QUESTIONSWhat are Banks?What roles do banks play in society?How did banks evolve?

BASELINE OBSERVATIONSThey serve as the blood of the country.Banks control the money supply. They serve as financial intermediarySafekeeping of money is the primary purpose of banks.Regulates money circulation.They give out loansThey act as go-between between people, corporations, etc.Safe keeper of monies.

A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.

- Robert Frost-

Importance of BanksIndispensable Institution The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society. Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and commerce, banks have attained an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and, above all, trust and confidence. In this connection, it is important that banks should guard against injury attributable to negligence or bad faith on its part. As repeatedly emphasized, since the banking business is impressed with public interest, the trust and confidence of the public in it is of paramount importance.

(G.R. No. 170984. January 30, 2009.], SECURITY BANK AND TRUST COMPANY, petitioner, vs. RIZAL COMMERCIAL BANKING CORPORATION, respondent; G.R. No. 170987. January 30, 2009.],RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. SECURITY BANK AND TRUST COMPANY, respondent.)

BanksThe word Bank was borrowed in Middle English from Middle French banque, from Old Italian banca, from Old High German banc, bank "bench, counter".

The earliest evidence of money-changing activity is depicted on a silver Greek drachm coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350325 BC, presented in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city.

BanksChamber of Loans Bank of Venice (12th century) - discount; deposit and circulation.

Bank of Amsterdam

Bank of England prototype of modern banks

BanksThe definition of bank varies from country to country.

In common law, Bank- means anyone that carries on the business of banking.

Business of Banking-means conducting current accounts for customers, where the amounts are repayable to the customers order, and the person also either collects cheques payable to the customer or receives funds from the third parties to the customers current account

History of Banks in PH

History of Banking in the Philippines16th century Obras Pias, first organized credit institutions.

Bulk of funds came from native Filipinos

History of Banking in the PhilippinesBegan in 1828 when, as the Philippines reaped the benefits of increased trade, King Ferdinand VII of Spain issued a decree mandating the establishment of a public bank in the Philippines.

Source:BPI

History of Banking in the PhilippinesIt took 23 years before that bank could become a reality. The man behind the actual organization of the bank was no less than the governor-general of the Philippines at that time, His Excellency Antonio de Urbiztondo y Eguia.

History of Banking in the PhilippinesGov. de Urbiztondo called for the support of the Junta de Autoridades (a committee comprising of civil and ecclesiastical officials) in approving the bank's statutes and by-laws. The junta approved these statutes and by-laws on August 1, 1851, but it was understood that such approval had to be confirmed by the Spanish Crown.

History of Banking in the Philippines

The bank was called El Banco Espaol Filipino de Isabel 2, in honor of the reigning queen of Spain Isabella II, daughter of King Ferdinand VII, who passed away in 1830. The Bank's office was located at the Royal Custom house (Aduana) in Intramuros.

History of Banking in the PhilippinesThe royal decree that confirmed the creation of El Banco Espaol Filipino de Isabel 2 also gave the Bank the exclusive privilege to issue paper money, which antedated the currency-issuing authority of the post-war Central Bank of the Philippines by about a hundred years (The present central bank, the official issuer of Philippine currency, started operations only in 1949). The original bank notes were collectively called pesos fuertes (PF), Spanish for "strong pesos."

History of Banking in the PhilippinesThe first bank notes (or paper money) in the Philippines had the issue date May 1, 1852 and could be redeemed in Mexican coins in gold or silver. Apart from carrying the name of the Bank as issuer of the currency, the bank notes also bore the portrait of the woman for whom the bank was named - Queen Isabella II.

History of Banking in the PhilippinesOn September 3, 1869, the Bank officially dropped the name of the queen after she was ousted from the Spanish throne during a revolution a year earlier. Hence, since 1869, the Bank was known simply as El Banco Espaol Filipino.

History of Banking in the PhilippinesFollowing the signing of the Treaty of Paris in 1898, the Bank promptly shed off its Spanish character and converted into a Philippine institution.

Years later, in 1912, as a result of an earlier decision of the stockholders to rename the Bank, El Banco Espaol Filipino became officially known as the Bank of the Philippine Islands (BPI), or Banco de las Islas Filipinas. Under the American administration, the Bank was allowed to continue issuing Philippine pesos, although no longer on an exclusive basis.

