The document provides an overview of the history and development of banking in the Philippines from medieval times to modern universal banking. Some key points covered include: - The origins of commercial banking beginning in Mediterranean cities in the 14th century. - How goldsmiths in England in the 17th century engaged in money lending, laying the foundations for modern banking. - The establishment of early forms of banking in the Philippines through religious organizations (Obra Pias) and the opening of ports to international trade in the 19th century. - The founding of the Philippine National Bank in 1916 and its rapid growth to dominate the country's banking resources. - The establishment of the Central Bank of the Philippines in

1. BANKING:
DEVELOPMENT AND
GROWTH
CHAPTER 11

2. Learning Objectives
• Medieval Times
• Beginning of Commercial Banking
• Banking in England
• Goldsmith Started Banking
• Development of Banking in the Philippines
• Obra Pias
• The Rise of Banks
• The Coming of Foreign Banks
• The Need for Rural Credits
• The PNB Story
• The Ups and Downs of PNB
• The PNB Role Under the Republic
• PNB-The First Universal Bank
• The Central Bank of the Philippines
• Accomplishment of CBP
• Financial Reforms
• What is Universal Banking?
• What is the Rationale for the Adoption of
Universal Banking?
• What are the Objectives of Universal Banking

3. Represented by:
NHEL ARCERA
KELSEY B.
CAGADOC DARRYL ANDREW
MAALIW
ROBERT
CAMPOMANES
3

4. Medieval Times
Genos
Italian
4
12th Century

5. 5
Europe
Italian
14th Century-trade and
banking system

6. 6
14th Century- using documents
16th to 18th Century- legal doctraine
of negotiability is developed

7. Beginning of Commercial
Banking
- The bankers of the Mediterranean cities were
the direct of modern commercial banking
• (1356)- establishment of public banks
• (1587)- Banco della Pizza di Rialto was founded
in venice, the first real public bank
• (1401)- Bank Deposit of Barcelona
• (1407)- Cass di San Glorio in Genoa

8. Banking in England
8
Middle Ages- Englands finance was
not fully developed.

9. 9
The nature of the banking in England
LOANS COLLECTION
TRANSMISSION
OF
REVENUES
FINANCING ON
FOREIGN TRADES

10. 10
Bill of exchange are not used as
money Bank notes were not
known Interest rates controlled by
the state.

11. 11
17th Century- trade expansion, capital
accumulation and increasing need of financial
agencies and instruments
Sir Thomas Gresham

12. Goldsmith Started Banking
12
1640- goldsmiths were engaged in
money lending using their own funds.

13. DEVELOPMENT OF BANKING IN THE PHILIPPINES
Can be traced back to the Commonwealth period when
the early infrastructure for development financing was
laid by the government, we were formed in 1958 through
the re-organization brought about by changes in the
management of government trust funds, assets and
resources. Expanding our facilities and operations to
accelerate national development efforts, we established
a network of branches throughout the country, delivering
substantial benefits in capital formation, employment
generation and increased revenues, particularly in the
countryside. 13

14. Obra Pias
14
•During the time, rich and religious citizens
donated money for charitable and pious projects.
Such funds were then called obras pias which
means pious works. These were managed by
religious confraternities. However, said funds
were also used as loans to traders. Many of those
who were engaged in the Galleon Trade
borrowed money from the obras pias to finance
their business. Interest rates were based on the
degree of risks of the business.

15. The Rise of Banks
15
The arrival of Governor Jose Basco y Vargas in 1778 paved the way
for the economic development of the Philippines His program was
to transform the country into s self-sufficient economy, and to
make it financially indepen dent from Mexico. To attain his
programs of development, he organized in 1781 the Economic
Society of Friends of the Country which stressed the development
of agriculture, commerce and industry. Economic development was
the opening of Manila to world trade. In view of the commercial
liberalism pervading in Europe at that time, King Ferdinand VII
abolished the monopoly of the Galleon Trade and the privileges of
the Royal Company of the Philippines. The King of Spain also
opened the port of Manila to world trade in 1834.

16. The Coming of Foreign Banks
16
The opening of the Suez Canal in 1869 greatly increased
Philippine trade. Producers in the country acquired more
merchants in Europe for their products. Such economic
opportunities stimulated further agricultural development. Banco
Español-Filipino played a very vital role. It financed crops for
exports and established correspondent relations in Spain and
France to assist the European trade. When Queen Isabel II had
been dethroned by the revolution in 1868, the bank shortened its
name. Thus, it has become known as Banco Español-Filipino.
The expansion of trade with European markets attracted British
capital to the Philippines. In 1873, the Chartered Bank of India,
Australia and China established its branch in Manila. Two years
later, Hongkong and Shanghai Bank also organized its branch.

17. The Need for Rural Credits
• At the time of the American rule, land reform became a
government policy. Some friar estates were purchased
and subdivided for the tenants. The American
administration stated that the country's land and
natural resources should be utilized in the interests of
the Filipino themselves. Commercial banks were then
dominated by foreigners. Provision of rural credit
facilities was not much given atten- tion by the
foreigners. As a result, the poor farmers depended
heavily on the loan sharks. More often than not, the
poor farmers were exploited by the moneylenders.

