BANGKO SENTRAL NG PILIPINAS, MALATE, MAYNILA, PILIPINAS: A CASE STUDY

MARLON F. BAITECJAYSON S. MAGAT

COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCYCENTRAL LUZON STATE UNIVERSITY

Science City of Muñoz, Nueva Ecija

APRIL 2010

BANGKO SENTRAL NG PILIPINAS, MALATE, MAYNILA, PILIPINAS: A CASE STUDY

MARLON F. BAITECJAYSON S. MAGAT

A Case Study submitted to the College of Business Administration and Accountancy, Central Luzon Sate University, Science City of Muñoz, Nueva Ecija,

in partial fulfillment of the requirementsfor the degree

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION(Management)

APRIL 2010

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APPROVAL SHEET

This Case Study entitled THE BANGKO SENTRAL NG PILIPINAS, prepared and submitted by Marlon F. Baitec and Jayson S. Magat in partial fulfillment of the requirements for the degree of BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION major in MANAGEMENT is hereby approved.

MARILYN A.ESCALONA EVA F. AVELLANOZAMember, Advisory Committee Member, Advisory Committee

___________ _________ Date Signed Date Signed

ELVIRA O. DAZAChairperson, Advisory Committee

___________Date Signed

Accepted in partial fulfillment of the requirements for the degree of BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION, major in MANAGEMENT.

JANICE FAYE S. ANG AMAPOLA DC. GENEROSA Practicum Coordinator Department Chairperson

___________ ___________ Date Signed Date Signed

DANILO S. CASTRODean

___________Date Signed

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TABLE OF CONTENTS

TITLE Page

Title Page ii Approval sheet iiiAcknowledgement ixBiographical Sketches

Author A xiiiAuthor B xvi

Table of Contents ivList of Figures viList of Tables viiList of Exhibits viii

I. INTRODUCTION 1

II. BACKGROUND OF THE FIRM 4

History of Bangko Sentral ng Pilipinas 4

The BSP’s Legal Mandate 7Powers and Functions 7The Central Bank 9The Goals of Monetary Policy 9

High Employment 9Economic Growth 10Stable Prices 10Interest Rate Stability 11Stability of Financial Markets 11Stability of Foreign Exchange Markets 11

Instruments of Central Bank Actions 12Control of Legal Reserve Requirement (RA 7653, Sec. 96 to Sec. 102) 12Control of discount and rediscount rates. (RA 7653, Sec. 85) 13Open Market Operation (RA 7653, Sec. 91) 14Control of Collateral’s Required (RA 7653 Sec. 106) 15Imposition of Portfolio Ceiling (RA 7653 Sec. 107) 15Minimum Capital Ratio 16Margin requirements for Letters of Credit 16(RA 7653 Sec. 105)Moral Suasion 16

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Vision 17Mission 17Core Values 17Objectives 17Organizational Structure of the Firm 18Executive Management Services 19Governance of the Bank 22The Monetary Board 23The Governor 25

III. LOCATION AND LAY-OUT 26

Location 26Facilities and Equipments 28

IV. PROBLEM IDENTIFIED 29

V. FACTS OF THE CASE 30

Monetary policy approach – Inflation Targeting 30Decreased GDP and GNP 34Decreasing Real Interest Rate and

Increasing Nominal Lending Rate 35Weakening Peso Exchange Rate 35

VI. ALTERNATIVE COURSE OF ACTION 38

Maintain Strong Peso Foreign Exchange Rate 38Reassess Inflation Targeting Process Flowchart 39Shift to Other Monetary Policy Framework Targeting 41

VII. RECOMMENDATIONS 42

VIII. CONCLUSION 43

IX. POTENTIAL PROBLEMS 44

X. SOLUTIONS TO THE POTENTIAL PROBLEMS 45

XI.

