Asia Pacific College3 Humabon Place,

MagallanesMakati City

PHILIPPINE

BANKIN

Submitted by:APOLINARIO, Emmanuel John

M.AVESTRO, Isha Alexa

AYOP, Leah Fe

Submitted to:Ms. Angelita

Salting

~ PHILIPPINE BANKING SYSTEM ~

I. OverviewThe Philippine banking system   is composed of universal and commercial banks,

thrift banks, rural and cooperative banks. Universal and commercial banks   represent the largest single group of financial

institutions in the country. They offer the various banking services among financial institutions. In addition to the function of an ordinary commercial bank, universal banks are also authorized to engage in underwriting and other functions of investment houses, and to invest in equities of non-allied undertakings.

The thrift banking system   is composed of savings and mortgage banks, private development banks, and stock savings and loan associations. Thrift banks are engaged in accumulating savings of depositors and investing them.

Rural banks   are the more popular type of banks in the rural communities. Rural and cooperative banks help farmers through the stages of production, from buying seedlings to marketing of their produce. Rural banks and cooperative banks are differentiated from each other by ownership. Rural banks are privately owned and managed.

Cooperative banks are organized/owned by cooperatives or federation of cooperatives.

II. HistoryThe capital of Obras Pias came from pious Catholics and their profits were

intended to maintain hospitals, orphanages, and other charitable endeavors. The Obras Pias served as commercial banks and marine insurance companies, with the bulk of their funds invested in the galleon trade.

In 1869, the opening of the Suez Canal facilitated trade between the Philippines and Europe. The Philippines then attracted British capital, and in the years that followed, the Chartered Bank of India, Australia, and China (now known as the Standard Chartered Bank) and the Hong Kong and Shanghai Banking Corporation (HSBC), both British-owned banks, opened their branches in Manila.

By the end of the Spanish regime, the banks in existence were: El Banco Español Filipino de Isabel (now the Bank of Philippine Islands or BPI), which was given the sole mandate under a Spanish Royal Decree of 1854 to issue banknotes called Pesos Fuertes; the Chartered Bank of India, a branch of the HSBC; the Monte de Piedad; and the Banco Peninsular Ultamarino de Madrid.

During the American colonial period, banks from the United States of America started to establish local branches that would cater to growing American economic interests and capital inflow into the country. The American Bank was first to open a branch in 1901. The Philippine banking system was largely dominated by foreign bank branches whose capitals were devoted to financing commerce and trade, rather than the development of the country’s natural resources.

To break the foreign banking monopoly and remedy the lack of credit facilities, the Philippine National Bank (PNB) was established in 1916 with the Philippine Government as the majority stockholder. Only Filipino-owned and Japanese banks were allowed to operate during World War II. The Chartered Bank of India, Australia, and China, the HSBC, and the National City Bank of New York were all

treated as enemy properties and placed under liquidation by the Japanese Military Government.

In 1949, when the Central Bank of the Philippines started its operations, the banking system consisted of seven commercial banks, three thrift banks, the sole government specialized bank, the Agricultural and Industrial Bank, and seven foreign bank branches.

On July 3, 1993, pursuant to its constitutional mandate to establish an independent central monetary authority, Congress passed House Bill No. 7037 and Senate Bill No. 1235, which were later signed into law as Republic Act 7653, the New Central Bank Act. The law created the Bangko Sentral ng Pilipinas with the primordial responsibility to administer the monetary and banking system.

Another significant legislation, Republic Act 7721, An Act Liberalizing the Entry of Foreign Banks in the Philippines, was enacted in 1994. The law liberalized the participation of foreign banks in the local banking system. From only four foreign banks in the country in 1994, the number soon grew to 18 head offices and subsidiaries.

On April 12, 2000, Republic Act 8791, the General Banking Law of 2000, was enacted — repealing the 52-year-old banking law. The passage of the General Banking Law of 2000 strengthened the Bangko Sentral’s policy agenda and institutionalized banking reforms in the Philippines.

