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Second semester
CHAPTER 12: Financial institution and intermediaries: Overview Financial institution is a company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange. The financial system matches savers and borrowers through two channels: (1) financial markets, and (2) banks and other financial intermediaries These two channels are distinguished by how funds flow from savers, or lenders, to borrowers and by the financial institutions involved. Funds flow from lenders to borrowers directly through financial markets such as the New York Stock Exchange and Philippine Stock Exchange or indirectl y through financial intermediaries, such as banks. Financial intermediary is a financial firm, such as a bank, that borrows funds from the savers and lends them to borrowers. Basic Structure of Financial Institutions/Intermediaries A. Depository Institutions
- Commercial Banks / Universal Banks
- Savings And Loans Associations
- Mutual Savings Bank
- Credit Union B. Contractual Savings Institutions
- Insurance companies
- Pension funds C. Investment Intermediaries
- Investment Banks
- Mutual Funds
- Hedge Funds
- Finance Companies
- Money Market Mutual Funds A. Depository Institutions
- Commercial Banks - the most important intermediaries. Commercial banks play a key role in the financial system by taking in deposits from households and firms and investing most of those deposits, either by making loans to households and firms or by buying securities, such as government bonds, or securitized loans. Many firms rely on bank loans to meet their short-term needs
- Universal Banks - Also referred to as a full- service financial institution, a universal bank provides a large array of services including those of commercial banks and investment banks. The types of services offered include:
- Deposit accounts such as checking and savings
- Loans and credit
- Asset and wealth management
- Buying and selling securities
- Financial and investment advice
- Insurance products B. Contractual Savings Institutions These are financial intermediaries that receive payments from individual as a result of a contract and uses the funds to make investments.
- Insurance companies - specialize in writing contracts to protect their policyholders from the risk of financial losses associated with events, such as automobile accidents or fires. Insurance companies collect premiums from policyholders, which the companies then invest then obtain the funds necessary to pay claims to policyholders and to cover their other costs.
Second semester
The insurance industry has two segments: a. Life loss insurance of companies- sell policies to protect households against insurance earnings from the disability, retirement or death of the person. b. Property and casualty - companies sell policies to protect household and firms from the risks of illness, theft, fire, accidents and natural disasters. Examples are Standard Insurance Company and Malayan Insurance Corporation.
- Pension Fund - Pension fund is a financial intermediary that invests contributions of workers and firms in stocks, bonds, and mortgages to provide pension benefit payments during workers' retirements. People can accumulate retirement savings in two ways: (1) through pension funds sponsored by employers or (2) through personal savings accounts. Most notable examples of pension funds are Social Security System (SSS) for employees of private companies and Government Service Insurance System (GSIS) for government employees. **Types of Pension Funds Plans
- Defined contribution plan** ❖ Employer places contributions from employer into investments such as mutual funds, chosen by the employees. Employees own the value of the funds in the plan. They also bear the risk of poor investment returns. ✓ Employee’s investments profitable = Employees retirement income will be high (vice versa) 2. Defined benefit plan ❖ An employer promises employees a particular peso benefit payment, based on each employee's earnings and years of service. The benefit payments may or may not be indexed to increase with inflation. ✓ Funds exceed the promised amount= excess remain with the employer ✓ Funds insufficient (underfunded) = employer will be liable for the different C. Investment intermediaries Investment intermediaries are financial firms that raise funds to invest in loans and securities. The most important investment intermediaries are investment banks, mutual funds, hedge funds finance companies and money market mutual fund.
- Investment banks – Investments banks, such as Goldman, Sachs and Morgan Stanley, Merrill Lynch differ from commercial banks in that they do not take in deposits and instead, they concentrate on providing advice to firms issuing stocks and bonds or considering mergers with other firms. They also engage in underwriting , in which they guarantee a price to a firm issuing stocks or bonds and then make a profit by selling the stocks or bonds at a higher price.
- Mutual Funds - These financial intermediaries allow savers to purchase shares in portfolio of financial assets, including stocks, bonds, mortgages, and money market securities.
