The Philippine banking structure consists of the governmentowned Central Bank of the Philippines (created in 1949), which acts as the government's fiscal agent and administers the monetary and banking system; and some 45 commercial banks, of which 17 are foreign-majority-owned. Other institutions include more than 111 thrift banks, 787 rural banks, 38 private development banks, 7 savings banks, and 10 investment houses, and two specialized government banks. The largest commercial bank, the Philippine National Bank (PNB), is a government institution with over 194 local offices and 12 overseas branches. It supplies about half the commercial credit, basically as agricultural loans. The government operates about 1,145 postal savings banks and the Development Bank of the Philippines, the Land Bank of the Philippines, and the Philippine Amanah Bank (for Mindanao). There are also 13 offshore banking units in the country, and 26 foreign bank representative offices. Total assets reached approximately $65 billion in March 2001, 39% of which belonged to the five largest banks. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $7.7 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds— was $41.9 billion. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was8.298%.
Philippine stock exchanges are self-governing, although the Philippine Securities and Exchange Commission, established in 1936, has supervisory power over registrants. The country's two stock exchanges, Manila and Makati (both in the capital), were formally merged in the Philippines Stock Exchange in March 1993. A computer link-up was effected a year later, although the two retained separate trading floors until November 1995. Only 220 companies were listed as of 1998. But the process of privatization is expected to push up listings, while domestic participation in the equity market is being specifically promoted by new regulations requiring that all initial public offerings reserve a 10% tranche for small investors. Before the Asian crisis, market capitalization of publicly listed companies had grown to $89 billion, or six times the amount of 1992. But in 1998, only 10 of the largest companies accounted for more than half of trading volume. In 2000, a financial scandal in which the SEC failed to regulate the market properly drove the stock market down by a quarter and destroyed investor confidence. In 2000, market capitalization was a mere 38% of the previous year, and only 12% of the peak level in 1996.