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Monetary System

  • Measures or actionstaken by the Central Bank to regulate the supply of money in the economy

The Nineties: The new Central Bank

(Bangko Sentral ng Pilipinas)

Change in the composition of the Monetary Board: (2) members from the government, (5) full-time members from the private sector

OBJECTIVES:

  • adoption of price stability
  • conducive to a balancee sustained growth
  • maintenance of monetary stability
  • convertability of the peso

Strenghtening of the regulations and supervision framework for banks and quasi-banks

Abolition of two suspense accounts, the Monetary Adjustment Accounts (MAA) and the Exchange Stabilization Adjustment Account (ESAA)

The phase-out of fiscal agency function

The phase-out of regulatory functions over finance companies without quasi-banking fxns w/in 5years

Additional mandatory reports to assure accountability

Financial Restructing of the CB upon effectivity of the law

The imposition of requirements on trust accounts by the Monetary Board are authorized under the new law

The imposition of interest on loans and advances made by the CB to any bank w/c has been placed under recievership, even after the bank is cloased

Overview of BSP

Established on July 3, 1993

Autonomous in its Fiscal and Administrative functions in the National Government as it pursues its mandated responsibility

OBJECTIVE: to promote a "low and stable inflation conducive to a balance and sustainable economic growth"

Functions of BSP

Liquidity management - influencing money supply consistent with its primary objective, to maintain price stability

Currency Issue - Exclusive power to issue the national currency

Lender of Last Resort - Extends discounts, loans, etc.

FInancial Supervision - - Supervises banks and exercises regulatory powers over nonbank istitutions performing quasi-banking fxns

Management of foreign currency reserves

Determination of Exchange rate policy

Other activities - Functions as banker, financial advisor and official depository of the Government, its political subdivisions and instrumentalities and GOCC's

MONETARY POLICY

Measure or actions taken by the Central Bank to regulate the supply of money in the economy constitute.

Aimed at influencing the timing, cost and availability of money and credit, as well as other financial factors, for the purpose of stabilizing the price level

Inflation Targetting

January 24, 2000

Framework of conducting monetary policy

Focuses mainly on achieving price stability as the ultimate objective.

Advantages of the Establishment of the New Central Bank/Bangko Sentral ng Pilipinas

The Government's assumption of certain liabilities of the old CB will lower inflation and interest rates..

..and will result to a higher economic growth, since the BSP will be relieved of the burden of servicing these liabilities..

..w/c in the past resulted in large CB deficit and exerted expansionary influences on money and, consequently, on prices.

With BSP no longer burdened by these liabliities, it can now focus on its monetary management functions in pursuit of its primary objectives on maintaining price stability

Strenghtening the Banking System

Changes in the regulatory framework for banks. Transparency on the part of both market participants and regulators

Mergers and acquisitions and through greater participation of foreign financial institutions

An Overview of the Philippine Financial System

Monetary System

General guidelines for those banks planning to offer e-banking services to ensure that the banks have rigorous internal controls and comprehensive risk management systems

(cc) photo by Metro Centric on Flickr

(cc) photo by jimmyharris on Flickr

(cc) photo by Franco Folini on Flickr

(cc) photo by Metro Centric on Flickr

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