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Chronology of Events: Central Banking in the Philippines

Act No. 52 was passed by the First Philippine Commission placing all banks under the
Bureau of Treasury. The Insular Treasurer was authorized to supervise and examine banks
and banking activities.

February 1929
The Bureau of Banking under the Department of Finance took over the task of banking

1939 A bill establishing a central bank was drafted by Secretary of Finance Manuel Roxas and
approved by the Philippine Legislature. However, the bill was returned by the US
government, without action, to the Commonwealth Government.

A joint Philippine-American Finance Commission was created to study the Philippine
currency and banking system. The Commission recommended the reform of the monetary
system, the formation of a central bank and the regulation of money and credit.

The charter of the Central Bank of Guatemala was chosen as the model of the proposed
central bank charter.

August 1947 A Central Bank Council was formed to review the Commissions report and prepare the
necessary legislation for implementation.

February 1948 President Manuel Roxas submitted to Congress a bill Establishing the Central Bank of the
Philippines, defining its powers in the administration of the monetary and banking system,
amending pertinent provisions of the Administrative Code with respect to the currency and
the Bureau of Banking, and for other purposes.

The bill was signed into law as Republic Act No. 265 (The Central Bank Act) by President
15 June 1948 Elpidio Quirino.

3 January 1949 The Central Bank of the Philippines (CBP) was inaugurated and formally opened with Hon.
Miguel Cuaderno, Sr. as the first governor.

The broad policy objectives contained in RA No. 265 guided the CBP in the implementation
of its duties and responsibilities, particularly in relation to the promotion of economic
development in addition to the maintenance of internal and external monetary stability.

November 1972 RA No. 265 was amended by Presidential Decree No. 72 to make the CBP more responsive
to changing economic conditions.

PD No. 72 emphasized the maintenance of domestic and international monetary stability as

the primary objective of the CBP. Moreover, the CBPs authority was expanded to include
not only the supervision of the banking system but also the regulation of the entire
financial system.

January 1981 Further amendments were made with the issuance of PD No. 1771 to improve and
strengthen the financial system, among which was the increase in the capitalization of the
CBP from P10 million to P10 billion.

Executive Order No. 16 amended the Monetary Board membership to promote greater
1986 harmony and coordination of government monetary and fiscal policies.

3 July 1993 The Bangko Sentral ng Pilipinas (BSP) was established to replace the CBP as the countrys
central monetary authority.

1. Liquidity management, by formulating and implementing monetary policy aimed at influencing money
supply, consistent with its primary objective to maintain price stability,

2. 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,

3. Lender of last resort, by extending discounts, loans and advances to banking institutions
for liquidity purposes,

4. Financial supervision, by supervising banks and exercising regulatory powers over non-bank institutions
performing quasi-banking functions,

5. Management of foreign currency reserves, by maintaining 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,

6. Determination of exchange rate policy, by determining the exchange rate policy of the Philippines.
Currently, the BSP adheres to a market-oriented foreign exchange rate policy, and
7. Being the banker, financial advisor and official depository of the Government, its political subdivisions and
instrumentalities and GOCCs.

The current members of the Monetary Board are:

Amando M. Tetangco, Jr., Chairman

Cesar V. Purisima, Secretary of the Department of Finance

Alfredo C. Antonio

Juan D. De Zuiga, Jr.

Valentin A. Araneta

Felipe M. Medalla

Armando L. Suratos

In 2000, the General Banking Law mandated the BSP to recognize microfinance as a legitimate banking activity and
to set the rules and regulations for its practice within the banking sector. In the same year, the BSP declared
microfinance as its flagship program for poverty alleviation. The BSP has become the prime advocate for the
development of microfinance.