TITLE Page

References 46

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Exhibits 47

LIST OF FIGURES

FIGURE Page

1 Organizational Structure of Bangko sentral ng Pilipinas 19

2 Monetary Board of Bangko Sentral ng Pilipinas 26

3 Location Map of Bangko Sentral ng Pilipinas 30

4 Building Layout of Bangko Sentral ng Pilipinas Main Complex 31

5 Average Inflation Target – Actual Inflation Comparison 32

6 Inflation Targeting: Process Flowchart 35

7 Real GDP and GNP 2002-2008 37

8 Real Interest Rate (2000-2008) 38

9 Nominal Interest Rate (2000-2008) 39

10 Peso-dollar exchange rates (2000-2008) 40

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LIST OF TABLE

TABLE Page

1 Average Inflation Target – Actual Inflation Comparison 32

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LIST OF EXHIBITS

EXHIBIT Page

1 Philippine Selected Economic and Financial Indicator) 49

2 Monetary Policy of the Bansgko Sentral ng Pilipinas 54

3 Open Letter on 2008 Inflation 58

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ACKNOWLEDGEMENT

“Patience is the best remedy for every trouble.”Plantus, Titus Maccius (c. 254- 184 B.C.)

“Without realistic goals and positive behavior, positive thinking alone is not enough.”

The author wish to acknowledge the debt of gratitude to special persons who

whole heartedly gave their support and encouragement in the successful completion of

this study – with equal enthusiasm, that many who have helped in ways that they might

not be aware.

To Dr. Elvira O. Daza, of College of Business Administration and Accountancy,

Central Luzon State University for her advice, guidance and never ending support in the

making and successful completion of this case study;

To Prof. Eva F. Avellanoza and Prof Marilyn A. Escalona, who served as

panelists, for their consistent and considerate supervision the preparation towards the

betterment of this case study;

To all employees and staff of Corporate Affairs, Bangko Sentral ng Pilipinas,

Malate, Manila, Philippines for the support, concern, motivation, and companionship

they extended throughout the practicum period.;

To all faculty and staff of the College of Business Administration and

Accountancy, for equipping him with the knowledge, worth-remembering and beautiful

memories of his college life;

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To his CBAA, SAMS, ManSoc and S1 family, the friendship, love, tough

moments and fun-filled memories making half of his college life memorable;

To all Panday of Pandayan Bookshop, who share the fun-filled working

experience;

To all Staff of Public Employment Service Office, San Jose City, who help

provide him summer employment that helps in continuity of his education;

To NESDF, Inc. and Co-scholar, for the scholarship grant for which his

education will not be possible;

To all Management 4 for he busy-rushing schedules, for moments intermingled

with fun and the sweet memories of the four-year stay;

To his Dade and Mame, Mr. Marco T. Baitec and Mrs. Rosalita F. Baitec for

their undying support, love, care concern and advise that made him truly inspired;

To his Family, Kuya Marick, Ate Joy, Ate Rose Mean, Jill Ann, Pamangkin

Paula, Rafael and LJ, Lola, Nanay, Tito and Tita and Cousins, who stay beside him

giving their support and inspiration;

To all his high school and college friends and his inspiration, the gift of a

lifetime friendship and love that he had found;

Above all, to God Almighty, the Creator of all, who never fails to show the love,

peace and guidance, the strength, knowledge and health in able to pursue this piece of

work without His grace and guidance would not be possible;

To them this piece of work is whole heartedly dedicated.

MARLON FELIX BAITEC

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ACKNOWLEDGEMENT

The author wants to express his deepest gratitude and appreciation to a number of

great people who individually and collectively extended their support and assistance in

the realization of this study most especially to the group of good people who had been a

very good part of his two months stay in the Bangko Sentral ng Pilipinas and to people

who have been his inspiration in doing this study.

