The corner bank

Title

The corner bank

Language

English

Source

May 31, 1970

Year

1970

Subject

Banking industry

Savings banks

The Corner Bank

Rights

In Copyright - Educational Use Permitted

Fulltext

with private domestic banks and 30 per cent .with PNB. —The net increment of P50 million in deposits with the commercial bank ing system resulted from additions to time and sav ings deposits of Pl 15 mil lion and deposits with the government of P39 mil lion, after reductions in demana deposits and de posits of banks by P71 million 3nd P33 million, respectively. —Deposits with private domestic banks dropped by a net amount of P63 million; those with PNB and foreign banks rose by P69 million and P44 mil lion, respectively. —This quarter, PNB re duced its bills payable and “other liabilities by a substantial P170 million. —Private d o m e s tic banks continued to liqui date their bills payable (by P45 million this quar ter) . Net additions to this group of account arose mainly from the incur rence ol additional “other liabilities” of P50 million and additions to marginal deposits on letters of cre dit of P33 million. An increase of P20 mil lion during the first quar ter of 1970 brought the total net worth of domes tic commercial banks to about Pl.2 million as of March 1970. —Unused letters of cre dit rose by a substantial Pl,484 million this quar ter, with PNB accounting for P929 million of the increase. The increment of P929 million is about 174 per cent of the addi tions to PNB’s unused let ters of credit for 1969. —Unused letters of cre dit of private domestic banks rose by P326 mil lion. Last year, unused letters of credit of these banks dropped by P68 mil lion from the previous year. —The significant in crease in unused letters of credit may be attributed mainly to the floating ex change rate adopted on Feb. 21, 1970 and the si multaneous lifting of the ceiling on foreign curren cy letters of credit. The floating rate for the peso is around P6 to U.S. $1 as compared to the parity rate of P3.90 to U.S. $1. THE CORNER BANK During the recent wave of student demonstrations against the “establish ment” — the government, the capitalists, the privi leged elite, etc., it is re freshing to note that one bank continued to identify itself with the masses without any cry of dissent from the protestors. This is not at all surpris ing since Provident Sav ings Bank — “The Corner Bank,” has been closely identified with the masses from the time it first for mally opened its doors to the public six years ago. Indeed, it was established primarily to serve the banking needs of and help the “common tao.” And it earned its name, “The Corner Bank,” because it has chosen to establish its main office and later its branches where it is con venient and accessible to them — at the corner of the busiest streets. With the sustained sup port and continued pa tronage of the so-called “bakya crowd,” Provident has been able to greatly expand its resources and now ranks among the country’s bigger and more solid savings banks. From a modest start of P3 million, Provident’s to tal resources soared, in a short span of six years, to its present total of P60 million. Within this same span of years, it was able to establish six extension offices to better serve its growing clientele. These branches are all conven iently located in Legarda, Central Market, Ylaya, Evangelista, Baclaran and Rizal Avenue and collec(Continued ou Page Id) Sunday, May 31, 1970 BANKING SUPPLEMENT Page 5 other equally mandatory instruments of credit con trol. the CB can still at tain the desired goal by means of moral suasion. This tool may take the form of published an nouncements, holding of conferences, meetings ^ith the Bankers Associa tion of the Philippines (BAP) and the like where in plans and courses of action are proposed and discussed. The object is to seek the cooperation of banks in the realization of the objectives of the Cen tral Bank tc stabilize the currency and promote overall economic progress. That this approach has proven successful in ma ny cases in the past, in that the banking commu nity has heeded the call of PNB BANK MONEY ORDER (BMO) are now available at the following: PASAY CITY DEVELOPMENT BANK 2462 Taft Avenue Extension Pasay City 2ND BULACAN DEVELOPMENT BANK MacArthur Highway Meycauayan, Buiacan and also at its Branches at: Malolos, Valenzuela, (Polo) Bocaue, including its Extension Office at Meycauayan town proper BMO IS EVERYWHERE FOR YOU! PHILIPPINE NATIONAL BANK 124 Branches and Aganciaa throughout tho Philippine* Correspondent Banka throughout tho World Cable Addrow: PHILNABANK support by the Central Bank, is due largely to the fact that appeals of this sort have instilled in the banks a sense of belonging and of being enthusiastic partners with the CB in the praiseworthy task of bringing about monetary stability and material wel fare . Open Market Another important measure of credit control which is. beginning to take roots in developing coun tries although still in its infancy in the Philippines is the traditional tool of open market operations. This instrument can very well serve as a brake to unwarranted expansion of credit in times of inflation and as an accelerator in granting more credit in periods