III. Governing Law

REPUBLIC ACT NO. 8791AN ACT PROVIDING FOR THE REGULATION OF THE

ORGANIZATION AND OPERATIONS OF BANKS, QUASI-BANKS, TRUST ENTITIES AND FOR OTHER PURPOSES

The short title of this Act shall be "The General Banking Law of 2000."No person or entity shall engage in banking operations or quasi-banking

functions without authority from the Bangko Sentral, provided, however, that an entity authorized by the Bangko Sentral to perform universal or commercial banking functions shall likewise have the authority to engage in quasi-banking functions.

The Monetary Board may authorize the organization of a bank or quasi-bank subject to the following conditions:a. That the entity is a stock corporation (7);b. That its funds are obtained from the public, which shall mean twenty (20) or more persons andc. That the minimum capital requirements prescribed by the Monetary Board for each category of banks are satisfied. 

Foreign Stockholdings a. At least 25% of the total authorized capital stock should be subscribed by the subscribers of the proposed bank.b. The stockholdings of an individual, family, corporate or business group in any bank should be subject to the following limits:

c. Foreign individuals and non-bank corporations can own or control up to 40% of the voting stock of a domestic bank. A Filipino individual and a domestic non-bank corporation can each own up to 40% of the voting stock of a domestic bank.d. The citizenship of the corporation which is a stockholder of a bank should follow the citizenship of the controlling stockholders of the corporation, irrespective of the place of incorporation.e. At least 60% of voting stock of any commercial bank should be owned by Filipino citizens.

Board of Directors. - The provisions of the Corporation Code to the contrary notwithstanding, there shall be at least five (5), and a maximum of fifteen (15) members of the board or directors of a bank, two (2) of whom shall be independent directors. An "independent director" shall mean a person other than an officer or employee of the bank, its subsidiaries or affiliates or related interests.Directors of Merged or Consolidated Banks. - In the case of a bank merger or consolidation, the number of directors shall not exceed twenty-one (21).Other Banking Laws. – The organization, the ownership and capital requirements, powers, supervision and general conduct of business of thrift banks, rural banks and cooperative banks shall be governed by the provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code, respectively.

IV. DefinitionThe origin of the word bank can be traced back to the German word, Banck,

and Italian word, Banco, which means heap of money. Banking has been defined as “accepting for the purpose of lending &

investment, of deposit of money from the public, repayable on demand order or otherwise and withdraw able by check, draft or otherwise.”

Banking means transacting business with a bank; depositing or withdrawing funds or requesting a loan etc.

V. Functions

A. Primary Functions of Banks The primary functions of a bank are also known as banking functions. They

are the main functions of a bank. These primary functions of banks are explained below.

1. Accepting DepositsThe bank collects deposits from the public. These deposits can be of different types, such as: Saving Deposits - This type of deposits encourages saving habit among the

public. The rate of interest is low. Fixed Deposits - Lump sum amount is deposited at one time for a specific

period. Those who have surplus funds go for fixed deposit. Current/Demand Deposits - This type of account is operated by businessmen.

Withdrawals are freely allowed. No interest is paid.

Recurring Deposits - This type of account is operated by salaried persons and petty traders. A certain sum of money is periodically deposited into the bank. 

2. Granting of Loans and AdvancesThe bank advances loans to the business community and other members of

the public. The rate charged is higher than what it pays on deposits. The difference in the interest rates (lending rate and the deposit rate) is its profit. The types of bank loans and advances are: Overdraft - This type of advances are given to current account holders. No

separate account is maintained. All entries are made in the current account. A certain amount is sanctioned as overdraft which can be withdrawn within a certain period of time say three months or so.

Cash Credits - The loan granted under this head is credited to current account opened in the name of borrower. The borrower can withdraw money through checks according to his requirement. The interest is charged on the amount actually withdrawn by the borrower.

Loans – It is normally granted for short and medium-term to individuals and traders against the security of movable and immovable property. The amount of loan is credited to the borrower's account. Interest is charged on the entire loan sanctioned.

