Specialized Banks 4k4o5b

Principles of Finance 1ST SEMESTER AY 2014-2015 UNIVERSITY OF SANTO TOMAS FACULTY OF ARTS AND LETTERS

Specialized Banks  Banks that cater to specific sectors of the economy This includes ordinary households, SME’s farmers, landowners and even the Muslim minority.

Thrift Banks (TB’s) Includes the following financial institutions: a)Savings and Mortgage Banks (SMB's)  a financial institution in which its’ functions are limited to receiving deposits and issuing mortgages a)Stock savings and loan associations (SSLA's)  engages in the business of pooling the savings of its stockholders and using these funds on private and Government Securities c)Private Development Banks (PDB’s)  Established to meet the needs for capital and credit for Filipino entrepreneurs particularly those engaged in the agricultural and industry sectors

Thrift Banks POWERS 1) accepts savings and time deposits from the public 2) Grant secured loans 3) Invest in readily marketable bonds and other debt-securities, commercial papers and s receivables or notes arising out of commercial transactions. 4) Issue domestic Letters of Credit

Thrift Banks Powers with limitations and/or approval of BSP 1) Open current or checking s provided that the thrift bank has net assets of at least P20M 2) Act as official depository of national agencies and of municipalities 3) Deal in foreign exchange and operate Foreign Currency Deposit Units (FCDU) 4) Issue mortgages 5) Engage in quasi-banking 5) Act as collection agent for government entities (SSS, BIR, BOC, etc.)

Thrift Banks Characteristics I. More conservative in its’ operations than Commercial Banks (KB’s)  Higher cash to assets ratio than KB’s  Lower investment to assets ratio than KB’s  Lower loans to deposit ratio than KB’s  Lower ROPOA to assets ratio than KB’s  Most of its’ investment are directed towards short-term debts II. Prioritizes credit provisions to SME’s and sectors such as the agricultural, industrial and housing.

Chamber of thrift banks  Coordinates with BSP and PDIC in supervising thrift bank activities  Helps TB’s in reaching out to SMEs and small savers particularly to rural areas

Rural Banks  Help farmers by providing credit to buy seedlings, farm machines and in the marketing of their produce.  In the early 80’s, it relied heavily on Government funding  In the late 80’s, rural bank rehabilitation program took place  Over the years, rural banks have engaged in lending to commercial and industrial sectors

Specialized Government Banks Though now classified as commercial banks, these are still Government owned and controlled  Developmental Bank of the Philippines  Started out as a bank that provides credit for economic recovery during the WWII.  In the 80’s, it accumulated huge amount of bad debts mainly because of Behest Loans.  In the 90's, it has been given authority to function as a universal bank  active role in sectoral development by extending credit to strategic industries such as transportation, telecommunications, power and energy, education and healthcare.

Specialized Government Banks  Land Bank of the Philippines  First established to land reform by financing the transfer of farm lots to tenants or cultivators with a repayment plan of 25 years.

Specialized Government Banks Al-Amanah Islamic Investment Bank of the Philippines  the first and only Islamic bank in the Philippines  provides Muslim communities with financial and banking products and services that are congruent with their religious values and principles.  Savings and Current s are operated in Wadiah basis

Other Important Financial Agencies  Philippine Deposit Insurance Corporation (PDIC)  Government corporation created for the primary purpose of insuring bank deposits.  Works with BSP in monitoring the transparency and the prudence of the banking system.  Aids in liquidation of bank closures  Maximum coverage is set at P500,000.00  Insurance is paid by the banks not by the depositors  hip of banks to PDIC is mandatory; hence, all operating banks are of PDIC.

Other Important Financial Agencies  International Monetary Fund (IMF)  promotes international monetary cooperation and exchange rate stability, facilitates the balanced growth of international trade, and provides resources to help in balance of payments difficulties or to assist with poverty reduction  it has 188 member countries. It is a specialized agency of the United Nations but has its own charter, governing structure, and finances.  provides loans to countries that have trouble meeting their international payments and cannot otherwise find sufficient financing on affordable

Other Important Financial Agencies  Asian Development Bank (ADB)  aims for an Asia and Pacific free from poverty.  main devices for assistance are loans, grants, policy dialogue, technical assistance and equity investments.  Economists, sociologists, engineers, gender experts and environmental scientists are amongst the hundreds of professions at the bank working together to reduce poverty.  Environmental sustainability is a core strategy of ADB  Philippines is fifth largest borrower, ing for about 8% of total lending.