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It came up with the rudiments of a bill for the establishment of a central bank for the country after a careful study of the economic provisions of the Hare-Hawes Cutting bill, the Philippine independence bill approved by the US Congress. 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. As it was a monetary law, it required the approval of the United States president. However, President Franklin D. Roosevelt disapproved it due to strong opposition from vested interests. A second law was passed in 1944 during the Japanese occupation, but the arrival of the American liberalization forces aborted its implementation.
Shortly after President Manuel Roxas assumed office in 1946, he instructed then Finance Secretary Miguel Cuaderno, Sr.
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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. The Commission, which studied Philippine financial, monetary and fiscal problems in 1947, recommended a shift from the dollar exchange standard to a managed currency system.
A central bank was necessary to implement the proposed shift to the new system.
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 February1948. 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 Bank Act of 1948. The establishment of the Central Bank of the Philippines was a definite step toward national sovereignty.
Over the years, changes were introduced to make the charter more responsive to the needs of the economy. On 29 November 1972, Presidential Decree No. 72 adopted the recommendations of the Joint IMF-CB Banking Survey Commission which made a study of the Philippine banking system. The Commission proposed a program designed to ensure the system’s soundness and healthy growth. Its most important recommendations were related to the objectives of the Central Bank, its policy-making structures, scope of its authority and procedures for dealing with problem financial institutions.
Subsequent changes sought to enhance the capability of the Central Bank, in the light of a developing economy, to enforce banking laws and regulations and to respond to emerging central banking issues. 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 into law Republic Act No. 7653, the New Central Bank Act, on 14 June 1993.
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 3 July 1993, the New Central Bank Act took effect. The BSP’s Organizational Structure The Monetary Board, which exercises the power and functions of the BSP, such as the conduct of monetary policy and supervision of the financial system.
The Monetary Stability Sector, which takes charge of the formulation and implementation of the BSP’s monetary policy, including serving the banking needs of all banks through accepting deposits, servicing withdrawals and extending credit through the rediscounting facility, The Supervision and Examination Sector, which enforces and monitors compliance to banking laws to promote a sound and healthy banking system, and The Resource Management Sector, which serves the human, financial and physical resource needs of the BSP.
The powers and function of Bangko Sentral are exercised by its Monetary Board, whose seven members are appointed by the President of the Philippines. As provided for by the New Central Bank Act, one of the government sector members of the Monetary Board must also be a member of the President's Cabinet. Members of the Monetary Board are prohibited from holding certain positions in other government agencies and private institutions that may give rise to conflicts of interest. The members have fixed, overlapping, terms, except for the cabinet secretary representing the incumbent administration and it was the expansionary.
The current members of the Monetary Board are:
Villafuerte The BSP’s primary objective is to maintain price stability conducive to a balanced and sustainable economic growth. The BSP also aims to promote and preserve monetary stability and the convertibility of the national currency. The BSP provides policy directions in the areas of money, banking and credit. It supervises operations of banks and exercises regulatory powers over non-bank financial institutions with quasi-banking functions.
Under the New Central Bank Act, the BSP performs the following functions, all of which relate to its status as the Republic’s central monetary authority.
A payments system comprises the cultural, political, legal, economic and business practices and arrangements that is used within a market economy to determine, store and exchange value or ownership of goods and services. Properly functioning payments systems enhance the stability of the financial system, reduce transaction costs in the economy, promote the efficient use of financial resources, improve financial market liquidity and facilitate the conduct of monetary policy. Central banks have a strong interest in promoting safety and improving efficiency in payments systems as part of their overall concern with financial stability.
Central banks play a key role in the domestic payments system because it is their liquid liabilities—more particularly their reserve balances—that are the instruments in which the bulk of domestic payment obligations are legally finally settled. This pivotal role reflects, in part, the central bank’s statutory legal tender monopoly. Payment is a transfer of value. At its basic level, a payments system is a mechanism agreed upon by buyers and sellers in transferring value between them in order to consummate a particular transaction. A payments system facilitates the exchange of goods or services in an economy.
A payment instrument is always required for each payment transaction to supply the term and conditions for the transaction, which should meet physical, legal and regulatory standards. Transfer of goods or services Goods flow Value flow Transfer of value through a payments system Seller Payee Flow of Payments System Buyers and Sellers, Payors and Payees Buyer Payor There are two general classifications of payment instruments, namely: cash or non-cash payment instruments. Cash is generally paper-based while the non-cash instruments are either paper-based or electronic-based.
Non-cash payment instruments can be classified further into cheque payments, direct electronic funds transfers and card payments. Under the general structure of the payments system, the payments system consists of the set of arrangements for discharging obligations assumed by economic actors whenever they acquire real or financial resources, including the institutions providing payment services, the various instruments used to convey payment instructions, the means of transferring those instructions (including communications channels), and the contractual relationship among the parties concerned.
One of my subject had affected was my major subject and that is Cost Accounting. Based on my own observation Cost Accounting had been affected throughout the Educational Tour of BAS. It affected me a lot because in terms of the hours that we pay on that subject it ruined and besides in terms in the subject we missed the lesson that should be took up on us on that day. But, Unfortunately, I’m not totally affected on that day, I learned a lot because our getaway tour is not all about fun. It is just like you are still studying but outside the campus.
Evolution of the Philippine Central Bank: A Historical Overview. (2018, Oct 19). Retrieved from https://studymoose.com/new-central-bank-act-essay
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