banking finance

DOF won’t withdraw pending ‘sin’ tax bill

November 25, 2019

THE Department of Finance (DOF) will not withdraw its proposal seeking to increase “sin” taxes on alternative tobacco products despite President Duterte’s pronouncement banning the public use and importation of vapes and electronic cigarettes.      Finance Secretary Carlos G. Dominguez III said that legislative deliberation on proposed higher excise taxes on e-cigarettes and vape products should continue in the Senate as they await the President’s executive order (EO)on the ban.      “We are awaiting the EO on this matter from the Office of the President. In the meantime, we urge the legislature to pass the measure that is pending their approval,” Dominguez told reporters in a mobile phone message late Wednesday when asked if the DOF will still push for higher taxes on e-cigarettes and vapes.      President Duterte recently directed authorities to ban the use of vapes and e-cigarettes in public as well as their importation, saying “it is toxic, and government has the power to issue measures to protect public health and public interest.”      Last week, the Department of Health (DOH) reported the first case of e-cigarette or vaping-associated lung injury (EVALI) in Visayas.      In recent months, a spike in the number of cases of EVALI has also been seen in the United States, with over 2,000 cases reported, and 39 people having lost their lives.      Earlier, both the DOF and DOH said that it was better to regulate the use of vapes and e-cigarettes in the country than imposing a blanket ban on these products.      According to the health and finance departments, a total ban may just force vapes and e-cigarettes onto the black market, where the products would be harder to control by the government.      President Duterte had endorsed higher taxes on alternative cigarettes and alcoholic beverages, or Senate Bill No. 1074, as his urgent measure that needs to be passed by Congress before yearend and implemented beginning January 2020.      In his letter to the Senate leadership, President Duterte sought the swift passage of the bill “to address the urgent need to generate additional revenue to support the effective implementation of the Universal Health Care Act and to further protect the right to health of the people.”      SB-1074 aims to align the tax rate of heated tobacco and vape with traditional cigarettes at P45 beginning next year, P50 in 2021, P55 in 2022, and P60 in 2023, with five percent annual increases onwards.      The proposed bill also covers alcoholic beverages, which once passed into law will increase the tax on distilled spirits from P23.5 to P90 per proof liter with a 20 percent ad valorem tax beginning next year.      Meanwhile, fermented liquors and alcopops would be taxed at P45 per liter, up from P25.4. Finally, a specific tax of P600 would be imposed on sparkling wines, while a specific tax of P43 would be imposed on still and carbonated wines beginning 2020.      The DOF expects SB-1074 to raise at least P47.9 billion in incremental revenue for its first year of implementation.

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BPI targets 20% growth in sustainable loans in 2020

November 22, 2019

THE Bank of the Philippine Islands (BPI) is targeting a 20% growth in its sustainable loan portfolio by next year.      On the sidelines of a company event on Friday evening, BPI President and CEO Cezar P. Consing said the bank is looking to grow its sustainable loan book, which currently accounts for 10% of the total loan portfolio.      “What we’re trying is to improve our ratio… 10% of our loan book is sustainable and our renewable to non-renewable (ratio) is 50-50%, more or less. That 10% has to grow and the 50-50 has to overtime swing in favor of renewables but this takes time,” Mr. Consing told reporters.      BPI Head of Corporate Credit Junie Veloso said that the Ayala-led bank is targeting to increase its P130-billion sustainable financing portfolio by 20% next year.      “For the renewable energy and sustainable portfolio, it’s P100-P150 billion. Our target is to grow that by 20% next year. This is a long-term vision. Moving forward, we want to become more sustainable by pushing for sustainable financing,” Mr. Veloso said on the sidelines of the bank’s Sustainable Development Finance launch on Friday.      The bank’s Sustainable Energy Finance (SEF) portfolio has cumulative availed loans of over P130 billion as of June, majority of which or 63% are classified as renewable energy, while the remaining fall under energy efficiency (21%) and climate resilience (16%), according to Jo Ann B. Eala, head of sustainable development finance at BPI.      “We have a total of 330 projects funded already, almost half of that goes to energy efficiency, which refers to projects that bring down electricity consumption. You bring down electricity consumption and increase efficiency first, before you go to the sexier renewables,” Ms. Eala said during the same event.      However, Mr. Veloso said the bank’s funding has always been available but there is a lack of eligible projects.      “Our problem is less our desire to grow it but the availability of financeable projects. Capacity (of renewables) are smaller as compared to fossils like coal plants which are much bigger. Hopefully we can find those small ones so we can hit our growth target… Typically, when we say renewables, malaki na ang 50 megawatts for a single project (50 megawatts is relatively big),” he explained.      “Remember, we can only lend to projects that are there, the projects have to be there. If not, there’s nothing that we can do. It takes a while to develop them to the point that they are financeable,” Mr. Consing said.      While the bank is boosting its support to renewable energy, BPI Head of Corporate Banking John C. Syquia said that the bank is also pushing for energy conservation, arguing that “even if it were clean energy, you also want to use less of it”.      In September, the lender raised $300 million in ASEAN green bonds, a drawdown from it medium-term note (MTN) program to finance eligible projects under its Green Finance Framework.      BPI’s Green Finance Framework was launched in June, providing guidelines for any green bonds or loans issued by the bank, including the evaluation and selection of eligible projects, management of proceeds, and reporting, among others.      The Ayala-led bank’s net income stood at P22.03 billion in the first nine months of the year, 29.5% higher than the P17.01 billion posted a year ago.

