History of Banking in the Philippines

• The first organized credit

institutions were
established in the
Philippines during the
16th century Spanish
colonial era. These were
the OBRAS PIAS.
• Obras Pias was a charitable foundation during the
Spanish period. The word itself means works of
piety in Spanish. The Church directed a share of
personal fortunes to its charities such as the Obras
Pias. Donors had specified that the funds are to be
used for charitable, religious and educational
purposes. However, some of the funds were managed
by confraternities that invested capital in secular
activities like underwriting cargoes for the galleon
trade.
• In1869, 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.
•SUEZ CANAL
• Bythe end of the Spanish regime, the banks in
existence were: El Banco Español Filipino de
Isabel II (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 USA 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. However, it was placed under
receivership by the Insular Treasurer for making
doubtful loans after only 4 years of operations.
• In1916, the Philippine National Bank was
established with the Philippine Government as
the majority stockholder. This is to break the
foreign banking monopoly and remedy the lack
of credit facilities.
• The PNB was meant to function as a
government enterprise that would widen the
variety of banking services “beyond trade
finance in exportation and importation, money
changing of foreign currency, and fund
transfers, all of which , while useful in the short
term, failed to mobilize capital in the
development of natural resources.”
• It’s charter at that time empowered PNB to
issue bank notes and act as a depository of
government funds.
• At the turn of the 20th century, the Americans
established the Guaranty Trust Corporation
(GTC) and International Banking Corporation
(IBC). The existence of GTC was short-lived,
while IBC was eventually taken over by the
National City Bank of New York (now known as
Citibank).
• In 1918, the Manila branch of the Yokohama
Specie Bank was given license to do business in
the Philippines.
• Between 1935 to 1946, more foreign bank
branches were established in the Philippines.
These include the Bank of Taiwan, and the
Nederlandsche Indische Handelsbanks.
• In 1939, the government created the
Agricultural and Industrial Bank to absorb the
functions of the National Loan and Investment
Board and to harness government resources.
• The Philippine Bank of Communications is the
first bank with genuine Filipino private capital.
However, it was temporarily closed at the
outbreak of WWII.
• Only Filipino-owned and Japanese banks were
allowed to operate during WWII; The Chartered
Bank of India, Australia, and China, HSBC, and
the National City Bank of New York were all
treated as enemy properties and placed under
liquidation by the Japanese Military
Government.
• On the other hand, the Nampo Kaihatsu Kinko
(Southern Development Bank) opened a Manila
branch in 1942 and acted as the Japanese
government’s fiscal agent in the Philippines.
• After the liberation, all domestic banks that
operated during the Japanese occupation were
unable to reopen because the greater part of
their assets consisted of worthless Japanese
war notes, bonds, and obligations of the
Japanese-sponsored republic, and balances
with Japanese banks.
• In1947, a branch of the Bank of America was
allowed to establish a branch in Manila and in
the following year, it absorbed the assets and
liabilities of the local branch of the
Nederlandsche Indische Handelsbanks.
• In
1952, the Rural Bank Act was enacted and
two years later, the Agricultural and Industrial
Bank merged with the Reconstruction and
Rehabilitation Fund to form the Development
Bank of the Philippines.