18. The PNB Story
The Philippine National Bank(PNB) was formally inaugurated on
July 22, 1916. Around fifty individuals were recruited to start the
operations of the bank. Henry Parker Wellis became the first
president and chairman. He was then the Secretary of the United
States Federal Reserve Board. The PNB was capitalized at P20
million. Of this amount, P10.1 million came from the Philippine
government. The rest came from the private sector. The bank
rented a building at 84-96 Escolta Street, Manila. This was its
headquarters for fifty years. Later on PNB moved to a new building
down the same street, The PNB had an immediate impact on
commercial banking in the Philippines. In two years time after its
opening in 1916, the bank controlled about two-thirds of the count
ry's banking resources.

19. The Ups and Downs of PNB

20. The PNB Role Under
the Republic

21. PNB-The First Universal
Bank

22. The Central Bank of the
Philippines

23. Accomplishment of CBP
1. It has taken a lead role during the last decades in mobilizing domestic
savings for capital formation. Such program has been envisioned to reduce
dependence on foreign source. Over the last eight years, domestics savings
rose to P185.4 billion. The central bank has initiated an information drive on
credit consciousness throughout the country, focused towards the formers.
The program involves the wise use of money, the proper ways of utilizing
credit, and good savings habits.
2. The Central Bank has participated extensively in government programs for
development. Through the rural banking system, it has funded projects which
have intended to improve the quality of life of the rural poor. Example are rice
and corn production, poultry and piggery industries, fisheries and other agro-
industrial programs.
3. The Central Bank continues to pursue its policy of dispersal of financial
institutions to the rural areas. Emphasis has been given to regional growth
and its linkage effects on all sectors of the economy. From a few commercial

24. 4. The Central Bank has maintained linkages with the
international financial markets through the offstore
banking units established in 1977 and the foreign currency
deposit units. The consolidated borrowing program was
created in 1978 for the benefit of the Philippine industry.
The latter has access to external funds at chapter rates
and longer maturities. As a proof of confidence in the
Central Bank of the Philippines, foreign financial
institutions have been offering loans to our country.
5 the Central Bank has adopted the program of universal
banking to improve efficiency in the financial system. At
this writing there are nine commercial banks which
operate as universal banks.

25. Financial Reforms
The financial system and the national economy in 1949 when the
Central Bank of the Philippines opened its door for business were
not the same in later years.
In 1949, there were only 11 commercial banks with 75 branches
nationwide. As on September 1990, there were 1795 commercial
banks including head offices and branches.
The banking system has grown significantly in size, complexity
and sophistication.
The original role of the Central Bank in the allocation and pricing
of financial resources became less effective and in adequate. To
make the Central Bank more responsive and efficient in meeting
the needs of a dynamic financial systems as well as the increasing

26. Financial Reforms were introduced in 1972, and in 1980. The
financial reforms of 1972 were the product of a joint IMF- CB
Banking Survey Commission. Said reforms included the
expansion of the scope of authority of Central Bank to include
not only the banking system, but also the entire financial and
credit system. In the case of the financial reforms of 1980, these
were the recommendations of the joint IMF-WB Mission in March
1979. There was a need to increase the flow of savings,
especially for medium and long-term projects. Aside from
increasing the capital of commercial banks, the entry of foreign
investment in commercial banking was liberalized. However, not
a few economic observe have claimed that such WB-IMF
suggestions were actually conditions imposed by said
institution on the Philippine government for the approval of our
WB-IMF loans. Apparently, such reforms facilitated the entry of

27. What is Universal Banking?
•A variation of the German concept of
universal banking what one bank can do, any
other bank can do the Philippine version
referred to as expanded commercial banking,
allows banks to expand their functions so as
to become super banks with department store
capabilities.
27

28. What is the Rationale for the Adoption of Universal Banking?
• In spite of the remarkable growth of the financial
system to the development finance requirements of
the country, accumulated earnings were not still
adequate to fulfill the credit need of the country. The
financial system conspicuously failed to provide
sufficient medium and long-term finance. As a
result, short term lending continued to predominate.
The reliance on short term finance not only to
created a climate of uncertainly for investors and
reduced capital formation, it also favored
misallocation of existing financial intermediation.
28

29. 29
Since early 1970s the financial system
has been guided by the concept of
specialization of function under the
strong regulatory control of the
Central Bank.

30. 30
What are the Objectives of Universal Banking
1. To increase the mobilization of savings intermediated through the
financial system
2. To channel more of the financial resources towards medium and
long-term purpose rather than for short-term lending.
Under the present system also, there is specialization of functions
among the different types of institutions.
Universal banking would then be aptly described as “ department
store banking” In a universal bank, a customer would have every
facility of a commercial bank, investment house, development banks,
financing company, and even a leasing company.