2. Central Bank
Under the Philippine law, a central bank is defined as the central monetary
authority which provides policy direction in the areas of money, credit and banking.
It supervises the operations of banks and exercise regulatory powers over non-
bank financial institutions performing quasi-banking functions.
3. Origin of Central Bank
Central banks have developed in two ways.
A. Through a slow process of evolution,
The first central banks evolved in Europe due to the great need to
safeguard the interests of the bankers, and to improve monetary conditions. Such
banks were privately owned and were generally knows as banks of issue or as national
banks. In latter years, they gradually performed the functions of central banking. The
state granted them the sole right of note issue (issuance of money), and the authority
to act as agent and banker of the government. Here are some brief notes on the oldest
central banks.
Bank of England. It was organized in 1694 as a joint-stock company. It extended
financial assistance to the distressed government of William III
4. The Riksbank of Sweden. It was established in 1656 as a private bank. However, it was
reorganized in 1668 as a State bank. It gradually developed into a central bank using
the Bank of England as a model.
The Bank of France. It was created in 1800 mainly from private capital and the rest
from government funds. The founder of said bank was Napoleon Bonaparte. It was the
government’s banker and it had the sole right of note issue.
5. Other central banks.
The Bank of the Netherlands was founded in 1814 with private capital. However,
the government appointed the president and secretary of the managing board
while the stockholders elected the other members of the managing board and the
board of directors.
The Bank of Norway was established in 1817 with private capital. Its further
development was similar with that of Riksbank of Sweden.
Although it was founded with a private capital, its top officials were appointed by
the king, and the others were elected by the members the legislature.
In subsequent years, Denmark, Belgium, Spain, Russia, Germany, Austria and Japan
put up their respective central banks
6. B - Creation of Central Banks
During the first decade of 1900 all of the countries in North America, South
America, and Central America had no central banks. Even countries with ancient
civilization like China and India were still without central banks. In the case of the
United States, it has established its central bank only in 1913 during the time of
President Wilson. This was followed by South Africa which created its South African
Reserve Bank in 1921.
7. list of some of the more familiar places with the
corresponding dates of the creation of their central
banks:
Central Bank of China 1928
National Bank of Iran 1928
Bank of Canada 1935
Reserve Bank of India 1935
Bank of Thailand 1942
State Bank of Pakistan 1948
Central Bank of the Philippines 1949
National Bank of Cuba 1950
Bank of Korea 1950
Union Bank of Burma 1952
Bank of Indonesia 1953
Bank of Israel 1954
Central Bank of Malaysia 1958
8. The Central Bank and the Economy
The central bank of any country has a crucial role to play, especially in a poor
country where resources are not properly distributed and efficiently used. Through
its powers and policies, a central bank can direct flow of money and credit into the
various sectors of the economy, it can also improve the social and economic
conditions of the poor by making credit facilities accessible to them. With liberal
bank loans, the poor can put up their small business or income-producing projects.
Since they constitute the foundation of our society and the economy, the
improvement of their standard of living would results to a more stable society and
a balanced economic growth. The principal trust of any economic program should
be economic efficiency with social justice. And the central bank can be a positive
contributor if its vast resources are utilized with competence and social
responsibility.
9. The Bangko Sentral Ng Pilipinas
The Bangko Sentral Ng Pilipinas (BSP) is the central monetary authority. It has a policy-
making body which provides direction in the fields of money, credits and banking. This
is the Monetary Board of the Bangko Sentral Ng Pilipinas
To achieve its major objectives – maintain price stability and balanced and sustainable
economic growth – the Bangko Sentral supervises the operations of the banking
institutions and regulates the activities of the non-banking financial institutions
performing quasi-functions. Such powers of the Bangko Sentral are important in order
to be able to control within desirable limits the supply of money circulating in the
economy
10. Creating a Central Bank for the Philippines
A group of Filipinos led by Miguel Cuaderno, the first governor of the Central Bank,
had conceptualized a central bank for the Philippines as early as 1933.
During the Commonwealth period (1935 – 1941), the discussion about a Philippine
central bank that would promote price stability and economic growth continued.
The country’s monetary system then was administered by the Department of
Finance and the National Treasury. The Philippines was on the exchange standard
using the US dollar – which was backed by 100 percent gold reserve – as the
standard currency.
In 1939, as required by the Tydings-McDuffie Act, the Philippine legislature passed
a law establishing a central bank
11. Shortly after President Manuel Roxas assumed office in 1946, he instructed then
Finance Secretary Miguel Cuaderno, Sr. to draw up a charter for a central bank. The
establishment of a monetary authority became imperative a year later as a result of
the findings of the Joint Philippine-American Finance Commission chaired by Mr.
Cuaderno
Immediately, the Central Bank Council, which was created by President Manuel
Roxas to prepare the charter of a proposed monetary authority, produced a draft. It
was submitted to Congress in February 1948. By June of the same year, the newly-
proclaimed President Elpidio Quirino, who succeeded President Roxas, affixed his
signature on Republic Act No. 265, the Central Act of 1948.