Discounting of Bill of Exchange – It means the arrangements of making payments before maturity of bills of exchange. The payment made by the bank to the holder of bill of exchange before its maturity is the amount of loan. The discount charged is the earning of the bank.

B. Secondary Functions of Banks The bank performs a number of secondary functions, also called as non-

banking functions. These important secondary functions of banks are explained below.

1. Agency FunctionsThe bank acts as an agent of its customers. The bank performs a number of

agency functions which includes: Transfer of Funds - The bank transfer funds from one branch to another or

from one place to another. Collection of Checks - The bank collects the money of the checks through

clearing section of its customers. The bank also collects money of the bills of exchange.

Periodic Payments - On standing instructions of the client, the bank makes periodic payments in respect of electricity bills, rent, etc.

Portfolio Management - The banks also undertakes to purchase and sell the shares and debentures on behalf of the clients and accordingly debits or credits the account. This facility is called portfolio management.

Periodic Collections - The bank collects salary, pension, dividend and such other periodic collections on behalf of the client.

Other Agency Functions - They act as trustees, executors, advisers and administrators on behalf of its clients. They act as representatives of clients to deal with other banks and institutions.

2. General Utility FunctionsThe bank also performs general utility functions, such as:

Issue of Drafts, Letter of Credits, etc. - Banks issue drafts for transferring money from one place to another. It also issues letter of credit, especially in case of, import trade. It also issues travelers' checks.

Locker Facility - The bank provides a locker facility for the safe custody of valuable documents, gold ornaments and other valuables.

Underwriting of Shares - The bank underwrites shares and debentures through its merchant banking division.

Other Utility Functions - It acts as a referee to financial standing of customers. It collects creditworthiness information about clients of its customers. It provides market information to its customers, etc. It provides travelers' check facility.

VI. RolesUnderstanding the many roles that banks play in the financial system is one of

the fundamental issues in finance. The efficiency of the process through which savings are channeled into productive activities is crucial for growth and general welfare.

a. Providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance;

b.  Assisting customer with financing, investments, secure payments and asset management;

c. Help households, entrepreneurs and companies make well-grounded decisions so that they can achieve their plans and ambitions;

d. Finance the industrial sector in a number of ways by providing short-term, medium-term and long-term loans to industry;

e. Finance employment generating activities in developing countries by providing loans for the education of young people;

f. Help the economic development of a country by faithfully following the monetary policy of the central bank.

g. Provide access to funding and financial services to both local business and citizens;

h. Provide credit and services to generate revenues, which are then invested back into a local, national, or international community.

~ COMMERCIAL BANKS ~

I. DefinitionCommercial banks are corporations engaged regularly in the lending of

funds obtained from the public through the receipt of deposits and which accept or create demand deposits subject to withdrawal by checks.

A financial institution that provides services, such as accepting deposits, giving business loans and auto loans, mortgage lending, and basic investment products like savings accounts and certificates of deposit. The traditional commercial bank is a brick and mortar institution with tellers, safe deposit boxes, vaults and ATMs. However, some commercial banks do not have any physical branches and require consumers to complete all transactions by phone or Internet. In exchange, they generally pay higher interest rates on investments and deposits, and charge lower fees.

II. Governing Law

REPUBLIC ACT NO. 337AN ACT REGULATING BANKS AND BANKING INSTITUTIONS AND FOR

OTHER PURPOSESSec. 20. A commercial banking corporation shall be any corporation which accepts or creates demand deposits subject to withdrawal by check. Sec. 21. A commercial banking corporation shall have all such powers as shall be necessary to carry on the business of commercial banking, by accepting drafts and issuing letters of credit, by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling foreign exchange and gold or silver bullion, and by lending money against personal security or against securities consisting of personal property or improved real estate and the insured improvements thereon. No loan on the security of real estate shall have a maturity in excess of fifteen (15) years but the aggregate of such loans on real estate security shall not exceed seventy percent (70%) of the total savings deposits of the bank. Commercial banks may acquire high-grade bonds and other evidences of indebtedness. Except in exceptional circumstances, however, the Monetary Board shall not permit commercial banks to invest in securities having maturities greater than three years from the date of acquisition by the bank an amount in excess of twenty percent (20%) of its total deposits. 