To Dr. Elvira O. Daza, his adviser, College of Business Administration and

Accountancy, Central Luzon State University, for her advice, encouragement, and

patience towards the betterment of this case study;

To Ma’am Marilyn Escalona and Ma’am Eva F. Avellanosa, who served as

panelists, for spending their time sharing knowledge and constructive criticisms towards

the improvement of this study;

To all management and staff of Corporate Affairs Office in Bangkos Sentral

ng Pilipinas in Malate Manila for imparting knowledge and skills towards the author’s

development in meeting real life challenges;

To all faculty and staff of the College of Business Administration and

Accountancy, for equipping him with the knowledge, worth-remembering and beautiful

memories of his college life;

To his SAMS family, to batch GUESS and REDEMPTIO, the friendship, love,

tough moments and fun-filled memories making half of his college life memorable;

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To all Management 4, for the busy-rushing schedules, for moments intermingled

with fun and the sweet memories of the four-year stay;

To his SEXYBOYS friends, PAUL, FRANCIS, JIMMY, LEXTER, and KUA

AL for the gift of a lifetime friendship that he had found;

To his MANSOC family, the group that may not last long, for the hundreds of

beautiful and sad memories spent together will forever be alive and treasured in his heart

To his college friends,, for sharing the sad, best and fun-filled memories together,

for bringing inspirations, love and care and most especially to his Girlfriend, Ms. Janina

C. Mamaclay whom he used to be his confidant, strength and inspiration;

To all of his friends most especially to THE PEARLS, for being his second

family in times of troubles and sadness; To his co trainee MARLON for being his

companion throughout the training and his buddy in doing this case study;

To his brother and cousin, Emman and Ren Ren, for the blessings of love and

care

To his beloved and ever supportive parents, Mr. Emelito R. Magat and Mrs.

Emma S. Magat, for being the best role models and mentors, for the undying sacrifices,

love, care, and for being the best parents in the whole world, no words can describe how

lucky and happy the author felt having them as his parents

Above all, to God Almighty, the Creator of all, who never fails to shower him

with blessings and love inspite of his shortcomings in life, the source of all wisdom and

strength amidst all struggles, frustrations and challenges in life, this piece of work would

not be possible without His grace and guidance;

To them this piece of work is whole heartedly dedicated.

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JAYSON S. MAGAT

BIOGRAPHICAL SKETCH

Name: Marlon F. Baitec

Birthday: June 14, 1990

Home Address: 12-1 Eugenio Street,Brgy. Canuto Ramos, San Jose City,Nueva Ecija, 3121

Name of Parents: Marco T. BaitecRosalita F. Baitec

Educational Background: San Jose West Central SchoolSan Jose City, Nueva Ecija1996 – 2002

Constancio Padilla National High SchoolSan Jose City, Nueva Ecija2002 – 2006

Special Trainings: Corporate Affairs Department, Bangko Sentral ng Pilipinas,

P. Ocampo cor. Mabini, Malate ManilaJanuary 2009 – January 2010

Honors / Awards Received: Honorable Mention and other awardsConstancio Padilla National High SchoolCadhit St., San Jose City, Nueva EcijaHigh School Diploma, 2002 – 2006

Organizational Affiliations: MemberCLSU - Management Society

2009

Executive Manager (President)College of Business Administration and Accountancy – Society for the Advancement of Management Students (CBAA – SAMS)S.Y. 2009 – 2010

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Member College of Business Administration and Accountancy – Society for the Advancement of Management Students (CBAA – SAMS) S.Y. 2008 – 2009

Member Society for the Advancement of Volunteerism and Excellence - Nueva Ecija (SAVE - NE)2006-2010

Business ManagerCBAA – Senior OfficersS.Y. 2009 - 2010

Business ManagerYouth Entrepreneur Society (YES)S.Y. 2009 - 2010

Academic Activities: “Product Expo and Trade Fair 2010 – During Students’ Week 2010”Multi Purpose Gym, CLSU, Science City of Muñoz, Nueva EcijaFebruary 11, 2010

Lecture Seminar on PracticumCBAA Mini Theatre, CLSU, Science City of Muñoz, Nueva EcijaNovember 12, 2009