- Mutual funds offer savers the advantage of reducing transactions costs. Mutual funds provide risk-sharing benefits by offering a d iversified portfolio of assets and liquidit y benefits because savers can easily sell the shares. Types of mutual funds a. Close- end mutual funds – issues a fixed number or non-redeemable shares, which investor may then rode in over the counter just as stocks are traded. Price of a share fluctuates with market value (net asset value (NAV)
Second semester
Investment intermediaries Mutual funds Shares Stock, bonds Hedge Funds Shares Stock, bonds, derivatives Finance companies Commercial paper, stocks, bonds Consumer and business loans Money market mutual funds Shares Money market instruments CHAPTER 13: Basic Commercial Banking The bank Balance sheet ➢ Banks sources and used of funds are summarized on its balance sheet, which is a statement that list and individual or firms’ assets and liabilities to indicate the firm’s financial position on particular day. a. Asset – something of value that individual or firms owns b. Liability – something that individual or firms owes c. Bank capital – also called as shareholders equity, it is the difference between value of the bank asset and liabilities. A. Bank Asset Banks acquire bank assets with the funds they receive from depositors, the funds they borrow, the funds they acquire from their shareholders purchasing the bank's new stock issues, and the profits they retain from their operations. The following are the most important bank assets
1. Reserves and other cash assets Reserve – most liquid asset that bank hold which consist of a. Vault cash – cash on hand and in the bank (Including ATM), or in deposit at other banks, and deposits bank have with the central bank. Note: As authorized by Congress, the BSP mandates that banks hold a percentage of their demand deposits and NOW accounts (but not Money Market Deposit Accounts (MMDAs)) as required reserves. Reserves that banks hold over and above those that are required are called excess reserves.
Second semester
2. Securities Marketable securities – liquid assets that banks trade in financial market. Banks are allowed to hold securities issued by the government. Treasury and other government agencies, corporate bonds that received investment-grade rating when they were first issued, and some limited amounts of municipal bonds, which are bonds issued by state and local governments. Because of their liquidity, bank holding of Government Treasury securities are sometimes called secondary reserves. 3. Loans receivable Loans - illiquid relative to marketable securities and entails greater default risk and higher information cost. As a result, the interest rates banks receive on loans are higher than those they receive on marketable securities. a. Loans to businesses - called commercial and industrial, or C&1, loans b. Consumer loans - made to households primarily to buy automobiles, furniture and other goods c. Real estate loans , - which include mortgage loans and any other loans backed with real estate as collateral. Mortgage loans made to purchase homes are called residential mortgages, while mortgages made to purchase stores, offices, factories, and other commercial buildings, are called commercial mortgages. 4. Other assets Other assets include banks' physical assets, such as computer equipment and buildings. This category also includes collateral received from borrowers who have defaulted on loans. B. Bank liabilities The most important bank liabilities are the funds a bank acquires from savers, to make bank loans uses the funds to make investments, for instance, by buying bonds, or to households and firms. Bank deposit offer households and firms certain advantage over other ways in which they might hold their funds. 1. Demand or current deposit Current account banking come in different varieties, which are determined partly by the regulations and partly by the desire of bank managers to tailor checking accounts they offer to meet the needs of households and firms. Demand deposits and now (negotiable order of withdrawal) are the most important categories of checkable deposits. Demand deposits are current account deposits on which banks do not pay interest. now checking accounts that pay interest. Businesses often hold substantial balances in demand deposits because demand deposits represent a liquid asset than can be accessed with very low transactions costs. 2. Non demand deposit Nondemand deposits are for savers who are willing to sacrifice immediate access to their funds in exchange for higher interest payments (savings account, money market deposit account, time deposits) 3. Borrowings Banks raise funds by borrowing. Bank can earn a profit from this borrowing if the interest rate it pays to borrow funds is lower than the interest it earns by lending the funds to households and firms. Borrowing includes short terms loans in the BSP funds market, loans from foreign branches or other subsidiaries or affiliates. Federal funds – market in which banks make short term loans- often just overnight to other banks.
