Bangko Sentral ng Pilipinas BSP BSP is principally
Bangko Sentral ng Pilipinas (BSP)
• BSP is principally an institution designed to regulate the monetary and financial system
Confidence of Money • The BSP is the only authorized government entity to print money and is responsible for the proper administration of the monetary banking credit system of the republic to achieve monetary stability and create conditions conducive to economic development.
Confidence of Money What are some instances of monetary management that can cause people to lose confidence in money? What are the probable effects?
Confidence of Money Example: The unrestrained growth in money supply which causes severe inflation and distorts investments, production, and employment.
Confidence of Money Example: Pervasive unchecked circulation of fake money
BSP Organization
Executive Manangement Services
Monetary Stability Sector
Supervision and Examination Sector
Resource Management Sector
Security Plant Complex
BSP Organization • Monetary Board – highest policy-making body in the BSP – appointed by the President of the Philippines
BSP Organization • Governor – chief executive officer of the BSP – direct and supervise the operations and internal administration of the BSP – head of a department
BSP Organization • Monetary Stability Sector – responsible for the operations or activities related to monetary policy formulation and implementation
BSP Organization • Supervision and Examination Sector – responsible for the regulation of banks and other BSP supervised financial institutions
BSP Organization • Resource Management Sector – responsible for the management of human, financial, and physical resources of the Bank
BSP Organization • Security Plant Complex – responsible for the production of Philippine currency, security documents, and commemorative medals and medallions
Characters of the BSP 1. Publicly-owned – there are varieties of ownership patterns for central banks, but government ownership is a common factor
Characters of the BSP 2. Bank of currency issues and ultimate source of money – all central banks perform the note issue function for the country
Characters of the BSP 3. Banker's Bank – The old central banks evolved partly from the need for some institution to become a bank for bankers
Characters of the BSP 4. Custodian of the country's reserves of foreign currencies – Central banks naturally serve as the keeper of the country's reserve of international currencies
Characters of the BSP 5. Regulation of monetary and financial activities – most central banks are given the authority to regulate the operations of all banks and other financial institution in the country
Republic Act 7653 • BSP was created by R. A. 7653, otherwise know as The New Central Bank Act • Passed by the House of Representatives and the Senate on June 10, 1993 • Signed into law on June 14, 1993
Republic Act 7653 Sec. 2 of said Act states that "there is hereby established an independent central monetary authority, which shall be known as the Bangko Sentral ng Pilipinas"
Republic Act 7653 The creation of an independent Central Monetary Authority shall: • Provide policy directions in the areas of money, banking, and credit • Have supervision over the operations of the banks and exercise such regulatory powers as provided by in R. A 7653, over the operations of finance companies and other institutions performing similar functions
Objectives of the BSP (R. A #7653) 1. To maintain price stability conducive to a balanced and sustainable growth of the economy 2. To promote and maintain monetary stability and the convertibility of the peso
Monetary Board The powers and function of the Bangko Sentral shall be exercised by the monetary Board, such as the conduct of monetry policy and supervision of financial system.
Monetary Board - Composition Composed of seven members appointed by the President of the Philippines. Governor - Chairman of the Monetary Board. Member of the Cabinet - designated by the President of the Philippines. Five member who shall come from the private sector - all shall serve full time
Monetary Board - Functions and Powers The major functions of the Monetary Board include the power to: 1. Issue rules and regulations - considers necessary for the effective discharge of the responsibilities and exercise of the powers vested in it.
Monetary Board - Functions and Powers 2. Direct the management, operations, and administration of Bangko Sentral - organize its personnel and issue such rules and regulations as it may deem necessary or desirable for this purpose.
Monetary Board - Functions and Powers 3. Establish a human resource management system which governs the selection, hiring, appointment, transfer, promotion, or dismissal of all personnel.
Monetary Board - Functions and Powers 4. Adopt an annual budget and authorize such expenditures, by Bangko Sentral, as for the interest of the effective administration and operations of Bangko Sentral in accordance with applicable laws and regulations.
Monetary Board - Functions and Powers 5. Indemnify its members and other officials of BSP, including personnel of the departments performing supervision and examination functions, against all costs and expenses reasonably incurred by such persons to which may be made by reason of the performance of his functions, unless such members or other officials is found to be liable for negligence or misconduct.
Actions when the International stability of the Peso is threatened Whenever the international reserve of the BSP fall to a level, and the Monetary Board considers inadequate to meet the prospective net demands on the Bangko Sentral foreign currencies, the Monetary Board shall :
Actions when the International stability of the Peso is threatened 1. Take such remedial measures as appropriate and within the powers granted to the Monetary Board and Bangko Sentral under the provision of this R. A 7653.
Actions when the International stability of the Peso is threatened 2. Submit to the President of the Philippines and to Congress a detailed report which shall include, as a minimum, a description and analysis of :
Actions when the International stability of the Peso is threatened a. the nature and causes of existing or imminent decline b. the remedial measures already taken or to be taken by the Monetary Board
Actions when the International stability of the Peso is threatened c. the Monetary Board, fiscal or administrative measures further proposed d. the character and extent of cooperation required from government agencies for the successful execution of policies of the Monetary Board
Actions when the International stability of the Peso is threatened The Monetary Board shall submit periodic reports to the President until the threat to the international monetary stability of the Philippines has disappeared
How the BSP influences the economy? The BSP has the sole ability to influence the amount of money circulating in the economy • All money aggregates are incorporated with output and interest rate
How the BSP influences the economy? It is assumed that the BSP is able to determine the level of money supply that is needed given the desired level of inflation that is consistent with the economy's growth objective. In effect the BSP controls inflation indirectly by targeting money supply.
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