CAPITAL REQUIREMENT/STOCKHOLDINGS. Banks should comply with the required minimum capital enumerated below or as may be prescribed by the

Monetary Board:

Sec. 22. The combined capital accounts of each commercial

bank shall not be less than an amount equal to fifteen per cent (15%) of its total assets, excluding the following assets: 

(a) Cash on hand; (b) Amounts due from banks, both at home and abroad, including all deposits with the Central Bank; and (c) Evidences of indebtedness of the Republic of the Philippines and of the Central Bank, and any other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines. 

Sec. 24. No commercial bank shall make any loan or discount on the security of shares of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase be necessary to prevent loss upon a debt previously contracted in good faith.Sec. 27. Any commercial bank organized under the laws of the Philippines may, with the prior approval of the Monetary Board, establish branches in the Philippines or branches or agencies outside the Philippines, and the bank shall be responsible for all business conducted in such branches to the same extent and in the same manner as though such business had all been conducted in the head office.  Sec. 28. The Monetary Board, by the affirmative vote of at least five of its members, may compel the head office of any commercial bank organized under the laws of the Philippines to liquidate the business of any branch or agency if the business of such branch or agency is being conducted unlawfully or in a manner likely to prejudice the interests of the creditors of the branch or agency or of the head office. 

III. FunctionsCommercial bank being

the financial institution performs diverse types of functions. It satisfies the financial needs of the sectors such as agriculture, industry, trade, communication, etc. That means they play very significant role in a process of economic social needs. The functions performed by banks are changing according to change in time and recently they are becoming customer centric and widening their functions. Generally the functions of commercial banks are divided into two categories: primary functions and the secondary functions. The following chart simplifies the functions of banks.

IV. RolesFor centuries, the banking sector has been a pillar of economic prosperity.

Indeed, history provides us with some startling information about how banks

financed imperial ventures in newly acquired colonies. Over time, banks have become a crucial force for savings and investment.

Land, labor, capital, and expertise are the basic economic resources available to business. However, to make the use of these resources, a business requires finance to purchase land, hire labor, pay for capital goods, and acquire individuals with specialized skills. And that's where commercial banks come in. Read on to find out how commercial banks contribute to the economy, financial markets, and economic growth.1. Trade Development . Commercial banks provide capital, technical assistance

and other tools to businessmen according to their need, which helps to develop trade.

2. Agricultural Development. Commercial banks finance the most important sector of developing economics i.e. agriculture. Short, medium and long-term loans are provided for the purchase of seeds and fertilizer, the installation of tube wells, the construction of warehouses, the purchasing of tractors, threshers and other equipment, etc.

3. Industrial Development . The countries that concentrated on their industrial sector made rapid gains economic development. South Korea, Malaysia, Taiwan, Hong Kong, and Indonesia have recently developed their industrial sector with the help of commercial banks.

4. Capital Formation. Commercial banks help accelerate the rate of a country's capital. Capital formation refers to increases in the number of production units and improvements and dissemination in technology, plants, and machinery. Banks finance the projects responsible for increasing the rate of capital formation.

5. Development of Foreign Trade . Commercial banks help traders from two different countries do business together. Letters of credit are issued by the importer’s bank to the exporters to ensure the payment. The banks also arrange foreign exchange.

V. Differences and Similarities to other banksCommercial banks and Thrift banks

Unlike a thrift bank, a commercial bank is typically a large, multi-national corporation that focuses on business loans and services, such as construction or expansion loans, rather than on residential mortgage loans. Additionally, large commercial banks are more likely to offer unsecured loans, such as credit cards, than savings and loan associations. While commercial banks are allowed to offer residential mortgages, they tend to focus more on the needs of regional, national and international businesses.

