BANGKO SENTRAL NG PILIPINAS

Creating a Central Bank for the Philippines

A group of Filipinos had conceptualized a central bank for the Philippines as early as 1933. 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. 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.

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Chronology of Events: Central Banking in the Philippines

1900 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 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.
1946 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 and credit.

The charter of the Central Bank of Guatemala was chosen as the model of the proposed
central bank charter.
August 1947 A Central Bank Council was formed to review the Commission’s report and prepare the
necessary legislation for implementation.
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.
15 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. Moreover, the CBP’s authority was expanded to
include not only the supervision of the banking system but also the regulation of the entire
financial system.
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.
1986 Executive Order No. 16 amended the Monetary Board membership to promote greater
harmony and coordination of government monetary and fiscal policies.
3 July 1993 The Bangko Sentral ng Pilipinas (BSP) was established to replace the CBP as the
country’s central monetary authority.

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The BSP Vision and Mission

The BSP Vision

The BSP aims to be a world-class monetary authority and a catalyst for a globally competitive economy and financial system
that delivers a high quality of life for all Filipinos.

The BSP Mission

BSP is committed to promote and maintain price stability and provide proactive leadership in bringing about a strong financial
system conducive to a balanced and sustainable growth of the economy. Towards this end, it shall conduct sound monetary
policy and effective supervision over financial institutions under its jurisdiction.

BSP Citizen's Charter

Currency Management Sub-Sector

 Servicing of Cash Deposit and Subsequent Verification of Regular Deposit

The Bangko Sentral ng Pilipinas (BSP) Cash Department (CD) receives and keeps in custody banknotes and
coins currency deposit for credit to client banks' demand deposit account, pursuant to Circular No. 931
Series of 2016 dated 09 December 2016.

 Sale of Commemorative Notes and Coins

The BSP sells Commemorative Notes and Coins to the General Public.

 Servicing of Bank Withdrawals

The BSP releases cash withdrawal of notes and coins for debit to client banks’ demand deposit accounts with the
BSP.

 Redemption of Mutilated Notes/Coins Through Cash Payment

Examination of mutilated Philippine Peso notes and coins as to their genuineness and redemption value

 Examination of Doubtful Currency Notes for Issuanace of Certification

Examination of doubtful currency notes as to their genuineness, for issuance of certification

 Issuance of Permit to Reproduce or Use Facsimiles of Legal Tender Philippine Notes and Coins

BSP approval is required by law for the reproduction of facsimiles of legal tender Philippine currency for promotional
purposes in all print and broadcast media

Overview of Functions and Operations

Objectives

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.

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Responsibilities

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.

 Liquidity Management. The BSP formulates and implements monetary policy aimed at influencing money supply
consistent with its primary objective to maintain price stability.
 Currency issue. The BSP has the exclusive power to issue the national currency. All notes and coins issued by the
BSP are fully guaranteed by the Government and are considered legal tender for all private and public debts.
 Lender of last resort. The BSP extends discounts, loans and advances to banking institutions for liquidity
purposes.
 Financial Supervision. The BSP supervises banks and exercises regulatory powers over non-bank institutions
performing quasi-banking functions.
 Management of foreign currency reserves. The BSP seeks to maintain sufficient international reserves to meet
any foreseeable net demands for foreign currencies in order to preserve the international stability and convertibility
of the Philippine peso.
 Determination of exchange rate policy. The BSP determines the exchange rate policy of the Philippines.
Currently, the BSP adheres to a market-oriented foreign exchange rate policy such that the role of Bangko Sentral is
principally to ensure orderly conditions in the market.
 Other activities. The BSP functions as the banker, financial advisor and official depository of the Government, its
political subdivisions and instrumentalities and government-owned and -controlled corporations.

The BSP's Organizational Structure

as of 23 January 2017

 Executive Management Services– a collective term for all departments/offices directly reporting to the Monetary
Board or to the Governor
 Functional Sectors

 Monetary Stability Sector- mainly responsible for the operations/activities related to monetary policy formulation
and implementation
 Supervision and Examination Sector– mainly responsible for the regulation of banks and other BSP-supervised
financial institutions
 Resource Management Sector– mainly responsible for the management of human, financial, and physical
resources of the Bank

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 Security Plant Complex– responsible for the production of Philippine currency, security documents, and
commemorative medals and medallions

Governance of the Bank

The Monetary Board exercises the powers and functions of the BSP, such as the conduct of monetary policy and supervision
of the financial system. Its chairman is the BSP Governor, with five full-time members from the private sector and one
member from the Cabinet.

The Governor is the chief executive officer of the BSP and is required to direct and supervise the operations and internal
administration of the BSP. A deputy governor heads each of the BSP's operating sector as follows:

 Monetary Stability Sector 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.

 Supervision and Examination Sector enforces and monitors compliance to banking laws to promote a sound and
healthy banking system.

 Resource Management Sector serves the human, financial and physical resource needs of the BSP

Advocacies

The BSP is deeply involved in various projects and activities aimed towards alleviating poverty, contributing to the global fight
against money laundering, increasing transparency of monetary policy and improving the financial literacy of the public.

 The BSP has declared microfinance as its flagship program for poverty alleviation in Year 2000 and has since then
played a key role in the development of sustainable microfinance in the country. The BSP initiatives have focused
on the policy and regulatory environment, training and capacity building as well as on promotion and advocacy.

 In order to implement its continued commitment and support of the global fight against money laundering, the BSP
worked for the passage of the Anti-Money Laundering Act and issued a number of measures to bring the
Philippines' regulatory regime on money laundering closer to international standards.

 The BSP has been conducting public information campaigns in line with the effort to increase public awareness on
the role of the BSP in the economy and the financial system and to further enhance the transparency of monetary
policy.

 The BSP has also taken a proactive stance in embarking on a consumer education program that aims to improve
the basic financial literacy of the public.

 The BSP undertakes various bank-related initiatives to improve the remittance environment and to channel
remittances to productive undertakings. Through these initiatives, the BSP intends to maximize the benefits of
remittances aimed at: (1) ensuring the smooth inflow of remittances, and (2) promoting their use for development by
channeling them to the financial sector so that these funds can be mobilized for lending and other productive
activities.

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