 It is not necessarily rare or even unusual  They accumulate the savings of depositors and

 What makes these industries special? provide housing loans an financing for
 Examples of these ______ as well as ______ to ______ engage
 What are the characteristics of Specialized in ______, ______ and ______.
industries  Promote and expand the rural community by
 Audit Considerations mobilizing savings and extends the rural
community by mobilizing savings and
extending loans and other financial services
to ______ to help with the purchase of
 They perform critical function in the Phil.
______, ______, ______, and other ______
economy
and the ______
 They are responsible for:
 On the other hand, they are composed of
 And conversion of these funds into:
______, ______, ______, ______, ______,
 They finance the ______ which desire to raise and ______.
productive capacity by ______, ______,
 They are not allowed to ______ but may
______, ______, and ______, and ______,
encourage the general public to ______ in
______.
various ______
 It is very important for the ______ and ______
 There are several types of non-bank financial
to continue finding ways to ______ to save
institutions offering a wide variety of services
______ in various financial assets so that
such as ______, ______, ______, ______,
these resources could be ______ and ______
______, ______, ______, ______, ______,
that will finance the ______.
______, ______, ______.
 The Philippine banks are classified into 3
 ______ for term insurances, ______ to pension
types: Accepted domestic deposits and
funds, ______ or ______ in financing
offered checking account services.
companies and pawnshops.
 Had dominated the Philippines’ banking
 Is the independent central monetary authority
industry and had total deposits valued at
of the Phils. That has regulatory and
approximately ______.
supervisory power over banks and non banks.
 ______ perform the function of ______ and
 They supervises the ______.
______, ______ in the form of ______,
 Insurance companies are overseen by ______
______, ______, as well as the ______.
 Investment houses are overseen by ______
 ______ particularly the ______ and ______ are
 The main service of commercial banks are
also allowed to engage in other intermediation
______, and ______.
activities such as ______ (______ and or
______ for other firms)  Universal banks provide ______ and ______
and ______.
 The financial system is composed of 2 general
groups namely.  The most popular banks among customer with
different financial needs because of its wide
 Are allowed to collect savings and time
array of financial services.
deposits to fund loans and also performs the
function of ______ and ______.  As of ______, the value of loans granted by
______ and ______ in the Philippines
 Banking institution include:
amounted to nearly ______. Of these loans,
 Have the largest resources and offer the widest
approximately ______ have been granted for
variety of banking services outside of ______
motor vehicle loans for household
and ______. The other services include:
consumption and approximately ______
 Include ______, ______, ______, and ______
worth of loans granted for production of real
and ______
estate businesses in the country.
 Bank loans that have ______ are generally  A practice whereby insurers transfer
considered ______ and can affect the banks portion of their risk portfolios to other
cash flows. parties by some form of agreement.
 As of ______, the ratio of nonperforming loans  Financial obligations that an insurance
to total gross loans in the Phil. was almost company owes to policyholders,
______ and has significantly decreased over beneficiaries, and other parties.
the past years.  the ratio of underwriting expenses to
 The BSP issued the IRR for the ______ that earned premiums.
requires all lenders under BSP supervision to  measures the profitability of an
grant a ______ or ______ without imposing insurance company by comparing net
______, ______ or ______. income to shareholders' equity.
 BSP also relaxed the ______ for both over the  compares current assets to current
counter and electronic or online transactions. liabilities, indicating the insurer’s short-
 In expressing an opinion on the banks FS, the term liquidity.
auditor:  measures the proportion of debt used to
 The financial statements of banks are prepared finance the insurer’s operations
in the context of the ______and ______ and compared to shareholders' equity.
______ influenced by such regulations.  Formula of Current Ratio
 The BSP ______ may differ materially from  Formula of Acid test ratio
______.  Formula of Working Capital
 Banks are under attack, being subject to  Formula of Debt ratio
______, ______, ______, and ______.  Formula of Equity ratio
 As stated in ______ “______”, internal audit  Formula of Accounts receivable
provides ______ in promoting an ______ and Turnover
the ______.  Formula of Average Collection Period
 What are the Audit and Accounting  Formula of gross profit margin
Considerations for banks  Formula of Operating Profit Margin
 Bank and Financial institution TRENDS:  Formula of net profit margin
 Most banks do not include ______  Formula of Return on Investment on
 They operate with very high leverage meaning Asset
______  Formula of Return on Equity
 is the risk of financial loss to the Group if a  Formula of degree of operating leverage
counterparty to a financial instrument fails to  Formula of degree of financial leverage
meet its contractual obligation
 is the current and prospective risk to earnings
or capital arising from the inability to meet its
obligations when they become due
 is the possibility of loss to future earnings, fair
values or future cash flows that may result
from changes in the price of a financial
instrument.
 is
 the probability of loss to
 earnings or capital arising from
 changes in foreign exchange
 rates
 denominated in the counterparty’s home
currency. The counterparty may be
1. the risk that a customer or counterparty unable to obtain the currency of the
will not settle an obligation for full value, obligation irrespective of the
either when due or at any time counterparty’s particular financial
thereafter. Credit risk, particularly from condition. Transfer
commercial lending, may be considered
the most important risk in banking 8. the risk of loss arising from failure to
operations. Credit risk arises from comply with regulatory or legal
lending to individuals, companies, banks requirements in the relevant jurisdiction
and governments. It also exists in assets in which the bank operates. It also
other than loans, such as investments, includes any loss that could arise from
balances due from other banks and in changes in regulatory requirements.
off-balance sheet commitments. Credit Regulatory risk –
risk also includes country risk, transfer
risk, replacement risk and settlement 9. the risk of foreign customers and
risk. Credit risk – counterparties failing to settle their
obligations because of economic,
2. the risk of loss arising from future political and social factors of the
movements in the exchange rates counterparty’s home country and
applicable to foreign currency assets, external to the customer or counterparty
liabilities, rights and obligations. Country risk –
Currency risk –

