FM3A - Javier, Angelica Mae S - Quiz 1 - FM105

Angelica Mae S.
Javier QUIZ 1
BSBA FM-3A
Direction: Answer the following questions (Minimum of 5 Sentences).
1. Identify the different types of financial institutions. Define each type.

- There are 8 types of financial institutions, the first one is Banks, A bank is a commercial or
government-owned financial organization that performs financial services such as issuing money in
different forms, accepting money deposits, lending money, processing transactions, and building credit. In
this type of financial institution there are 8 types of banks and the first one is a Central Bank, which is an
organization responsible for the monetary policy of a country or a collection of member states, such as the
European Central Bank (ECB) in the European Union, the Federal Reserve System in the United States of
America, and the States Bank in Pakistan. Its main job is to keep the national currency and money supply
stable, but it also has more active responsibilities such as monitoring subsidized-loan interest rates and
acting as a "lender of last resort" to the banking sector during financial crises. Next type of bank is
Commercial Bank, in a practice known as fractional-reverse banking; it collects deposits from
consumers and then provides loans, sometimes in excess of the deposits. Banknotes are issued as legal
money by some banks (known as Bank of Issue). The third would be Investment Bank, which assists
firms, governments, and other agencies in raising funds through the main market by issuing and selling
securities. They help public and private companies raise money in the capital markets (both equity and
debt), as well as giving strategic advice on mergers, acquisitions, and other financial transactions. The
fourth type of bank is a savings bank, which is a financial organization whose primary aim is to take
savings deposits. It may also be used for other purposes. Micro Finance Bank, for the purpose of poverty
reduction program, such kind of banks is working in the different countries with the contribution of UNO
or World Bank. Aside from these it also have the other three (3) types of banks, which are Islamic Bank,
Specialized Bank and Non-banking financial company.
An investment company is a firm that issues securities and is principally involved in the business
of investing in securities (corporation, business trust, partnership, or Limited Liability Company). An
investment company invests the money it receives from investors as a group, and each investor shares in
the gains and losses in proportion to his or her investment company stake. A leasing company or tenancy
is the right to use or occupy personal property or real property granted by a lessor to another person
(commonly referred to as the lessee or tenant) for a set or indefinite length of time in exchange for
payment of a fixed or determinable amount to the lessor (payment). The fourth type of Financial
Institution is Insuring Companies, which also have two funds; Mutual Fund and Pension Funds.
Credit unions are cooperative organizations whose members are expected to share a similar bond, such
as working for the same company. Credit unions are frequently the cheapest source of cash accessible to
individual borrowers; members' savings are loans and house mortgages. The last type is Brokerage
houses or stock brokers, aid consumers in investing; online-only organizations are known as cheap
brokerages; full-service brokerages, or private client services, are known as full-service brokerages.
Banks, thrift banks, rural and cooperative banks, and consumer finance firms are all examples of
financial institutions. Universal and Commercial Banks, which account for the majority of financial
institutions in the Philippines, provide the widest range of services. Privately held commercial banks
provide fundamental services such as business, personal, and mortgage loans. They also take deposits and
provide savings and checking account openings. Universal banks, on the other hand, provide the same
services as commercial banks while also allowing them to engage in other activities such as stock trading
and underwriting. A universal bank is a financial organization that offers a broad range of financial
services, including retail, wholesale, and investment banking. A universal bank is a financial organization
that offers a wide range of financial services, including retail, wholesale, and investment banking, and
creates synergy between them. Private development banks, stock savings, mortgage banks, loan savings,
and microfinance thrift banks are all part of the thrift banking system. They operate by taking deposits
from members and investing them in order to expand. If you need money for short-term working capital
or medium- and long-term financing for your business, thrift bank systems are a viable solution. They
mainly provide this service to agricultural and housing firms, as well as small and medium-sized
businesses. Rural and cooperative banks are situated in rural communities, and these banks provide basic
financial services to the people who live there. They also aid particular groups, such as farmers, in
sustaining their businesses. Rural banks are privately held entities, unlike cooperative banks, which are
administered and controlled by cooperative federations. Alternative institutions that customers can turn to
for items such as cash loans and product loans include the Consumer Finance Company. Companies like
these, unlike banks and other financial systems, seek for fewer qualifications from its applicants, making
them a fantastic choice for people who have been turned down by banks due to a lack of banking
experience. Similar to the other institutions on this list, authorized consumer finance companies are also
regulated by the BSP.
2. Enumerate the functions of BSP.
 Bank of issue
 Government’s banker, agent, and adviser
 Custodian of the cash reserves of banks
 Custodian of the nation’s reserves of international currency
 Bank of rediscount and lender of last resort
 Bank of central clearance and settlement
 Controller of credit
3. Explain the importance of financial institutions.
- Financial institutions connect investors and borrowers, allowing for growth by allowing them to
borrow for capital investment. They also provide a safe place to store money, a place to get or secure a
loan, and a cushion during recessions, reducing the effects. It also offers a diverse range of services
and financial products to both individuals and business clients. During economic booms, financial
institutions supply the capital that fuels expansion, but during downturns, banks reduce lending. This
can worsen a country's financial troubles and call attention to the fact that the financial sector is so
important to its economy.
4. Explain the roles of banks as financial institutions.

- When looking for financial assistance or guidance, most individuals go to the bank first. Many
customers, however, discover that the bank's services fall short of their expectations, leaving them
unsure what to do next. NBFIs unbundle these products and modify them to match the needs of the
unique client, whereas banks often offer a range of financial services as part of a clear bundled
solution. As a result, many people who are unable to obtain assistance from a bank might do so
through a non-bank financial institution. NBFIs serve to augment banks by allocating surplus
resources to individuals and businesses with financial deficiencies. NBFIs seek to increase
competition in the financial industry by unbundling financial services, targeting them, and
specializing on the requirements of individuals.

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Angelica Mae S.

Direction: Answer the following questions (Minimum of 5 Sentences).

1. Identify the different types of financial institutions. Define each type.

4. Explain the roles of banks as financial institutions.

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