12. Thus, in the 1973 Constitution, the National Assembly was mandated to establish
an independent central monetary authority. Later, PD 1801 designated the Central
Bank of the Philippines as the central monetary authority (CMA). Years later, the
1987 Constitution adopted the provisions on the CMA from the 1973 Constitution
that were aimed essentially at establishing an independent monetary authority
through increased capitalization and greater private sector representation in the
Monetary Board
The administration that followed the transition government of President Corazon C.
Aquino saw the turning of another chapter in Philippine central banking. In
accordance with a provision in the 1987 Constitution, President Fidel V. Ramos
signed law Republic Act No. 7653, the new Central Bank Act, on June 14, 1993.
13. The law provides for the establishment of an independent monetary authority to
be known as the Bangko Sentral ng Pilipinas, with the maintenance of price
stability explicitly stated as its primary objective. This objective was only implied in
the old Central Bank charter. The law also gives the Bangko Sentral fiscal and
administrative autonomy which the old Central Bank did not have. On July 3, 1993,
the New Central Bank Act took effect.
14. Responsibility of the Central Bank of the
Philippines
There was rapid expansion in savings, development, and rural banks as well as in
savings and loan associations. Likewise, banking services increased to meet the
special needs of various clients. It was during the early 1970s that non-bank
financial institutions, especially investment houses and finance companies, cropped
up. The full development of the money market took also took place. It was also
during this period that the Euro-currency banking began in the Philippines. The
Central Bank launched a program to bring back foreign currency holdings of
residents abroad, and authorized the creation of special foreign currency deposit
(FCDUs) of local commercial banks.
15. Objectives of the New Central Bank
The BSP’s primary objectives are to:
maintain price stability conducive to a balanced and sustainable economic growth.
Price stability means monetary stability. If there are wide fluctuations in price levels,
there is no price stability or monetary stability. For instance during inflation, that is
when prices are very high, the value of the peso is very low. Because the same amount
of peso can buy lesser number of goods and services. In other words, the purchasing
power of the buyers decreases
Promote and preserve monetary stability and the convertibility of the national
currency.
16. Convertibility of national currency which is the peso with other
currencies simply refers to foreign exchange. Could we exchange
our money with the other freely convertible currencies of other
countries? If not, it would be a great problem in our trade
relations with other countries. Today, we can easily convert our
peso to other foreign currencies; in fact some of our Asian
countries like Thailand accept our peso in buying goods.
17. Capitalization of the Bangko Sentral ng
Pilipinas
The capital of the Bangko Sentral is Fifty billion pesos (P50,000,000,000), fully
subscribed by the Government of the Republic and Ten billion pesos (P10,000,000)
fully paid by the Government.
18. Governors of the Central Bank
Miguel Cuaderno, Sr. Jan. 3, 1949 – Dec. 31, 1960
Andres V. Castillo Jan. 6, 1961 – Dec/ 31, 1960
Alfonso Calalang Jan. 1, 1968 – Jan. 9, 1970
Gregorio S. Licaros Jan. 10, 1970 – Jan. 15, 1981
Jaime C. Laya Jan. 16, 1981 – Jan. 18, 1984
Jose B. Fernandez, Jr. Jan. 19, 1984 – Feb. 19, 1990
Jose L. Cuisia, Jr. Feb. 20, 1990 – July 2, 1993
19. Governors of the Bangko Sentral Ng
Pilipinas
Gabriel C. Singson July 6, 1993 – July 5, 1999
Rafael B. Buenaventura July 6, 1999 – July 3, 2005
Amando M. Tetangco, Jr. July 4, 2005 - Present
20. The BSP Monetary Board - 2015
Governor Amando M. Tetangco, Jr - Chairman
Cesar Purisima Member
Alfredo C. Antonio “
Juan D. de Zuńiga, Jr. “
Valentin A. Araneta “
Felipe M. Medalla “
Armando L. Suratos
21. Banko Sentral Ng Pilipinas, New Central Bank Act or 1993, RA 7653
Report – BSP at 22: Providing stability, sustainability for inclusive growth,
supplement at Philippine Daily Inquirer – July 3, 2015
In pursuit of its mandate, the BSP focuses on its pillar of central banking:
Price stability
A sound and stable banking system, and
A payments and settlement system that is safe, reliable and efficient
22. How Do BSP fared in these mandate?
Successful Inflation Management
Inflation rate for the month of May 2015 is 1.6% the lowest in 20 years.
In 2014 – inflation average 4.1%, the sixth consecutive year that inflation remained
within the official target range.
Sound, stable and liquid banking system
It has a strong balance sheet and capitalization above national and international
requirements. Loans continue to increase at double-digit levels and are directed
mostly to productive sectors and public confidence in the banking system continues to
push deposits to record high levels.
23. Safe and reliable payments and settlement system
Operates the Philippines’ real-time gross settlement system called PhilPass is a
vital part of the economic and financial infrastructure. Its efficient functioning allows
transactions to be completed safely and on time, and thereby contributes to overall
confidence in the financial system.
Improving lives through financial inclusion
Beyond the three pillars of central banking, the BSP is actively working on the
development of an inclusive financial system that will support inclusive growth
