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Non-Bank Financial Institutions

Non-bank financial institutions (NBFIs) are financial institutions that do not have a full banking license and cannot accept deposits, but facilitate alternative financial services like investment, risk pooling, and money transmission. In the Philippines, NBFIs are composed of non-banks with quasi-banking functions, like investment houses and financing companies, and non-banks without quasi-banking functions, such as credit card companies, pawnshops, and securities dealers. NBFIs play an important role in the financial system by supplementing banks and promoting competition, but a lack of effective regulation can also exacerbate fragility and instability.

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Chriza Altizon
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3K views11 pages

Non-Bank Financial Institutions

Non-bank financial institutions (NBFIs) are financial institutions that do not have a full banking license and cannot accept deposits, but facilitate alternative financial services like investment, risk pooling, and money transmission. In the Philippines, NBFIs are composed of non-banks with quasi-banking functions, like investment houses and financing companies, and non-banks without quasi-banking functions, such as credit card companies, pawnshops, and securities dealers. NBFIs play an important role in the financial system by supplementing banks and promoting competition, but a lack of effective regulation can also exacerbate fragility and instability.

Uploaded by

Chriza Altizon
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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NON-BANK FINANCIAL INSTITUTIONS PREPARED BY : CHRIZA ALTIZON

(NBFI)
NON-BANK FINANCIAL INSTITUTIONS
(NBFI)
“A nonbank financial institution (NBFI) is a financial institution that does not have a full
banking license and cannot accept deposits from the public. However, NBFIs do
facilitate alternative financial services, such as investment (both collective and
individual), risk pooling, financial consulting, brokering, money transmission, and check
cashing. NBFIs are a source of consumer credit (along with licensed banks). “
(World Bank)

SOURCE : BSP (http://www.bsp.gov.ph/banking/glossary.asp)


BANKS

NON-BANK FINANCIAL INSTITUTIONS


(NBFIs)
OFFSHORE BANKING UNITS (OBUs)
NON-BANK FINANCIAL INSTITUTIONS
(NBFI)

Non-bank financial institutions(NBFIs) are financial institutions 0%

supervised by BSP. These do not have a full banking license


but they facilitate bank-related financial services, i.e., 42%
investment, risk pooling, contractual savings and market
brokering. In the Philippines, NBFIs are composed of the non-
58%
banks with quasi-banking functions and non-banks without
quasi-banking functions. (BSP)

Philippine Financial System 2018


SOURCE : BSP (http://www.bsp.gov.ph/downloads/Publications/2018/StatRep_1Sem2018.pdf)
NBFI

WITH OUT WITH QUASI


QUASI BANK BANK
FUNCTION FUNCTION

 Credit Card Companies (CCC)


 IH without QB functions
 FC without QB functions  Non-stock Savings and Loans  Investment Houses (IH)
 Securities Dealers Associations (NSSLA)  Financing Companies
 Brokers (SDB)  Investment Companies (IC) (FC)
 Pawnshops  Venture Capital Corporations (VCC)
 Lending Investors (LI)  Government NBFI (GNBFI)

SOURCE : BSP (http://www.bsp.gov.ph/banking/glossary.asp)


WITH QUASI BANK FUNCTION
WITHOUT QUASI BANK FUNCTION
BANK VS NBFI

BANKS NBFIs
DEFINITION Banking is acceptance of NBFI cannot accept demand
deposits, withdraw able by deposits
cheque or demand;
SCOPE OF BUSINESS Limited Various types of business
regarding financial activities.
NEED FOR A LICENSE Tightly controlled and quite Easy to get registered.
difficult to get a license to
operate.
ROLE OF NBFI IN FINANCIAL SYSTEM
 NBFIs supplement banks in providing financial services to individuals and firms
(esp. SMEs, household sector)
 Promote competition within the financial services industry (unbundling, targeting,
and specializing)
 Help State and Local government
 Provide liquidity
 Lowers interest rates

SOURCE : WORLD BANK (http://www.worldbank.org/en/publication/gfdr/gfdr-2016/background/nonbank-financial-institution)


ROLE OF NBFI IN FINANCIAL SYSTEM
 Protect economies from financial shocks and recover from those shocks.
 Reduce risks
 Investment of funds
 Create new assets and liabiities

SOURCE : WORLD BANK (http://www.worldbank.org/en/publication/gfdr/gfdr-2016/background/nonbank-financial-institution)


WEAKNESSES IN NBFI REGULATION
In countries that lack effective regulations, non-bank financial institutions can exacerbate
the fragility of the financial system.

Fuel a credit bubble and asset overpricing, followed by asset price collapse and loan
defaults

Perceived elevated likelihood of market instability

Investor confidence is low

Financial sector is inefficient and lacks liquidity


SOURCE : WORLD BANK, ADB (https://www.adb.org/sites/default/files/linked-documents/38276-02-phi-ssa.pdf)

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