History of Banking in the Philippines1900 -Act No. 52 was passed by the First Philippine Commission placing all banks under the Bureau of Treasury. The Insular Treasurer was authorized to supervise and examine banks and banking activities.

February 1929 -The Bureau of Banking under the Department of Finance took over the task of banking supervision.

1939-A bill establishing a central bank was drafted by then Secretary of Finance Manuel Roxas and approved by the Philippine Legislature. However, the bill was returned by the US government, without action, to the Commonwealth Government.

Source : BSP

History of Banking in the Philippines1946-A joint Philippine-American Finance Commission was created to study the Philippine currency and banking system. The Commission recommended the reform of the monetary system, the formation of a central bank and the regulation of money.

February 1948-President Manuel Roxas submitted to Congress a bill Establishing the Central Bank of the Philippines, defining its powers in the administration of the monetary and banking system, amending pertinent provisions of the Administrative Code with respect to the currency and the Bureau of Banking, and for other purposes.

History of Banking in the Philppines15 June 1948-The bill was signed into law as Republic Act No. 265 (The Central Bank Act) by President Elpidio Quirino.

3 January 1949-The Central Bank of the Philippines (CBP) was inaugurated and formally opened with Hon. Miguel Cuaderno, Sr. as the first governor.The broad policy objectives contained in RA No. 265 guided the CBP in the implementation of its duties and responsibilities, particularly in relation to the promotion of economic development in addition to the maintenance of internal and external monetary stability.

November 1972 RA No. 265 was amended by Presidential Decree No. 72 to make the CBP more responsive to changing economic conditions. PD No. 72 emphasized the maintenance of domestic and international monetary stability as the primary objective of the CBP.

January 1981-Further amendments were made with the issuance of PD No. 1771 to improve and strengthen the financial system, among which was the increase in the capitalization of the CBP from P10 million to P10 billion.

3 July 1993 - The Bangko Sentral ng Pilipinas (BSP) was established to replace the CBP as the countrys central monetary authority. Passage of RA 7653

2000 Passage of Republic Act 8791 otherwise known as the General Banking Act

Overview of Philippines Financial System I. Banksa.Universal BanksPrivate Domestic BanksGovernment BanksBranches of Foreign Banksb.Commercial BanksPrivate Domestic BanksSubsidiaries of Foreign BanksBranches of Foreign Banksc.Thrift Banksd.Rural and Cooperative Banks

II. Non-Bank Financial Institutions

a.With quasi-banking functionsb.Without quasi-banking functionsNon-Stock Savings and Loan AssociationsPawnshopsOthersc.Offshore Banking Units

source : BSP

Number of Banks in RP(BSP)

Type of BankNumber (as of June 2010)Universal Bank38Commercial Bank19Thrift Banks74Rural Banks624Cooperative Banks162

Laws CoverageGeneral Banking LawsGeneral Banking Law (RA 8791)New Central Bank Act (RA 7653)

Special Banking LawsRural Bank Act (RA 7353)Private Development Banks Act (RA 4093)Savings and Loan Association Act (RA 3779)Thrift Banks Act (RA 7906)

Other Laws affecting banksSecrecy of Bank Deposits (RA 1405)Unclaimed Balances Law (Act no.3936)Philippine Deposit Insurance Corporation (RA 3591)Special Purpose Vehicle Act (RA 9182)Anti-Money Laundering Act (RA 9160 as amended by RA 9194)

Five Persons primarily interested in the Banking SystemGovernmentDepositorsInvestorsCreditorsBorrowers

Declared Policy of the StateRA 8791, SECTION 2.Declaration of Policy. The State recognizes the vital role of banks in providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy.

Definition of Banks under GBLSECTION 3.Definition and Classification of Banks.

3.1."Banks" shall refer to entities engaged in the lending of funds obtained in the form of deposits. (2a)

Recitation Today:

Nature of the banking business

Liability of Banks for acts of officers and employees

Nature of Banking BusinessDebtor-Creditor RelationshipFiduciary DutyNot a trust agreementIndispensable InstitutionImpressed with public interestNot expected to be infallible

Liability of Banks for Acts of Officers and EmployeesPrimary Liability Highest Degree of Responsibility Respondeat Superior

Negligence of ManagerNegligence of OfficersNegligence of TellersRight to recover from employeesLiability for Damages