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Bangko Sentral readies new reforms for 2020

November 22, 2019

THE Bangko Sentral ng Pilipinas (BSP) is set to implement two new regulations targeted to further protect banks’ operational risks by 2020.      In her speech during the Chamber of Thrift Banks (CTB) membership meeting in Makati City Tuesday, BSP Deputy Governor Chuchi Fonacier said they are scheduled to implement by June next year the supervisory assessment framework or SAFr in lieu of the CAMELS rating.      CAMELS is an international rating system that checks on banks’ capital adequacy, management capability, earnings, liquidity, and sensitivity.      Fonacier said SAFr will have a four-point rating on banks’ overall health, with 4 as the highest and 1 as the lowest, unlike CAMELS’ 5 ratings.      “It features an assessment that is business model-centric that will shape the BSP’s supervisory intervention and influence, the frequency of examination,” she said.      Fonacier said they have conducted a parallel run with a major bank for SAFr implementation, but the results of the comparison with CAMELS are still being finalized.      She explained SAFr is forward-looking assessment while CAMELS’ is historical thus, there are some developments after the assessment period that are not incorporated vis-à-vis the bank’s ratings.      In an interview by journalists after the event, Fonacier said banks should be able to properly assess the risks and prepare for these because this is part of risk management.      “This is reputation risk management, meaning they should be very conscious of what are the potential threats to the reputation of the bank,” she said.      Fonacier further said SAFr is a holistic assessment of a bank’s overall health since it also checks on the various kinds of risks that banks face.      Under this system, which has yet to be approved by the Monetary Board (MB), an assessment will be made every two years, unlike CAMELS that is done annually.      The BSP is set to implement in the second quarter next year the risk-based pricing framework that will weigh “risks associated with lending and financing are adequately compensated.”      “Borrowers with lower risk profile should be charged with lower interest rates and vice versa,” she said.      Fonacier said they have released a draft circular on the system, which industry players and some small banks said maybe “tedious” to implement. (PNA)

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DBP installs ATMs in underbanked Palawan towns

November 4, 2019

In support of the national government’s efforts to promote greater financial inclusion, state-owned Development Bank of the Philippines (DBP) recently installed offsite automated teller machines (ATMs) in the underbanked municipalities of Quezon and Narra in Palawan, a top official said.      President and chief executive officer of DBP, Emmanuel Herbosa, said in a news release issued on Wednesday that the installation of the ATMs mirrors the bank’s commitment to promote financial inclusion, especially in underbanked and unserved areas of the country.      “These newly-installed ATMs will provide 24/7 electronic banking services to nearly 200,000 residents of the municipalities of Quezon and Narra, Palawan and the neighboring unbanked town of Rizal,” hesaid.      While classified as first-class municipalities, both Narra and Quezon, Palawan are underbanked with only two rural banks operating in these areas.      These towns are also more than two hours away from the provincial capital, Puerto Princesa City. (PR)

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ADB support to PH to reach record high in 2020–2022