Commercial banks and Rural BanksWhile the main reason behind the existence of rural bank is the development

of rural and backward areas, and also providing banking facility to rural population whereas the main reason behind the existence of commercial banks is to make profits out of their operations.

Scope of rural banks is limited to agriculture finance, small sector loans, handicrafts and other small sector loans, whereas scope of commercial banks is

wide and it not only provides agriculture finance but also housing loan, car finance, letter of credit, credit to big companies and for many activities.

~ THRIFT BANKS ~

I. DefinitionThrift banks are engaged in accumulating savings of depositors and

investing them. They also provide short-term working capital and medium- and long-term financing to businesses engaged in agriculture, services, industry and housing, and diversified financial and allied services, and to their chosen markets and constituencies, especially small- and medium- enterprises and individuals.

Thrift banks often have access to low-cost funding which allows them to offer a competitive rate of interest. Thrift banks have 3 sub-classifications:a. Savings and Mortgage Banks. Financial institution that specializes in savings

deposits and mortgage loans, and has become one of the primary sources of mortgage loans for homebuyers today. It offers mortgage services to people from the savings and deposits received from private investors. Primarily for the purpose of accumulating the small savings of depositors and investing them together with its capital, in bonds or in loans secured by bonds, real estate mortgages, and other forms of security. Its characteristics:

Privately or locally managed financial institutions Uses individuals’ deposits to make long-term amortized loans to home

buyers. Disperses loans for home repairs, construction, and refinancing

b. Stock Savings and Loan Associations. Engaged in the business accumulating the savings of its stockholders and using such accumulating, together with its capital, for loans or for investment in the securities of productive enterprises or in the securities of the government or any of its political subdivisions, instrumentalities or corporation.

c. Private Development Banks. Organized under the provision of Republic Act No. 4093 known as the Private Development Act. Shall be organized in the form of a stock corporation and its paid up capital shall not be less than the following: Class A-4,000,000; Class B-2,000,000; Class C- 1,000,000. They are exempted from taxes, charges, and fees.

II. Governing Law

REPUBLIC ACT NO. 7906AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION AND

OPERATIONS OF THRIFT BANKS, AND FOR OTHER PURPOSES

Sec. 1. Title. — This Act shall be known and cited as the "Thrift Banks Act of 1995."Sec. 4. Organization. — A thrift bank shall be organized in the form of stock corporation. The Monetary Board shall fix the minimum paid-up capital of thrift

banks in such amount as the Board may consider necessary for the safe and sound operation of thrift banks taking into account the development thrusts of this Act and due protection of the general public. No thrift bank shall be organized without a certificate of authority from the Monetary Board. Sec. 5. Establishment of Thrift Banks. — The articles of incorporation of any bank shall not be registered by the Securities and Exchange Commission unless accompanied by a certificate of authority issued by the Monetary Board under its official seal.

CAPITAL REQUIREMENT/STOCKHOLDINGS. Banks should comply with the required minimum capital enumerated below or as may be prescribed by the Monetary Board:

Sec. 17. Tax Exemptions. — All thrift banks, whether created or organized under this Act or in operation as of the date of effectivity of this Act, shall be exempt from payment ofall taxes, fees and charges of whatever nature and description, except the corporate income taxes and local taxes, fees and charges for a period of five (5) years, counted from the date of commencement of operations for thrift banks.

III. FunctionsThe main function of a thrift bank is to provide their customers and users

with mortgages, and to take deposits for banking conventions such as savings accounts. They also function in order to relieve the monopoly of national or international banks on the mortgage and lending market, giving local communities and alternative to brand-name banks.