of deflation. The first situation can be effected when the Cen tral Bank shall not make purchases of securities in the open market or at best minimize such purchases or even sell its security holdings. On the other hand, the second situation, i. e., in case of declining money supply and big do ses are needed to be in jected into the economy, is realized when the CB undertakes more purcha ses, withholds sales of its security holdings or re purchases its bonds or certificates of indebted ness. In this country open market operations »has been resorted to not only to control credit but also to make more people bank conscious since commer cial banks serve as agents in the encashment of bonds, to encourage forced savings habits and, most importantly, to finance economic development of the country. In addition, when open market operations expand or restrict credit, bank re serves are either increased or decreased. When the Central Bank purchases securities in the open mar ket the proceeds of the sale are credited to the member bank’s deposit ac counts at the Central Bank. This will increase the reserves of the banks because of an increase of the money available for circulation. Conversely, when the CB sells securities in the open market, the deposit accounts of the member bank will be debited, re sulting in the shrinkage of money supply and thereby in the bank reserves. Thus if the bank reserves are expanded member banks can provide more credit to the public and if bank re serves are reduced less cre dit is available. Other Reasons Besides the fact that open market operations as a uevice in controlling credit is comparatively of recent vintage in the Philppines; there are other reasons why it cannot be used extensively as yet in this country. For one thing, the market for se curities is small and the country is still largely agricultural where it is duiicuit to develop among the people the conscious ness of investing their mo ney in Donas and securi ties. For another thing, the people are not accustomed to buying and selling them and it is believed it would take some time to reorient their minds toward invest ment in securities. Never theless, education and mo ral suasion can be very useful measures that can bring about changes in this direction. There are still other ins truments that can control credit and which are bet ter known as selective cre dit control measures such as the placing of ceilings on rediscounts of commer cial banks and the re quirement that commer cial banks should main tain a one-to-one ratio between their actual fore ign exchange assets and foreign exchange liabili ties. There are authorities, however, such as Dr. Gre gorio S. Miranda, who claim that the former measure did not entirely curb lendings made by commercial banks and therefore not very effec tive in controlling credit. But the one-to-one ratio which was designed to check unnecessary im ports has been more effec tive in regulating credit with the added advantage of reducing the amount of the foreign exchange lia bilities of commercial banks with the correspon ding increase’ in their fo reign exchange assets. Other Measures Still in certain instances these traditional instru- * ments of credit control may not be effective enough to cope with the situation, say a rapid skyrocketting in money sup ply or an unchecked de crease in the quantity of money in circulation, bringing about a serious case of deflation. To be sure, many central banks in the world, including ours, have invariably em ployed other measures, singly or collectively in conjunction with the tra ditional instruments. These measures are the rationing of credit (i.e., placing a limit on dis counts) , prescribing mini mum cash margins for opening letters of credit and the imposition of mi nimum ratios which ca pital and surplus of banks must bear to the volume of then assets. By and large, however, all these credit control measures, despite their li mitations imposed by cir cumstances, lack of fiscal restram t, the law and the usual untra m m e 11 e d spending on developmen tal projects and public works, have contributed in one form or another to ward the expansion of cre dit and the curbing of un warranted expansion and consequently that too of the money supply. *His work on this mat-' ter, Business and Go vernment, has been used as reference for this ar ticle. The Corner Bank (Continu.ru /tom Page 5> tively account for 53 per cent of Provjdent’s total number of depositors and 42 per cent of its total de posits. To keep pace with the bank’s growth, Provident has expanded its lending operations. At present, its total outstanding loans amount to over P41 mil lion. A majority of these loans were granted for real estate development and housing construction as a response to the present need for housing facilities. Provident today enjoys the trust and confidence of over 110,000 depositors who avail of the 12-hour service of the bank from Monday to Saturday. Such, trust it has continuously nurtured through improv ed and better services and relentless efforts in looking for means to bring higher returns for the funds en trusted to it by these de positors. Page'10 BANKING 'SUPPLEMENT Sunday, May 31, 1970

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