Second semester
Management of Bank Capital Banks manage the amount of capital they hold to prevent bank failure and to meet bank capital requirements set by the regulatory authorities. However, they do not want to hold too much capital because by so doing, they will lower the returns to equity holders. In determining the amount of bank capital, managers must decide how much of the increased safety that covers with higher capital (the benefit) they are willing to trade off against the lower return on equity that comes with higher capital (the cost). Because of the high costs of holding capital to satisfy the requirement by regulatory authorities, bank managers often want to hold less capital than is required. Bank Capital and bank profit Bank profit – the difference between its revenue and its cost Banks revenue – earned primarily from interest on its securities and loans and fees its charges for credit and debit cards Bank cost – are the interest it pays to its depositor, the interest it pays on loan or other debts, and its cost of providing services. Bank net interest margin – difference between the interest it receives on its securities and loan and the interest it pays on deposit and debt, dividing by the total revenue of its earning asset. 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑 − 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑎𝑦 𝑡𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 Return on asset (ROA) 𝑎𝑓𝑡𝑒𝑟 − 𝑡𝑎𝑥 𝑝𝑟𝑜𝑓𝑖𝑡 𝐵𝑎𝑛𝑘 𝑎𝑠𝑠𝑒𝑡𝑠 Return on equity (ROE) 𝑎𝑓𝑡𝑒𝑟 − 𝑡𝑎𝑥 𝑝𝑟𝑜𝑓𝑖𝑡 𝐵𝑎𝑛𝑘 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 Ratio of asset to capital – measures bank leverage Ratio of capital to asset – called bank leverage ratio Leverage – measure of how much debt an investor assumes in making an investment. Managing bank risk
1. Managing liquidity risk Liquidity risk – possibility that a bank may not be ale to meets its cash need by selling assets or raising funds at reasonable cost. bank can minimize liquidity risk by holding fewer loans and securities and more reserves. Such as strategy reduces the bank's profitability, however, because the bank earns no interest on vault cash and only a low interest rate on its reserve deposits with the Fed. So, although the low-interest rate environment during the years 2. Managing credit risk Credit risk – risk that the borrowers might default on their loans. One sources of credit risk is asymmetric information (problems of adverse selection and moral hazard) Because borrowers know more about their financial health and their rule plans for using borrowed money than do banks, banks may find themselves inadvertently lending to poor something credit risks or to borrowers who intend to use borrowed funds for different other than their intended purpose a. Diversification investor - whether individuals or financial firms’ banks can reduce their exposure to risk by diversifying their holdings. If lend too much to one borrower, to borrower in one region, or to borrowers in one region, or to borrowers in
Second semester
one industry, they are exposed to greater risks from those loans. b. Credit risk analysis - bank loan officers screen loan applicants to eliminate potentially bad risks and to obtain a pool of credit worthy borrowers. Individual borrowers usually must give loan officers information about their employment, income, and net worth. Bank often use credit score system to predict statistically whether a borrower is likely to default c. Collateral - banks generally require that a borrower put up collateral, or assets pledged to the bank in the event that the borrower defaults. d. Credit rationing – banks minimize the costs of adverse selection and moral hazard through credit rationing. credit rationing - a bank either grants a borrower's loan application but limits the size of the loan or simply declines to lend any amount to the borrower at the current interest rate. The first type of credit rationing occurs in response to possible moral hazard. Limiting the size of bank loans reduces costs of moral hazard by increasing the chance that the borrower will repay the loan to maintain a sound credit rating. e. Monitoring and restrictive covenants - To reduce the costs of moral hazard, banks monitor borrowers to make sure they don't use the funds borrowed to pursue unauthorized, risky activities. f. Long term business relationship - the ability of banks to access credit risks on the basis of private information on borrowers is called relationship banking. One of the best ways for bank to gather information about a borrower's prospects or to monitor a borrower's activities is through a long-term business relationship.
3. Managing interest rate risk Interest rate risk occurs if there is a change in market interest rate cause a bank profit or its capital to fluctuate. Rise in market interest will lower the PV of bank asset and liabilities (vice versa). The effect of a change in interest rates on a bank's profit depends in part on the extent to which the bank's assets and liabilities are variable rate or fixed rate. 4. Reducing interest rate risk To reduce their exposure to interest rate risk a. Bank with negative gaps can make more adjustable rate or floating rate loans. That way, if market interest rates rise and banks must pay higher interest rates on deposits, they will also receive higher interest rates on their loans. Unfortunately for banks, many loan customers are reluctant to take out adjustable-rate the loans reduce loans because while the interest-rate risk banks face, they increase the interest-rate risk borrowers face. b. Bank can also use interest rate swaps – in which they agree to exchange or swap the payment from fixed rate loan for adjustable- rate loan.
