The Philippines Section 5: Money and Banking
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ARMY SERVICE FORCES MANUAL M365-5 Civil Affairs CIVIL AFFAIRS HANDBOOK THE PHILIPPINES SECTION 5: MONEY AND BANKING OF RESTRICTED MATTER. The information SDISSEMINATION gven characteristics of restricted material may be contained in restricted documents and the essential to any person known to be in the service of the United States and topersons of undoubted loyalty and Mar 44.)tothe work, but will not be communicated to the public5 discretionwho are cooperating in Government 44.) presecp yatole also par.23b, AR 380-5,15 IMar public relations agencies. (See press except by authorized military HEADQUARTERS, ARMY SERVICE FORCES, DECEMBER 1944 ARMY SERVICE FORCES MANUAL M 365-5 Civil Affairs CIVIL AFFAIRS HANDBOOK - THE PHILIPPINES SECTION 5: MONEY AND BANKING Headquarters, Army Service Forces, December 1944 DISSEMINATION OF RESTRICTED MATTER. The information contained in restricted documents and the essential characteristics of restricted material may be given to any person known to be in the service of the United States and to persons of undoubted loyalty and discretion who are cooperating in Government work, but will not be communicated to the public or to the press except by authorized military public relations agencies. (See also par. 23b, AR 380-5, 15 Mar 44.) United States Government PrintingOffice, Washington, 1944 NUMBERING SYSTEM OF ARMY SERVICE FORCES MANUALS The main subject matter of each Army Service Forces Manual is indicated by consecutive numbering within the following categories: M1- M99 Basic and Advanced Training M100-M199 Army Specialized Training Program and Pre-Induction Training M200-M299 Personnel and Morale M300-M399 Civil Affairs M400-M499 Supply and Transportation M500-M599 Fiscal M600-M699 Procurement and Production M700-M799 Administration M800-M899 Miscellaneous M900-up Equipment, Mat6riel, Housing and Construction HEADQUARTERS, ARMY SERVICE FORCES WASHINGTON 25, D. C., 28 December 1944 Army Service Forces Manual M 365-5, Civil Affairs Handbook, Philippine Islands-Money and Banking, has been prepared under the supervision of the Provost Marshal General and is published for the information and guidance of all concerned. [SPX 461 (21 Sep 43)] BY COMMAND OF LIEUTENANT GENERAL SOMERVELL: W. D. STYER Major General, General Staff Corp, :hief of !Std OFFICIAL: J. A. ULIO Major General The Adjutant General INTRODUCTION Purposes of the Civil Affairs Handbook The basic purposes of civil. affairs officers are (1) to assist the Commanding General by quickly establishing those orderly conditions which will contribute most effectively to the conduct of military operations, (2) to reduce to a minimum the human suffering and the material damage resulting from disorder, and (3) to create the conditions which will make it possible for civilian agencies to function effectively. The preparation of Civil Affairs Handbooks is a part of the effort to carry out these responsibilities as efficiently and humanely as possible. The Handbooks do not deal with plans or policies (which will depend upon changing and unpredict- able developments). It should be clearly understood that they do not imply any given official program of action. They are rather ready reference source books con- taining the basic factual information needed for planning and policy making. This study on Money and Banking in the Philippine Islands was prepared for the Military Government Division, Office of the Provost Marshal General by the Division of Research and Statistics, Board of Governors of the Federal Reserve System. Officers using this material are requested to make suggestions and criticisms indicating the revisions or additions which would make this material more useful for their purposes. These criticisms should be sent to the Chief of the Liaison and Studies Branch, Military Government Division, PMGO, 2807 Munitions Building, Washington 25, D. C. CIVIL AFFAIRS HANDBOOKS TOPICAL OUTLINE 1. Geographical and Social Back- 9. Labor ground 10. Public Works and Utilities 2. Government and Administration 11. Transportation Systems 3. Legal Affairs 12. Communications 4. Government Finance 13. Public Health and Sanitation 5. Money and Banking 14. Public Safety 6. Natural Resources 15. Education 7. Agriculture 16. Public Welfare 8. Industry and Commerce 17. Cultural Institutions This study on Money and Banking in the Philippine Islands was prepared for the Military Government Division, Office of the Provost Marshal General, by the Division of Research and Statistics, Board of Governors of the Federal Reserve System. TABLE OF CONTENTS PART I. MONEY AND BANKING IN 1941 Page Forew ord ................................... .................. ..................................................... .................. 