The document discusses the central bank's role in regulating monetary and credit conditions to promote economic growth and stability. It outlines the central bank's objectives, functions, tools, and historical context, emphasizing its independence from political influences and its responsibility as a fiscal agent, reserve manager, and monetary regulator. The evolution of the Central Bank of the Philippines is also highlighted, detailing its growth and adaptation of monetary policies over the decades.

1. CENTRAL
BANKING

2. THROUGH ITS VARIOUS MONETARY TOOLS
• It can regulate the monetary and credit
conditions of the country

3. CENTRAL BANK
• Increase investments
• …production
• …employments
• …incomes
It can stabilize, together with fiscal policies.

4. In the Formulation and Implementation of
Monetary Policies
CENTRAL BANK requires…
• High degree of competence
• Integrity

5. Central Bank must demonstrate an unquestionable independence
from any political considerations which affect adversely its
functions.

6. Central Bank
• Envisioned primarily to promote economic
growth for the welfare of the people.
• Not to serve the interests of the elite and
those who are in power.

7. Central Bank
Central Bank may be referred to as a body corporate
entrusted with the responsibility of administering
the monetary, banking, and credit system of the
country with due regard to the availability, use, and
cost of money and credit for attainment of a
balanced and sustainable growth of the economy, as
well as, the maintenance of internal and external
monetary stability in the country.
-R.A No. 265, Sec. 1,2, 64 and 67

8. Before 20th century
• There had been a loose and vague of central
banking.
Banking institutions that substantially performed
the role of central bankers in many banks of
the world, referred to as “banks of issue” or
“national banks”.

9. Bank of England
• Founded in 1964 as a joint-stock Company
• Crowned as the “Mother of All Central Banks”
• Develop the “art of Central Banking” or “job
of the ideal central bank”

10. Objectives of the CB
1. Primarily to maintain internal and external
monetary stability in the Phil., and to
preserve the international value of the peso
and its convertibility into other freely
convertible currencies;
2. To foster monetary, credit and exchange
conditions conducive to a balanced and
sustainable growth of the economy.

11. Summarized as…
“to help counteract inflationary and
deflationary movements, and to
share in creating conditions favorable
to sustained high employment, stable
values, growth of the country, and a
rising level of consumption” (The
Federal Reserve System, 1951)

12. Main Function of Federal Reserve
Is to regulate the flow of money
and credit.

13. Central Bank is not wanting of
methods, tools, or instruments of
monetary management (credit
controls)

14. Instruments or tools of monetary control
• General (quantitative)
• Selective (qualitative)
A particular tool or instrument of monetary
management may be regarded as
producing a tight or easy money policy.

15. General monetary or credit control
Example:
• Open-market operations
• Discount rates
• Reserve requirements

16. Selective instrument of monetary regulation
Examples:
• Margin instruments on letters of credit
• …and other selective Instrument credit
-Chandler and Goldfeld, 1978

17. Functions of CB
“ideal jobs”
1. As a fiscal agent of the government (later on
added to this responsibility is two-fold, such
as : banker and financial advisor of the
government);
2. As a caretaker of commercial banks’ reserves
(this refers to legal reserve requirements);

18. 3. As manager of international reserve of
the country (consisting of gold and
foreign exchange);
4. As issuer of notes (legal tender money;
and
5. As regulator or controller or credit.

19. Features of Central Bank
1. Except in isolated cases, said not to be
directly dealing with any particular
individual/s or the public at large;
2. Although it may realize profits from its
organization, it is definitely organized or
created not for the purpose of profit-
making or profit-seeking venture;

20. 3. As a body corporate owned by the
government, it is expected to fulfill its
role as an agency of the government in
implementing public policy;
4. The latter exercises supervision and
regulation over monetary, credit, and
banking system of the country; and
5. Serves as the linkage or the connecting
link between the banking system of one
country and that of another or the rest of
the world.

21. The Central Bank of the Philippines
• Inaugurated in January 3, 1949
• 3,000 employees(present)
• More than 1 billion dollar international reserve
as against $420M in January 1949
• 1950’s, maneuvered the country’s monetary
and banking activities to extraordinary growth
through exchange and trade controls.

22. • 1960’s; monetary and credit controls called
“laissez faire’ economy with a modified fixed
exchange rate.
• 1970’s, “unrestricted” exchange rate or
“floating peso”, putting back the economy on
the pathways of stability.
• 1980’s, restructuring of the banking system.

23. Banking Laws
• Amended to give…
1. Universal Banking
- an expanded commercial banking
authority
2. Lifting of interest rates ceiling on deposits.

24. Role of CB
To ensure a strong monetary
foundation and adequate
resource inputs to the
development process.
-Gov. Gregorio S. Licaros