own municipality, provincial level or regional
level but not on a national level. Thrift banks function is to benefit the local people
- it is the bank that offers high returns on their deposits and charges low interest on mortgage
loans as it focus on accumulating and investing depositors' savings, while also providing short-
term working capital, and medium and long term financing, and mortgage/home loans. It
includes savings and mortgage banks, private development banks, and stocks savings and loan
associations.
 BPI SAVINGS BANK (subsidiary of BPI)
 BPI DIRECT BANKO (subsidiary of BPI in Microfinance)
 PHILIPPINE BUSINESS BANK
 CHINA BANK SAVINGS (subsidiary of China Bank Corp)
 PHILIPPINE SAVINGS BANK (PSBANK – affiliate of Metrobank)
 BANK OF MAKATI
 Savings Bank - is a financial institution that is not run on a profit-maximizing basis, and whose
original or primary purpose is collecting and safekeeping funds from persons
who have no immediate need for cash and invests these funds in long-term
investment
 Private Development Banks – takes care of giving loans to be used for developing the economy
and may therefore engage in medium and long-term lending.
 Cooperative Banks - organized, owned and controlled by cooperative

organizations, for the purpose of providing financial and credit

services to cooperatives and their members.

 Microfinance Banks - caters to the financial services needs of the poor and micro

enterprises is normally collateral-free short term facility.

e. Offshore Banking Units

- Representative offices of foreign banks are set up in the Philippines to serve as marketing and
advertising platforms with the main purpose of promoting their services and/or forwarding
client orders from abroad. These offices are not allowed to accept deposits, issue letters of
credit, and engage in foreign exchange trading. They are required, however, to add the title
“Representative Office” to their official local bank name to demonstrate the limited function
accorded to them by the Bangko Sentral.
 BANK OF SINGAPORE LTD. REPRESENTATIVE OFFICE
  WELLS FARGO BANK, N.A. REPRESENTATIVCE OFFICE

GOVERNMENT BANKING INSTITUTIONS

Banks subject to the supervision and regulation by the Central Bank that play special roles in the
economic development of the country.

a. Development Bank of the Philippines

- a government-owned development bank that provides banking services for the medium- and
long-term needs of small and medium enterprises (SMEs) in the agricultural and industrial
sector like infrastructure and logistics, environment, social services and community
development. The bank also expands credit access for the following sectors: local government
units, water districts and electric cooperatives.

b. Land Bank of the Philippines

- a government-owned bank that primarily caters to developing the Philippines’ agricultural
sector and provides support for the agrarian reform program

c. Philippine Amanah Bank

- designed to promote and accelerate the socio economic growth and to provide banking facilities
to the Muslim provinces of Mindanao.

ECONOMIC SIGNIFICANCE OF BANKING

1. Promotion of Saving Habits
Bank attracts depositors by introducing attractive deposit schemes and providing rewards or
return in the form of interest. Banks providing different kinds of deposit schemes to its
customers. It enables to create of banking habits or saving habits among people.

2. Financing SMEs and Industrial/Agricultural Sectors

Commercial banks finance business lending in a variety of ways. A business owner may solicit a
loan to finance the start-up costs of a small business. Once funded, the small business may begin
operations and embark on a growth plan. The aggregate effect of small business activity
generates a significant portion of employment around the country.

Commercial banks finance the industrial sector in a number of ways. In general, they provide
short-term, medium-term, and long-term loans to the industry.

Commercial banks also help the large agricultural sector in developing countries in a number of
ways. They provide loans to traders in agricultural commodities. They provide finance directly to
farmers for the marketing of their produce, for the modernization and mechanization of their
farms, for providing irrigation facilities, for developing land, etc.

3. Generate Employment Opportunities

Since a bank promotes industry and investment, there automatically generate employment
opportunities. So, a bank enables an economy to generate employment opportunities.

4. Smoothing of trade and commerce functions

 In this modern era trade and commerce play a vital role in any country. So, the money
transaction should be user-friendly. A modern bank helps its customers to sent funds to
anywhere and receive funds from anywhere of the world.

A well-developed banking system provides various attractive services like mobile banking,
internet banking, debit cards, credit cards, etc. these kinds of services fast and smooth the
transactions. So, the bank helps to develop trade and commerce.

5. Application of Monetary Policy

Monetary policy is an important policy of any government. The major aim of the monitory policy
is to stabilize the financial system of the country from the dangers of inflation, deflation, crisis,
etc.

6. Support the Government Spending

Commercial banks also support the role of the government as an agent of economic
development. Generally, commercial banks help fund government spending by purchasing
bonds issued by the Department of the Treasury. Both long and short-term Treasury bonds help
finance government operations, programs and support deficit spending.