Responsibilities and Objectives
- Administration of the monetary and banking system
- Maintain monetary stability
- Preserve international value and convertibility of the peso
- Promote increased production, employment, and real income
Principal Office and Powers
- Principal office in Manila with branches as needed
- Corporate powers including own seal, contracts, property ownership, suing and being sued
- Authority to acquire assets and incur liabilities essential for operations
The Monetary Board Structure and Function
- Seven members including Secretary of Finance (presiding), Central Bank Governor, President of Philippine National Bank, Chairman of Rehabilitation Finance Corporation, plus three presidential appointees
- Appointment terms of six years, with initial staggered terms
- Qualifications: good moral character, competence in economics/banking, natural-born citizenship for Governor and members
- Disqualifications include holding other public office or banking positions
- Removal grounds include disqualification, fraudulent acts, or loss of qualifications
- Meetings every two weeks, quorum of four, decisions require majority
- Members must withdraw from deliberations where personal interests exist
Monetary Board Authority and Responsibilities
- Issue rules and regulations for Central Bank and monetary system
- Management and operation oversight of the Central Bank
- Appointment and removal of officers/employees excluding the Governor
- Authorization of expenditures
- Liability for violations or negligence causing loss, misuse of confidential information
Powers and Duties of the Governor
- Chief executive of the Central Bank
- Prepares meeting agendas and recommends policies
- Executes Board-approved policies
- Directs operations and administration
- Represents the Bank in dealings and legal proceedings
- Handles emergencies with limited authority subject to Board review
- Limited professional activities; no other employment except academic or governmental advisory roles
- Remuneration fixed by the Board with presidential approval, capped at P30,000/year
Central Bank Departments
- Economic Research: data gathering, forecasts, and economic studies; authority to subpoena information; training of personnel
- Supervision and Examination: supervises and examines banks and credit institutions; powers to investigate, administer oaths; prohibited from conflicts of interest
- Other departments as determined by the Monetary Board
Currency and Deposit Money
- Central Bank sole issuer of Philippine currency (notes and coins), guaranteed by the Government
- Currency defined and characterized by Monetary Board and approved by President
- Central Bank to replace unfit currency and may retire old notes and coins
- Deposit money includes bank liabilities payable on demand by checks; checks have no legal tender status
Guiding Principles of Monetary Administration
- Control fluctuations in money supply and prices to protect economic stability
- Money supply defined as domestic currency and deposit money, excluding government and banks' holdings
- Reporting requirements triggered by abnormal money supply or price changes
- Maintain international value and convertibility of the peso
- Adequate international reserves composed of gold, foreign currencies, and foreign assets
- Actions required when international reserve threats arise with reports to executive and Congress
Central Bank Instruments and Operations
- Moral influence and regulatory powers to manage money, credit, and exchange
- Buy and sell gold and foreign exchange within set rules and margins
- Emergency powers to restrict exchange operations during crises
- Avoid holding inconvertible foreign currencies unless in national interest
- Set and regulate exchange rates for spot and other types of transactions
Regulation of Banks in Foreign Exchange
- Monetary Board sets permissible buy/sell exchange rates with limited margin from legal parity
- Banks must sell surplus foreign exchange to Central Bank
- Require banks to maintain balanced currency positions
- Regulate speculative foreign exchange transactions
- Revaluation profits and losses on banks’ foreign assets accounted by Central Bank
- Banks bear risks of non-compliance and other exchange-related risks
- Reporting obligations imposed on banks and other entities regarding foreign exchange operations
Credit Policy and Operations
- Credit operations aimed at regulating volume, cost, and availability of bank credit
- Rediscount, discount, loans, and advances with specific maturities and collateral types
- Special provisions for loans to mortgage and government institutions
- Emergency credit calls for extraordinary secured advances during crises
- Interest rates and terms fixed by Monetary Board
Credit to Government
- Provisional advances permitted within strict limits for fiscal support
Open Market Operations
- Purchases and sales of government securities and bank obligations for policy goals
- Issue and management of Central Bank’s own negotiable debt instruments
Composition and Review of Central Bank’s Portfolio
- Monthly portfolio reviews focusing on maturities and credit policy alignment
Reserve Requirements
- Banks must maintain reserves proportional to deposit liabilities
- Minimum ratios set for peso and foreign currency deposits
- Penalties for reserve deficiencies include fines and restrictions
- Interbank clearing facilitated by Central Bank reserves
Regulation of Bank Credit
- Monetary Board may set max interest rates and charges
- May require minimum margins for letters of credit
- May set loan maturities and security standards
- Portfolio ceilings on bank loans and investments can be imposed
- Minimum capital ratios prescribed to protect depositors
Government Credit Institutions
- Government financial institutions must coordinate credit policies with the Central Bank
Fiscal Agent and Government Banker Functions
- Acts as Government’s fiscal agent and banker, managing official deposits and transactions
- Represents Government in dealings with International Monetary Fund and other institutions
- May use other banks as agents domestically and abroad
- Charges no fees or pay interest on Government deposits
Government Securities Marketing and Stabilization
- Acts as agent for issue and placement of Government securities without subscribing or guaranteeing
- Operates a Securities Stabilization Fund to promote liquidity and stability
- Fund sources include Exchange Standard Fund allocations and a portion of Central Bank’s profits
Government Financial Advisor
- Monetary Board advises on credit operations involving foreign or domestic borrowing
- Governor serves ex officio on the National Economic Council for policy coordination
Privileges and Exemptions
- Exempt from all national and local taxes, customs duties on import/export of currency and equipment
- Appointment of personnel subject to Civil Service Law except for policy, confidential, or technical positions
- Officers and employees prohibited from engaging in partisan political activities
Prohibitions
- Central Bank prohibited from owning shares or participating in business enterprises
Transitory Provisions
- Liquidation of Exchange Standard Fund to capitalize Central Bank and fund Securities Stabilization Fund
- Assumption of Treasury certificate and coin liabilities by Central Bank with appropriate asset transfers
- Temporary authority to make extraordinary advances to Government with conditions
- Transfer of functions from Bureau of the Treasury and Bureau of Banking to Central Bank
- Repeal of inconsistent laws
- Exemption of Central Bank borrowings from certain Banking Act restrictions
- Act effective upon organization and capitalization of Central Bank