1. What is a financial market?
(3 points)
2. Differentiate the ff: (4 points each)
a. Capital market and money market
b. Equity and Bonds market
c. Primary and secondary market
3. Describe the components of the financial
market using a concept tree (5 points)
FINANCIAL SERVICE INDUSTRY
Describe the brief history of banking
Define what are banks and their classification
Discuss the different functions of banks
2000 BC – Temples of Babylon ( lending gold
and silver) 20% interest
Height of development in Greece
Dark Ages (Fall of Rome) banking activities
retrogressed
Jews
First known registered banking institution
◦ Venice 1157 AD- imposed by government
◦ 17th-18th century –Europe
1401 Bank of Amsterdam
1609 Bank of Amsterdam
1619 Bank of Hamburg
1621 Nuremberg
1688
Stockton
1694 Bank of England ( first modern bank)
From the word BANCHI or BANCA meaning
bench or counter where transactions were
made
Also meaning mound of money/ stack of
money
Organization with accumulation of money in
large sums intended for a definite purpose
Establishment for receiving, keeping, lending
and sometimes using money and making
easier the exchange of funds by checks or
notes etc.
Private Domestic Banks- owned by Filipino
citizens
Private Foreign Banks- branch or subsidiary
of a foreign bank
Government Controlled Banks- partly
owned/controlled by the government
Specialized government banks- controlled
and owned by the government for a specific
purpose to help the gov’t carry out certain
objectives (ex. DBP, Landbank)
COMMERCIAL BANKS
◦ Universal bank or Uni Bank with expanded
commercial banking authority
◦ Non-unibank- without expanded commercial
banking authority
THRIFT BANKS
o Savings and mortgage
o Private development banks
o Savings and loan associations
o Cooperatives rural banks
Regional or unit banks
◦ Rural banks
Specialized government banks
◦ DBP, Land Bank
Intermediary between savers and borrowers
“Department Store of Finance”
They provide a wide variety of financial services
◦ Deposits
◦ Lending
◦ Investing
◦ Cashier’s checks
◦ Money orders
◦ Trust services
Help facilitate economic processes of production,
distribution and consumption
Banks whose business are confined largely
with transactions with businessmen and
business firms
Loans are mostly short term
DEPOSITORY
LOAN AND DISCOUNT
REMITTANCE AND COLLECTION FUNCTIONS
TRUST AND FIDUCIARY FUNCTIONS
CLASSIFICATION OF DEPOSITS
◦ According to source – gov’t or private
◦ According to time of withdrawal
Demand= can withdraw anytime
Term= term is indicated
How are bank deposits protected?
◦ PDIC
◦ BSP bank reserves
Loans to business
Lines of credit
Types of Loans
◦ Demand loan
◦ Time loan
◦ Term loan
◦ Secured / unsecured loans
Interest= fee on borrowed money
◦ Based on market forces and policy of management
CHECKING ACCOUNT- checks drawn on other
banks
Clearing house- association of banks
established to facilitate the clearing of
checks, drafts, notes and other items.
COLLECTING TRANSIT ITEMS
◦ Cash letter of credit or cash letter
◦ Remittance letter
Only commercial banks has a foreign
department
Services exporters, importers, travelers
IMPORTERS
◦ Opening commercial letters of credit to finance
imports
◦ Selling foreign exchange
◦ Financing importers
EXPORTERS
◦ Furnishing reports on credit standing of buyers in
foreign countries
◦ Submitting reports on market conditions
◦ Collecting drafts drawn by Filipino exporters on
foreign importers
◦ Paying drafts drawn by Filipino exporters un L/C
◦ Advancing money against drafts for collection or
against L/C
TRAVELLERS
◦ Selling foreign exchange, travelers checks
◦ Supplying letters of introduction to banks and other
third parties abroad
A systematic scheme or arrangement whereby
confidence as well as title to property are
placed by one party for sole benefit of
another
Trustee= recipient of trust
Beneficiary= recipient of benefit
EXECUTOR UNDER WILL
◦ Collect assets, pay liabilities, distribute excess
according to the will
ADMINISTRATOR OF INTERSTATE ESTATE
◦ Court appointed if no will was left
TRUSTEE UNDER WILL
◦ Testamentary trust
◦ If person does not wish to distribute estate
immediately
◦ Trustee will manage assets according to will
◦ Beneficiary relieved of managing responsibilities
GUARDIAN OR CONSERVATOR OF ESTATES
◦ Trustee administer estate of a minor ( court
appointed)
INVESTMENT BANKING
◦ Bridging the gap between those who need funds
and those who supply them
◦ Merchandising securities
◦ Buy and sell securities
◦ For working capital needs
◦ For government needs
◦ Purchase and improvement of real estate
NON-BANK THRIFT INSTITUTIONS
◦ Savings and loan associations
◦ Building and loan associations
GOVERNMENT BANKING INSTITUTIONS
◦ PNB
◦ DBP
◦ LAND BANK
◦ PHILIPPINE VETERANS BANKS
Choose 1 bank and 1 non-banking institution
Short background history
Category
List their products and group according to
function
Internet research or interview
Printed short bond 1-3 pages Arial 11
Be ready to discuss in class