Second semester
Investment Banks Investment banks offer distinct financial services, dealing with larger and more complicated financial deals than retail banks. Investment banks assist in the initial sale of securities in the primary market, securities brokers and dealers assist in the trading of securities in the secondary markets. Finally venture capital firms provide funds to companies not yet ready to sell securities to the public. Role of investment banks
- Corporate advising – they help the company take part in mergers and acquisition, create financial product to sell, and bring new companies to market
- Brokerage division – investment bank provide mediation between those who want to buy shares and those who want sell take place. The two supposed to be separate and distinct, so within an investment bank there is a so- called " wall " between these divisions to prevent conflict of interest. Typical division within investment banks
- Industry coverage group - established to have separate groups within the bank each having expertise in specific industries or market sections such as technology or health care. They develop client relationships with companies within various industries to bring financing, equity issue or merger and acquisition business to the bank
- Financial products groups - provide investment banking financial products such as IPOs, M&As, Corporation restructuring and various types of financing. There may be separate product groups that specialize in asset financing, leasing, leveraged financing and public financing. Types of firms engaged in Investment banking The classification of investment banks is primarily based on " size " which may refer to the size of the banks in terms of the number of offices or employees or to the average size of M & A deals handled by the bank.
- Bulge bracket banks – are the major, international investment banking firms with easily recognizable names such as Goldman Sacks, Deutsche Bank, Credit Suisse Group AG, Morgan Stanley and Bank of America. The bulge bracket banks are the largest in terms of number of offices and employees and also in terms of handling the largest deals and the largest corporate clients. Each of the bulge bracket banks operates internationally and has the largest global as well as domestic presence. They provide their clients with the full range of investment banking services including a. Trading, all types of financing, asset management services b. Equity research and issuance c. M& services
- Middle market banks - occupy the middle position between smaller regional investment banking firms and massive bulge bracket investment bank. They provide the same full range of investment banking services as bulge bracket banks such as a. Equity and debt capita market services b. Financing and asset management services c. M&A services
Second semester
3. Boutique Banks a. Regional Boutique banks - smallest of the investment banks, both in terms of firm size and typical deal size. They commonly serve smaller firms and organization but may have as client’s major corporations headquartered in their areas. They generally handle smaller M&A deals, in the range of $50 to $100 million or less. b. Elite Boutique banks - often like regional boutique in that they usually do not provide a complete range of investment banking services and may limit their operations to handling M&A related issues. They are more likely to offer restructuring and asset management services. Most elite boutique banks begin as regional boutiques and then gradually work up to elite status through handling successions of larger and larger deals for more prestigious clients. Areas of business A. Brokerage
- Proprietary trading. Investment banks have their own funds, and they can both invest and trade their own money, subject to certain conditions.
- Acting as a broker. Banks can match investors who want to buy shares with companies wanting to sell them, in order to create a market for those shares (known as market-making).
- Research. Analyst look at economic and market trend, make buy or sell recommendations, issue research notes, and provide advice on investment to high net worth and corporate clients. B. Corporate Advising
- Bringing companies to market. Investment banks can raise funds for new issues, underwriting Initial Public Offerings (IPOs) in exchange for a cut of the funds they raised.
- Bringing companies together. Banks facilitate mergers and acquisitions (M&A) by advising on the value of companies, the best way to proceed, and how to raise capital.
- Structuring products. Clients who want to sell a financial product to the public may bring in an investment bank to design it and target the retail or commercial banking market. How investment banks make or lose money Making money Banks receive fees in return for providing advice, underwriting services, loans and guarantees, brokerage services, and research and analysis. They also receive dividends from investments they hold, interest from loans, and charge a margin on financial transactions they facilitate. Losing money The advising division may end up holding unwanted shares if the take-up of an IPO is lower than expected. The trading division of a bank may make the wrong decisions and end up losing the bank money. In a year of little corporate activity, banks may have to rely on trading profits to bolster their returns. Banks may create financial products which they fail to sell on to other investors, leaving them holding loss-making securities or loans.
Second semester
Objective of Financial Regulation The government regulates financial market and financial institution for three main reasons A. Ensuring the soundness of the financial system Asymmetric information - one party often does not know enough about the other party to make accurate decisions. This can lead to widespread collapse of financial intermediaries, referred to as a financial panic. Because providers of funds to financial intermediaries may not be able to assess whether the institutions holding their funds are sound or not, if they have doubts about the overall health of financial intermediaries, they may want to pull their funds out of both sound and unsound institutions. The possible outcome is a financial panic that produces large losses for the public and causes serious damage to the economy. To protect the public and the economy from financial panics, the government has implemented the following types of regulation:
1. Restriction on Entry ➢ Very tight regulations as to who is allowed to set up a financial intermediary and institution have been created. Individuals or groups that want to establish a financial intermediary, such as a bank or an insurance company must obtain a charter from the SEC and the respective government agency. 2. Stringent reporting requirement ➢ Financial International institutions and intermediaries must follow strictly the Accounting and Reporting Standards. Their accounting must comply with strict principles, their books subject to periodic inspection, and they must make certain information available to the public. 3. Restriction on assets and activities ➢ These are restrictions on what financial institutions and intermediaries are allowed to do and what assets they can hold. They are not allowed to engage in certain risky activities or to hold certain risky assets, or at least from holding a greater quantity of these risky assets than is prudent. 4. Deposit insurance ➢ The government ensures that people's deposits (up to a maximum amount of P500,000) can be recovered if the institution that holds these deposits should fail. The most important government agency that provides this type of insurance in the Philippines Deposit Insurance Corporation (PDIC).
