Scribd
Upload
46 views5 pages

Far Eastern University: Midterm Assessment Task Topic Monetary and Fiscal Policies Clo3

This document discusses the functions of the Central Bank of the Philippines (BSP) and the importance of financial intermediaries to the monetary system. It provides examples of the BSP's primary responsibilities which include maintaining price stability, managing foreign currency reserves, and determining exchange rate policy. It then discusses the roles of one financial intermediary, FCB Bank, in pooling resources from small savers, providing liquidity and payment services, and diversifying risk. Financial intermediaries help link those who have capital and want to save with those who need capital and want to borrow.

Uploaded by

Gian Salvador
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
46 views5 pages

Far Eastern University: Midterm Assessment Task Topic Monetary and Fiscal Policies Clo3

This document discusses the functions of the Central Bank of the Philippines (BSP) and the importance of financial intermediaries to the monetary system. It provides examples of the BSP's primary responsibilities which include maintaining price stability, managing foreign currency reserves, and determining exchange rate policy. It then discusses the roles of one financial intermediary, FCB Bank, in pooling resources from small savers, providing liquidity and payment services, and diversifying risk. Financial intermediaries help link those who have capital and want to save with those who need capital and want to borrow.

Uploaded by

Gian Salvador
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 5

FAR EASTERN UNIVERSITY

Institute of Architecture and Fine Arts

MIDTERM ASSESSMENT TASK


TOPIC
MONETARY AND FISCAL POLICIES
CLO3

ECON 1N Sec-9 M/TH / 7:30 – 9:00

SUBMITTED BY:
Trogillo, Sem S. (2015718901)
Course Learning Outcomes
CLO3.

Topic: MONETARY AND FISCAL POLICIES

Assignment Task: Write an essay addressing both topics.

1. Identify and explain with examples the functions of the Central Bank to financial
institutions in the Philippines.

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.

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.

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.

2. Identify one financial intermediary in the Philippines and discuss its importance to the
Monetary system. Provide examples.

FCB BANK

Banks spread depositor funds over many types of loans, so the default of any one loan
does not put depositor funds in jeopardy. Financial intermediation is the process
performed by banks of taking in funds from a depositor and then lending them out to a
borrower. The banking business thrives on the financial intermediation abilities of
financial institutions that allow them to lend out money at relatively high rates of interest
while receiving money on deposit at relatively low rates of interest.

The bank raises funds from people looking to deposit money, and so can afford to lend
out to those individuals who need it. Some of the roles played by banks as financial
intermediaries are as follows.

Pooling the resources of small savers: Many borrowers require large sums, while
many savers offer small sums. Without intermediaries, the borrower for a $100 000
mortgage would have to find 100 people willing to lend him or her $1 000. That is hardly
efficient. Banks, for example, pool many small deposits and use this to make large
loans.
Mobilizing Wholesale finance and Lines of Credit: Banks will also mobilize large
sums of money from the wholesale markets for on-lending to many small borrowers
across various productive sectors. Such facilities can be mobilized offshore, where a
smaller company would not be able to negotiate favorable terms by themselves.
Examples of such facilities are offshore credit facilities raised by banks to fund SMEs or
mortgages locally.

Providing safekeeping, accounting, and payments mechanisms for resources:


Banks are an obvious example for the safekeeping of money in accounts, the records of
payments, deposits and withdrawals and the use of debit/ATM cards. Financial
intermediaries can do all of this much more cheaply than individuals because they take
advantage of economies of scale. All of these services are standardized and automated
on a large scale, so per unit transaction costs are minimized.

Providing liquidity: Financial intermediaries make is easy to transform various assets


into a means of payment through ATMs, credit cards, debit cards, etc. In doing this,
financial intermediaries manage many short-term outflows and investments with long-
term outflows and investments in order to meet their obligations while profiting from the
spread between long- and short-term interest rates

Diversifying risk: Financial intermediaries’ help investors diversify in ways they would
be unable to do on their own. Banks spread depositor funds over many types of loans,
so the default of any one loan does not put depositor funds in jeopardy.

Collecting and processing information: Financial intermediaries are experts at


collecting and processing information in order to accurately gauge the risk of various
investments and to price them accordingly. Individuals do not likely have to tools or
know-how to do the same, and certainly could not do so as cheaply as financial
intermediaries (once again, economies of scale are important here). This need to collect
and process information comes from a fundamental asymmetric information problem
inherent in financial markets.
REFERENCES:

http://www.bsp.gov.ph/about/functions.asp

https://www.herald.co.zw/importance-of-financial-intermediation/

You might also like