a. Savings and Mortgage Banks Capital accumulators and loan providers Act as a facilitator for the society Biggest promoter of thrift Deposit through post Issue of check book Pass book Standing instructions

b. Stock Savings and Loan Associations Servicing the need of households by providing personal finance and long

term financing for home building and developmentc. Private Development Banks

Accepts savings and time deposits Acts as correspondent for the other financial institution and as collection

agent

Rediscount paper with the CB, PNB or other banks in their branches

IV. Rolesa. Recognize the indispensable role of the private sector, to encourage private enterprise, and to provide incentives to needed investments; b. Promote economic development pursuant to the socioeconomic program of the government, to expand industrial and agricultural growth, to encourage the establishment of more private thrift banks in order to meet the needs for capital, personal and investment credit or medium- and long-term loans for Filipino entrepreneurs; c. Encourage and assist the establishment of thrift bank system which will promote agriculture and industry and at the same time place within easy reach of the people the medium-and long-term credit facilities at reasonable cost; d. Encourage industry, frugality and the accumulation of savings among the public, and the members and stockholders of thrift banks; ande. Regulate and supervise the activities of thrift banks in order to place their operations on a sound, stable and efficient basis and to curtail or prevent acts or practices which are prejudicial to the public interest.

V. Differences and Similarities to other banksThrift banks and Commercial banks

A thrift bank deals with consumers and not corporations, while a commercial bank is geared to corporations. A bank whose main purpose is to take deposits from consumers and make home mortgages. Thrift banks typically don't bother themselves with corporate banking, brokering, or underwriting.

Both commercial banks and thrift banks can be chartered by the states where they reside.

Thrift banks and Rural banks By design, thrift banks focus more on urban areas and lending to industry

and larger enterprises, while rural banks lend to farmers and MSMEs. Many thrift banks still focus on urban areas, including Manila, and on business lending.

~ RURAL BANKS ~

I. DefinitionRural bank is a financial institution that helps rationalize the developing

regions or developing country to finance their needs especially the projects regarding agricultural progress. Rural banking has a high potential area of growth in banking.

Rural banks can provide opportunity to grow fast and make great business sense both for improving bottom line & diversifying business portfolio.

II. Governing Law

REPUBLIC ACT NO. 7353AN ACT PROVIDING FOR THE CREATION, ORGANIZATION AND

OPERATION OF RURAL BANKS, AND FOR OTHER PURPOSES

Section 1. This Act shall be known and cited as the "Rural Act of 1992."Sec. 4. No rural bank shall be operated without a Certificate of Authority from the Monetary Board of the Central Bank. Rural banks shall be organized in the form of stock corporations.Sec. 5. All members of the Board of Directors of the rural bank shall be citizens of the Philippines at the time of their assumption to office.Sec. 6. Loans or advances extended by rural banks organized and operated under this Act shall be primarily for the purpose of meeting the normal credit needs of farmers, fishermen or farm families owning or cultivating land dedicated to agricultural production as well as the normal credit needs of cooperatives and merchants. In granting of loans, the rural bank shall give preference to the application of farmers and merchant whose cash requirements are small.Sec. 7. With the view to ensuring the balanced rural economic growth and expansion, rural banks may, within limits and conditions fixed by the Monetary Board, devote a portion of their loanable funds to meeting the normal credit needs of small business enterprises: provided, That loans shall not exceed fifteen percent (15%) of the net worth of a rural bank of such amount as the Monetary Board may prescribe as may be warranted by prevailing economic conditions, and of essential enterprises or industries, other than those which are strictly agricultural in nature.Sec. 8. To provide supplemental capital to any rural bank until it has accumulated enough capital of its own or stimulate private investments in rural banks, the Land Bank of the Philippines or any government-owned or controlled bank or financial institution shall subscribe within thirty (30) days to the capital stock of any rural bank from time to time in an amount equal to the total equity investment of the private shareholders.Sec. 13. Subject to such guidelines as may be established by the Monetary, rural banks may invest in equities of the allied undertakings are hereinafter enumerated: Provided, That: (a) the total investment in equities shall not exceed twenty- five percent (25%) of the net worth of the rural bank; (b) the equity investment in any single enterprise shall be limited to fifteen percent (15%) of the net worth of the rural bank; and (c) the equity investment of the rural bank in any single enterprise shall remain a minority holding in that enterprise: Provided, further, That equity investment shall not be permitted in non-related activities. Allied undertaking shall include:

a. Banks, financial institutions and non-bank financial intermediaries;b. Warehousing and other post-harvested facilities;c. Fertilizer and agricultural chemical and pesticides distribution;d. Farm equipment distribution;e. Trucking an transportation of agricultural products;f. Marketing and agricultural products;

g. Leasing; and other undertakings as may be determined by the Monetary Board.