1st ENEDA –YES NCR Chapter Regional Assembly with Entrepreneurship Seminar and Business Plan PresentationUniversity of the East Theatre, C. M. Recto, ManilaSeptember 18, 2009

Youth Seminar: Creating Awareness – “Youth Situation Under Econmic Crisis”University Auditorium, CLSU, Science City of Muñoz, Nueva Ecija

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March 6, 2009

1st Provincial Youth Summit on Economics – “Philippine Economy Amidst Global Turmoil”University Auditorium, Central Luzon State University, Science City of Muñoz, Nueva EcijaFebruary 12, 2009

AME Regional Marketing Management Education Convention (ARMMEd)“Sustaining Competitiveness through Excellence, Service and Quality”University Auditorium, Central Luzon State University, Science City of Muñoz, Nueva EcijaNovember 21, 2008

Non – Academic Activities: Villa Floresta Elementary School Outreach ProgramBrgy. Villa FlorestaSan Jose City, Nueva EcijaAugust 28, 2009

Gawad Kalinga Housing and Beautification ProjectFormoso Village, Sto. Niño 3rd

San Jose City, Nueva EcijaJanuary 26, 2008

Human Behavior OrganizationLeadership Training SeminarCBAA Multi Purpose Hall, CLSU Science City of Muñoz, Nueva EcijaJune 28, 2008

Medical Mission and Feeding ProgramNieves Pabalan Elementary SchoolBrgy. Kita-Kita, San Jose City, Nueva EcijaAugust 17, 2007

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BIOGRAPHICAL SKETCH

Name: Jayson S. Magat

Birthday: November 7, 1989

Home Address: 343 Brgy. Bakal I,Talavera, Nueva Ecija, 3114

Name of Parents: Emelito R. MagatMaxima S. Magat

Educational Background: ElementarySan Sebastian SchoolScience City of Munoz, Nueva Ecija1996 – 2002

High SchoolSan Sebastian SchoolScience City of Munoz, Nueva Ecija2002 – 2006

Special Trainings: Corporate Affairs Department, Bangko Sentral ng Pilipinas,

P. Ocampo cor. Mabini, Malate ManilaDecember 2009 – January 2010

Honor/ Awards Received:

Organizational Affiliations: Security Head OfficerManagement Society National

February 23, 2009

Recruitment and Membership2nd Semester, Nov. 2007 to June 2008

Security Head Officer1st Semester, 2007Society for the Advancement of Management Students CLSU, CBAA

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Academic Activities: 1st ENEDA National Mid-Year SummitUniversity of the East Theatre, C. M. Recto, ManilaSeptember 18, 2009

Youth Seminar : Creating Awareness – “Youth Situation Under Econmic Crisis”University Auditorium, CLSU, Science City of Muñoz, Nueva EcijaMarch 6, 2009

1st Youth Summit on EconomicsSeminar on Business Correspondence at theCollege of Education, Central Luzon State University, Science City of Muñoz, Nueva EcijaSeptember 16, 2007

Lecture – Seminar on Banking Services and Credit management at College of Business Administration and Accountancy Mini – Theater,Central Luzon State University, Science City of Muñoz, Nueva EcijaSeptember 15, 2007

Personality Development Seminar At University Auditorium, Central Luzon State University, Science City of Muñoz, Nueva EcijaAugust 15, 2007

Non – Academic Activities: Villa Floresta Elementary School Outreach ProgramBrgy. Villa FlorestaSan Jose City, Nueva EcijaAugust 28, 2009

Gawad Kalinga Housing and Beautification ProjectFormoso Village, Sto. Niño 3rd

San Jose City, Nueva EcijaJanuary 26, 2008 Medical Mission and Feeding ProgramNieves Pabalan Elementary SchoolBrgy. Kita-Kita, San Jose City, Nueva EcijaAugust 17, 2007

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