- Limit on competition ➢ These restrictions may take any of these forms: a. Restriction on the opening of additional branches in the same location. b. Restriction on the opening of branches in another location. 6. Restriction on interest rates ➢ Competition has also been reduced by regulations that impose restrictions on interest rates that can be paid on deposits. B. Increasing the information available to investor
- Asymmetric information in financial markets means that investors may be subject to adverse selection and moral hazard problems that may hinder the efficient operation of financial markets.
- Risky firms or outright crooks may be the most eager to sell securities to unwary investors, and the resulting adverse selection problem may keep investors out of financial market. Furthermore, once an investor has bought a security, thereby lending money to a firm, the borrower may have incentives to engage in risky activities or to commit outright fraud.
Second semester
- The presence of this moral hazard problem may also keep investors away moral financial markets. Government regulation can reduce adverse selection and moral hazard problems in financial markets and increase their efficiency by increasing the amount of information available to investors. C. Improving control of the financial system
- Because banks play a very important role in determining the supply of money (which in turn affects many aspects of the economy), much regulation of these financial intermediaries is intended to improve control over the money supply. Once such regulation is reserve requirements, which make it obligatory for all depository institutions to keep a certain fraction of their deposits in accounts with the BSP.
- The PDIC gives depositors confidence in the banking system and eliminates widespread bank failures, which can in turn cause large, uncontrollable fluctuations in the quantity of money. Role of Bangko Sentral ng Pilipinas June 14, 1993 – President Ramos signed into law R.A. 7653 entitled " The New establishment Act ", pursuant to the requirement of the 1987 Constitution for the of an independent Central Monetary Authority. Primary objective: ✓ to maintain price stability conducive to a balanced and sustainable economic growth. ✓ to promote and preserve monetary stability and the convertibility of the national currency. Responsibilities The BSP provides policy directions in the areas of money, banking and credit. It supervises operations of banks and exercises regulatory powers over non- bank financial institutions with quasi-banking functions. Under the New Central Bank Act, the BSP performs the following functions, all of which relate to its status as the Republic's central monetary authority.
- Liquidity Management. The BSP formulates and implements monetary policy aimed at influencing money supply consistent with its primary objective to maintain price stability.
- Currency issue. The BSP has the exclusive power to issue the national currency. All notes and coins issued by the BSP are fully guaranteed by the Government and are considered legal tender for all private and public debts.
- Lender of last resort. The BSP extends discounts, loans and advances to banking institutions for liquidity purposes.
- Financial Supervision. The BSP supervises banks and exercises regulatory powers over non-bank institutions performing quasi-banking functions.
- Management of foreign currency reserves. The BSP seeks to maintain sufficient international reserves to meet any foreseeable net demands for foreign currencies in order to preserve the international stability and convertibility of the Philippine peso.
- Determination of exchange rate policy. The BSP determines the exchange rate policy of the Philippines. Currently, the BSP adheres to a market-oriented foreign exchange rate policy such that the role of Bangko Sentral is principally to ensure orderly conditions in the market.