CAPITAL REQUIREMENT/STOCKHOLDINGS. Banks should comply with the required minimum capital enumerated below or as may be prescribed by the Monetary Board:

III. FunctionsSec. 12. In addition to the

operations especially authorized in this Act, any rural bank may:

a. Accept saving and time deposit;

b. Open current or checking accounts, provided the rural bank has net assets of at least five million (P5,000,000) subject to such guidelines as may be established by the Monetary Board;

c. Act as correspondent for other financial institutions;d. Act as a collection agent;e. Act as official depositary of municipal, city or provincial funds in the

municipality, city or province where it is located, subject to such guidelines as may be established by the Monetary Board;

f. Rediscount paper with the Philippine National Bank, the Land Bank of the Philippines, the Development Bank of the Philippines, or any other banking institution, including its branches and agencies;

g. Offer other banking service as provided in Section 72 of Republic Act No. 337, as amended, and

h. Extend financial assistance to public and private employees in accordance with the provisions of Section 5 of Republic Act No. 3779, as amended.

i. With written permission of the Monetary Board of the Central bank, any rural bank may act as trustee over estates or properties of farmer and merchants.

IV. RolesPeople living in rural areas need the same banking services as those living in

larger towns and cities. A community bank in a rural area might offer regular retail banking services, including loans and mortgages, that let personal and business customers manage their banking needs close to home. The following are the indispensable roles of rural banks in the economy:

a. Promote and expand the rural economy in an orderly and effective manner by providing the people in the rural communities with basic financial services.

b. Promote comprehensive rural development with the end in view of attaining acquitable distribution of opportunities, income and wealth

c. Expanding productivity as a key raising the quality of life for all, especially the underprivileged.

V. Differences and Similarities to other banks Rural banks and Thrift Banks

Both banks accept deposit from public. The difference is in the type or segment to whom they lend. Thrift banks generally lend for mortgages. Such institutions also have access to low cast fund from government. On other hand rural banks mostly operate in underdeveloped area mostly rural and the lending is primarily for agricultural purpose.

Rural banks are concern only on mobilizing and giving financing needs to rural areas while Thrift banks are providing services to the thrift or savers meaning rural banks grant loans to small farmers and thrift banks cater the depository of the savers.

Rural banks and Commercial Banks Rural banks is present in rural and semi urban areas only whereas

commercial banks do operations in all over the country that is rural, semi urban and urban areas.

While the focus of rural banks is more on accepting deposits and granting of loans to the people whereas the focus of commercial banks apart from lending and borrowing is on many other services like stock broking, asset management, insurance, merchant banking, venture capital financing, foreign exchange related business, etc.

References:http://www.pdic.gov.ph/index.php?nid1=10&nid2=4 http://kalyan-city.blogspot.com/2011/04/functions-of-banks-important-banking.html http://www.complianceonline.com/basic-guidelines-for-establishing-banks-in-the-philippines-an-overview-and-summary-of-requirements-13745-prdadhttp://www.investopedia.com/terms/t/thriftbank.asp#ixzz3rVvvBk00 http://www.yourarticlelibrary.com/banking/commercial-banks-7-important-role-of-commercial-banks-in-a-developing-country/10968/http://hubpages.com/education/Role-of-Commercial-Banks-in-Economic-Developmenthttp://www.investopedia.com/terms/c/commercialbank.asp#ixzz3rS6jo8Dc http://www.letslearnfinance.com/difference-between-rrb-and-commercial-banks.htmlhttp://www.livestrong.com/article/118130-commercial-banks-vs.-savings-loans/http://www.bsp.gov.ph/banking/bspsup.asphttp://www.investorguide.com/article/11829/what-is-a-savings-and-loan-association-igu/