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
DEFINITION Banking is acceptance of
deposits, withdraw able by
cheque or demand;
SCOPE OF BUSINESS Limited
NEED FOR A LICENSE Tightly controlled and quite
difficult to get a license to
operate.
NBFIs
NBFI cannot accept demand
deposits
Various types of business
regarding financial activities.
Easy to get registered.
 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)