RA 7653

RA 7653

The New Central Bank Act

Chronology of Events:

Central Banking in the Philippines

Objectives

The BSP’s primary objective is to maintain price stability conducive to a balanced and sustainable economic growth. The BSP also aims to promote and preserve monetary stability and the convertibility of the national currency.

Monetary Board

exercises the powers and functions of the BSP, such as the conduct of monetary policy and supervision of the financial system. Its chairman is the BSP Governor, with five full-time members from the private sector and one member from the Cabinet.

CHAPTER II 

THE BANGKO SENTRAL AND THE MEANS OF PAYMENT

ARTICLE I - THE UNIT OF MONETARY VALUE- SECTION 48. The Peso. The unit of monetary value in the Philippines is the "peso," which is represented by the sign " P".

CHAPTER III 

GUIDING PRINCIPLES OF MONETARY ADMINISTRATION BY THE BANGKO SENTRAL

ARTICLE I - DOMESTIC MONETARY STABILIZATION

SECTION 61. Guiding Principle. — The Monetary Board shall endeavor to control any expansion or contraction in monetary aggregates which is prejudicial to the attainment or maintenance of price stability.

CHAPTER IV INSTRUMENTS OF BANGKO SENTRAL ACTION

ARTICLE IV

LOANS TO BANKING AND OTHER FINANCIAL INSTITUTIONS

Section 85. Interest and Rediscount.

ARTICLE V

OPEN MARKET OPERATIONS FOR THE ACCOUNT OF THE BANGKO SENTRAL

Functions of BSP

February 1948

President Manuel Roxas submitted to Congress a bill “Establishing the Central Bank of the Philippines, defining its powers in the administration of the monetary and banking system, amending pertinent provisions of the Administrative Code with respect to the currency and the Bureau of Banking, and for other purposes.

Other activities.

The BSP functions as the banker, financial advisor and official depository of the Government, its political subdivisions and instrumentalities and government-owned and -controlled corporations.

August 1947

A Central Bank Council was formed to review the Commission’s report and prepare the necessary legislation for implementation.

Financial Supervision.

The BSP supervises banks and exercises regulatory powers over non-bank institutions performing quasi-banking functions.

1946

A joint Philippine-American Finance Commission was created to study the Philippine currency and banking system. The Commission recommended the reform of the monetary system, the formation of a central bank and the regulation of money and credit.

The charter of the Central Bank of Guatemala was chosen as the model of the proposed central bank charter.

1900

Act No. 52 was passed by the First Philippine Commission placing all banks under the Bureau of Treasury. The Insular Treasurer was authorized to supervise and examine banks and banking activities.

Liquidity Management.

The BSP formulates and implements monetary policy aimed at influencing money supply consistent with its primary objective to maintain price stability.

1939

A bill establishing a central bank was drafted by Secretary of Finance Manuel Roxas and approved by the Philippine Legislature. However, the bill was returned by the US government, without action, to the Commonwealth Government.

Determination of exchange rate policy.

The BSP determines the exchange rate policy of the Philippines. Currently, the BSP adheres to a market-oriented foreign exchange rate policy such that the role of Bangko Sentral is principally to ensure orderly conditions in the market.

15 June 1948

The bill was signed into law as Republic Act No. 265 (The Central Bank Act) by President Elpidio Quirino.

Management of foreign currency reserves.

The BSP seeks to maintain sufficient international reserves to meet any foreseeable net demands for foreign currencies in order to preserve the international stability and convertibility of the Philippine peso.

3 January 1949

The Central Bank of the Philippines (CBP) was inaugurated and formally opened with Hon. Miguel Cuaderno, Sr. as the first governor.

The broad policy objectives contained in RA No. 265 guided the CBP in the implementation of its duties and responsibilities, particularly in relation to the promotion of economic development in addition to the maintenance of internal and external monetary stability.

February 1929

The Bureau of Banking under the Department of Finance took over the task of banking supervision.

Currency issue.

The BSP has the exclusive power to issue the national currency. All notes and coins issued by the BSP are fully guaranteed by the Government and are considered legal tender for all private and public debts.

3 July 1993

The Bangko Sentral ng Pilipinas (BSP) was established to replace the CBP as the country’s central monetary authority.

Lender of last resort.

The BSP extends discounts, loans and advances to banking institutions for liquidity purposes.

November 1972

RA No. 265 was amended by Presidential Decree No. 72 to make the CBP more responsive to changing economic conditions.

PD No. 72 emphasized the maintenance of domestic and international monetary stability as the primary objective of the CBP. Moreover, the CBP’s authority was expanded to include not only the supervision of the banking system but also the regulation of the entire financial system.

1986

Executive Order No. 16 amended the Monetary Board membership to promote greater harmony and coordination of government monetary and fiscal policies.

January 1981

Further amendments were made with the issuance of PD No. 1771 to improve and strengthen the financial system, among which was the increase in the capitalization of the CBP from P10 million to P10 billion.

Amando M. Tetangco, Jr.

Chairman

Cesar V. Purisima

Alfredo C. Antonio

ARTICLE VII

BANK RESERVES

SECTION 94. Reserve Requirements.

ARTICLE II - INTERNATIONAL MONETARY STABILIZATION

SECTION 64. International Monetary Stabilization. — The Bangko Sentral shall exercise its powers under this Act to preserve the international value of the peso and to maintain its convertibility into other freely convertible currencies primarily for, although not necessarily limited to, current payments for foreign trade and invisibles.

Juan D. De Zuñiga, Jr.

Important Articles

in

RA 7653

Valentin A. Araneta

Felipe M. Medalla

Armando L. Suratos

Reference:

www. bsp.gov.ph

Blazado, Sarah Jane

Cervantes, Ruzelle

Noquiao, Kathleen

Lacanilao, Dax