3 1. C urrency .................................................................................................................................................... 4 (Notes and coins-Gold-Transfer of domestic funds) 2. Banking ................................. ............................................................................................................... 6 A. General Statement ...... ..... ........................................................................... 6 B . C om m ercial B anking............ ......................... ............................. ................................ 8 (Banking law-Banking control and regulation-Foreign banks-Trust corpor- ations-Bank taxes-Bank operations-Interest rates-Individual domestic banks: Philippine National Bank; Bank of the Philippine Islands; People's Bank and Trust Company; Philippine Trust Company; Philippine Bank of Commerce; Philippine Bank of Communications; China Banking Corporation; Bank of the Commonwealth-Branches of foreign banks: Hongkong and Shang- hai Banking Corporation; National City Bank of New York; Chartered Bank of India, Australia, and China; Yokohama Specie Bank; Nederlandsch Indische Handelsbank; Bank of Taiwan) C. Agricultural Credit...... .............................. ..... 19 (Agricultural and Industrial Bank: Funds subject to investment by the Agricul- tural and Industrial Bank; Rural banks; Rural credit associations) D . Savings and M ortgage Banking ....................................................................................... 23 (Private incorporated banks: Monte de Piedad y Caja de Ahorros; Banco Hipo- tecario de Filipinas-Building and loan associations-Philippine Postal Savings Bank) 3. Manila Stock Exchange....... ................................... 25 4. Insurance Companies .................................................................................... 26 (Insurance law-Insurance business: Life insurance; Fire insurance; Marine Insur- ance; Miscellaneous insurance) PART II. WARTIME DEVELOPMENTS 1. General Statement ........................................................... ................................... 31 2. Currency and Central Banking ................................................................... ........ ................................. 31 (Currency of the Commonwealth-Currency under the Japanese-Gold-Central bank-The purchasing power of the Peso-Counter-inflationary measures--Domestic transfers of funds-Foreign funds control under the Commonwealth-Foreign ex- change control under the Japanese) 3. Banking .......................................... ................................................................................ ............ ...... 35 (Deposit restrictions--Bank operations-Philippine National Bank branches-Liqui- dation of foreign banks-Interest rates-Bank control-Building and loan associations -Agricultural credit-Postal savings system) 4. Insurance Companies ................. ................ ................... ....... 39 SUMMARY The following report is divided into two principal Philippines was the grant of an overdraft secured sections, dealing with (I) the money and credit sys- by a "quedan," which was a pledge of stored com- tem in 1941, and (II) wartime developments. modities without transfer of title and its value de- Part I gives a detailed description of the currency pended largely on the good faith of the borrower. and banking institutions in the Philippine Islands There was little investment banking in the Philip- prior to the Japanese occupation. Enough back- pines other than that done by the government insti- ground information has been included to make clear tutions; indeed, aside from mining, sugar cultivation, the development of the financial structure of the and a few other fields, capital was represented chiefly Commonwealth, and the setting in which it operated. by government corporations. Part II describes wartime changes insofar as they One of the most persistent and important prob- may be ascertained from available information. This lems in the Philippines was that of agricultural is of a fragmentary and unreliable character, and credit which in turn grew partly out of the land the contents of this section must be accepted with tenure, agricultural production, and marketing sys- reserve. tems. Credit facilities were available to large land- owners but the bulk of the farming population was Part I sniall producers seeking loans of 50 P to 200 P. This business was unattractive to commercial banks, and The economy of the Philippine Islands is pre- the credit cooperative system, dominantly although encouraged agricultural and, except ,for the financ- by the Government, had been ineptly managed and ing of foreign trade, the credit structure in 1941 was failed to meet the need. The