Second semester
PART B: Role of Philippine deposit insurance corporation in financial regulation PDIC is a government instrumentality created in 1963 by Republic Act 3591, as amended, to insure the deposits of all banks. ➢ PDIC exists to protect depositors by providing deposit insurance coverage for the depositing public and help promote financial stability. ➢ PDIC is tasked to strengthen the mandatory deposit insurance coverage system to generate, preserve, maintain faith and confidence in the country's banking system; and protect it from illegal schemes and machinations. Function of PDIC
- Deposit insurance
- Risk mitigation
- Receivership and liquidation Governance and Structure Board of Directors The Board of Directors (the "Board") is primarily responsible for the governance of the Corporation. The Board is the government's agent in pursuing economic growth and development within the ambit of the Corporation's jurisdiction. To this end, it will be necessary to ensure that only individuals who are fit and proper by reason of their experience, education, training and competence can be appointed as members of the Board of PDIC. PDIC, being created by special law. Relevant Notes on Deposit Insurance A deposit insurance is essentially the assured amount a bank depositor gets in the case that the bank cannot fulfill its obligations. It is mandatory by law and stability. What are covered by PDIC Deposit Insurance? By deposit type
- Savings
- Special savings
- Demand/checking
- Time deposit
- Negotiable order of withdrawal By deposit account
- Single
- Joint account
- Account “by”, “in trust for”, or “for the account of” By currency
- Philippine peso
- Foreign currencies considered as part of BSP international reserve Who are required to file a claim against the assets of a closed bank Creditors of a closed bank including depositors ("creditors" for brevity) are required to file their claim against the assets of a closed bank. However, creditors whose credits are secured by a duly registered real estate mortgage or chattel mortgage, or duly constituted pledge are no longer required to file their claims against the assets of the bank. Likewise, depositors who have filed their claims for deposit insurance within sixty (60) days from the date of publication of the notice of closure are no longer required to file their claims against the assets of the bank. When should claims be filed Creditors must file their claim within sixty (60) days from the date of publication of the notice of closure of a bank in a newspaper of general circulation
Second semester
Disallowance of Claim due to absence/insufficiency of supporting documents and filing beyond the 60-day period for filing of claims The absence or insufficiency of documents to support the claim shall result in the disallowance of the claim. However, the period to submit the documentary deficiencies may be extended for a maximum period of fifteen (15) working days upon written request of the claimant and on meritorious grounds. Claims filed beyond the prescribed 60-day period for filing of claims shall likewise be disallowed. Remedy from disallowance The claimant has sixty (60) days after receipt of the notice of denial of claim to file his/her claim by request in writing for extension to the liquidator or file with the liquidation court. CHAPTER 17: Financial system regulator Part II S ecurities and Exchange Commission (Komisyon sa mga Panagot at Palitan) ➢ is the agency of the Government of the Philippines responsible for regulating the securities industry in the Philippines. In addition to its regulatory functions, the SEC also maintains the country's company register. ➢ SEC is temporarily headquartered at the Philippine International Convention Center in Pasay City, Metro Manila. It will due to transfer to a new site in Bonifacio Global City, Taguig City. History October 26, 1936 – SEC was established by virtue of commonwealth act no. 83 (Securities act) Operation began on Nov 11, 1936, under the leadership of commissioner Ricardo Nepomuceno. ❖ The agency was abolished during the Japanese occupation and was replace by the Philippine Executive Commission. It was reactivated in 1947 ❖ Dec 1, 2000, SEC was reorganized by RA 8788 also known as the Securities regulation code. ❖ It was tasked to regulate the sale and registration of securities, exchanges, brokers, dealers and salesmen. Subsequent laws were enacted to encourage investments and more active public participation in the affairs of private corporations and enterprises
Second semester
- To safeguard the rights and interest of the insuring public, pre-need and HMO customers. FUNCTIONS
- Promulgation governing the and implementation of policies, rules and regulations operations of entities engaged in insurance, pre-need, and HMO activities as well as benevolent features
- Licensing of insurance, reinsurance companies, its intermediaries, benefit associations, mutual trusts for charitable uses, pre-need companies, need intermediaries, and pre- HMO companies
- Conducting insurance agent's examinations, as well as processing of reinsurance treaties and request for investments of insurance companies
- Examination/verification business of of the financial condition and methods of doing benefit entities engaged in insurance business, pre-need, mutual associations, trusts for charitable uses, and HMO companies
- annual Evaluation and preparation of statistical reports, studies, research, matters, reports, and HMO and position papers relative to insurance, pre-need matters
- Review of premium rates imposed by life and non-life companies, mutual benefit associations; statistical reports of adjusters to determine compliance with established standards.
- Adjudication of claims and complaints involving loss, damage or liability incurred by an insurer under any kind of policy or contract of insurance or surety ship;
- Review and approval of all life and non-life policies, pre-need, and HMO plans before sale to prospective clients.
REGULATED ENTITIES
- Life and Non-life Insurance Companies
- Pre-Need Companies
- Health Maintenance Organization (HMOs)
- Mutual Benefit Associations
- Accredited Actuaries
- Brokers
- Resident Agents
- Insurance Adjusters