3. the risk of loss arising from the changes 10. (sometimes called performance risk) the
in the bank’s ability to sell or dispose of risk of failure of a customer or
an asset. Liquidity risk – counterparty to perform the terms of a
contract. This failure creates the need to
4. the risk associated with the replace the failed transaction with
imperfections and subjectivity of another at the current market price. This
valuation models used to determine the may result in a loss to the bank
values of assets or liabilities. Modeling equivalent to the difference between the
risk – contract price and the current market
price. Replacement risk –
5. the risk of direct or indirect loss resulting
from inadequate or failed internal 11. the risk of losing business because of
processes, people and systems or from negative public opinion and
external events. Operational risk – consequential damage to the bank’s
reputation arising from failure to properly
6. the risk of loss arising from adverse manage some of the above risks, or
changes in market prices, including from involvement in improper or illegal
interest rates, foreign exchange rates, activities by the bank or its senior
equity and commodity prices and from management, such as money
movements in the market prices of laundering or attempts to cover up
investments. Price risk – losses. Reputational risk –

7. the risk of loss arising when a 12. the risk that one side of a transaction will
counterparty’s obligation is not be settled without value being received
 from the customer or counterparty. This Under the General Banking Law of 2000
will generally result in the loss to the (GBL), a ___________ is a commercial bank
bank of the full principal amount. with the additional authority to exercise the
Settlement risk – powers of an investment house and invest in
non-allied enterprises.
13. the risk of loss arising from the
possibility of the bank not having
sufficient funds to meet its obligations, refers to a banking business with objectives
or from the bank’s inability to access and operations that do not involve interest
capital markets to raise required funds. (riba) as prohibited by the Shari’ah and which
Solvency risk – conducts its business transactions in
14. the risk of loss arising from factors such accordance with Shari’ah principles.  Shari’ah
as failure to maintain safe custody or refers to the practical divine law deduced from
negligence in the management of assets its legitimate sources: the Qur’an, Sunnah,
on behalf of other parties. Fiduciary risk consensus of Muslim scholars, analogical
– deduction and other approved sources of
Islamic law.  Financial contracts and servcies
15. the risk that contracts are documented are founded on risk sharing rather than
incorrectly or are not legally enforceable speculation in compliance with Shari’ah
in the relevant jurisdiction in which the principles.
contracts are to be enforced or where
the counterparties operate. This can
include the risk that assets will turn out The business of __________ includes
to be worth lesser, liabilities will turn out accepting drafts and issuing letters of credit;
to be greater than expected because of discounting and negotiating promissory notes,
inadequate or incorrect legal advice or drafts, bills of exchange, and other evidences
documentation. In addition, existing laws of debt; accepting or creating demand
may fail to resolve legal issues involving deposits; receiving other types of deposits and
a bank; a court case involving a deposit substitutes; buying and selling foreign
particular bank may have wider exchange and gold or silver bullion; acquiring
implications for the banking business marketable bonds and other debt securities;
and involve costs to it and many or all and extending credit, subject to such rules as
other banks; and laws affecting banks or the Monetary Board of the BSP may
other commercial enterprises may promulgate.
change. Banks are particularly
susceptible to legal risks when entering These include savings and mortgage banks,
into new types of transactions and when private development banks, and stock savings
the legal right of a counterparty to enter and loans associations organized under
into a transaction is not established. existing laws, and any banking corporation that
Legal and documentary risk – may be organized for the following purposes:

These are organized for the purpose of

16. the risk that a movement in interest providing adequate credit facilities to farmers
rates would have an adverse effect on and merchants, or to cooperatives of such
the value of assets and liabilities or farmers and merchants and in general, the
would affect interest cash flows. Interest people of the rural communities.
rate risk –
One organized for the primary purpose of
providing a wide range of financial services to
cooperatives and their members