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Philippine Banking Essay

1661 words - 7 pages

HISTORY OF PHILIPPINE BANKING

 Philippine banking has a long and colorful history. It began in 1828 when, as the Philippines reaped the benefits of increased trade, King Ferdinand VII of Spain issued a decree mandating the establishment of a public bank in the Philippines. 

However, it took 23 years before that bank could become a reality. The man behind the actual organization of the bank was no less than the governor-general of the Philippines at that time, His Excellency Antonio de Urbiztondo y Eguia. 

Gov. de Urbiztondo was a marquis of Solana in Spain who was named governor-general of the Philippines in 1850. His term of office was characterized by many administrative ...view middle of the document...

The man was Antonio de Ayala of the prominent Casa Roxas, precursor of Ayala y Cia, which is now Ayala Corporation. 

The royal decree that confirmed the creation of El Banco Español Filipino de Isabel 2 also gave the Bank the exclusive privilege to issue paper money, which antedated the currency-issuing authority of the post-war Central Bank of the Philippines by about a hundred years (The present central bank, the official issuer of Philippine currency, started operations only in 1949). The original bank notes were collectively called pesos fuertes (PF), Spanish for "strong pesos." 

The first bank notes (or paper money) in the Philippines had the issue date May 1, 1852 and could be redeemed in Mexican coins in gold or silver. Apart from carrying the name of the Bank as issuer of the currency, the bank notes also bore the portrait of the woman for whom the bank was named –- Queen Isabella II. 

Coincidentally, the first transaction of the Bank was a lending transaction recorded on May 1, 1852, in which the Bank discounted a promissory note from a Chinese client. Three days later, the Bank recorded its first deposit from its first depositor. 

On September 3, 1869, the Bank officially dropped the name of the queen after she was ousted from the Spanish throne during a revolution a year earlier. Like her father's reign, Isabella's rule had been stormy. Hence, since 1869, the Bank was known simply as El Banco Español Filipino. 

Decades later, the management of the Bank decided to move out to where the business activity was. Binondo, on the northern side of the Pasig River, had emerged as the new center of business growth and, thus, gained more economic prominence than Intramuros. 

The Chinese dominated the retail traffic while British merchants controlled the export-import business. Rosario Street (now Quintin Paredes) became the center of retail business while Escolta was the place for the finest of American and European shops. These were profitable sources of new business for El Banco Español Filipino after it relocated to No. 4 Plaza Cervantes in Binondo in January of 1892 on a piece of land acquired from the Dominican Order. 

Through the years, the Bank had a close link with the Spanish Crown that even the establishment of its first branch had to be approved by authorities in Madrid. In fact, it took a royal order in 1896 to enable the Bank to open branches, although, again, this authority was still subject to clearance by Spain's minister of the colonies. 

The Bank originally planned to open its first branch in Central Luzon during the first decade of its operations, which was sometime in the 1850s. The reason for this was the emergence of the region as a sugar-producing area. During that time, sugar was exported from this region, making the product a major source of income for local producers. 

But the plan to put up this first branch did not materialize. By the time the Bank was ready in 1897, Central Luzon had been...

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