November 4, 2019

THE Asian Development Bank’s (ADB) sovereign lending for the Philippines is expected to reach $9.1 billion between 2020 and 2022, as the government seeks to invest more in much-needed infrastructure and pro-poor projects that will merge rural areas into urban growth centers.      The indicative pipeline is in line with the priorities identified in ADB’s country partnership strategy.      In the Philippines Country Operations Business Plan (COPB) 2020–2022, ADB said it will invest 59.5 percent of its three-year sovereign lending program in transportation projects, such as railways, bridges, road networks, and elevated pedestrian walkways.      The rest of its financial support will be devoted to the social sector, agriculture, public sector management, and sustainable water and urban development.      “This latest Country Operations Business Plan reflects ADB’s strong commitment to supporting the Philippines’ efforts to sustain inclusive economic growth, create business and job opportunities in the regions, and widen the reach of the government’s education, health, and social protection programs,” ADB Country Director for the Philippines Kelly Bird said in a statement.      ADB plans to finance projects and programs worth at least $2.5 billion annually in 2020 and 2021, matching the record high of $2.5 billion in sovereign lending to the Philippines expected by the end of the year.      In comparison, ADB’s annual lending from 2008–2018 averaged about $800 million.      Half of ADB’s 2019 assistance program will fund the first tranche of the Malolos–Clark Railway Project, one of the government’s big-ticket infrastructure projects under its “Build, Build, Build” (BBB) program.      It is also the largest ADB project financing to date, worth $2.75 billion in total.      Contracts for civil works for the project are expected to be awarded before the end of the year and construction work may begin in the second quarter of 2020.      ADB is preparing additional financing this year for the Infrastructure Preparation and Innovation Facility to support detailed engineering designs and feasibility studies for the government’s priority projects under the BBB program.      This will ensure a steady flow of investments into much-needed infrastructure projects that are viable and innovative.      In 2020, transportation and infrastructure will still make up the majority of ADB’s financial support to the Philippines. This includes the South Commuter Railway Project that will connect Manila to Calamba and the EDSA Greenways Project, which will construct elevated walkways in four high density traffic locations along the main EDSA highway in Metro Manila.      The Integrated Flood Risk Management Sector Project is also being prepared for 2020 to finance up to six river basins across the country, and the Metro Manila Bridges Project will construct three bridges to help ease traffic conditions in the metropolis.      ADB’s 2020 program will also include financing for the Expanded Social Assistance Project, which will build on a decade of ADB assistance to the government’s conditional cash transfer program and support for the government’s agricultural competitiveness program.      ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to USD21.6 billion.      Established in 1966, it is owned by 68 members—49 from the region. (PR)

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BSP invests $150-M in BIS Green Bonds

November 4, 2019

AS part of foreign exchange reserve management, the Bangko Sentral ng Pilipinas (BSP) is initially investing $150 million in the open-funded Green Bonds managed by the Bank for International Settlements (BIS).      “The Philippines is one of the earliest subscribers (to the BIS green bond fund initiative). It’s now part of the GIR (gross international reserves),” BSP Governor Benjamin E. Diokno said Tuesday. Of the $86 billion GIR, $15.50 billion are reserve assets deposited overseas including in the BIS, and about $6.50 billion are foreign currency assets including bond investments in the BIS.      The BIS-managed Green Bonds, an investment pool facility, is the BSP’s signal that it is embarking on the “greening” of the finance sector, or green financing in support of an environmentally responsible finance and investment practices in the hope that it can convince the market to make investments that “promote climate- resilient, green, and sustainable growth,” according to Diokno.      Diokno said last month that investing in green bonds is one of the BSP’s GIR diversification management plans. The independent central bank is currently a member of the BIS’s advisory committee to for the green bond fund initiative.      “Climate change appears to be inevitable, and the financial sector has a significant role to play in pursuing sustainable and inclusive growth in the global economy, the environment, and society. The BSP is one with the BIS in its broader commitment to support environmentally responsible finance and investment practices,” said the BSP in a statement. Diokno disclosed earlier this month that the BSP is preparing a circular on sustainable finance policy framework. He said that proposed is a regulatory framework that includes these main provisions: that banks are expected to integrate environmental and social governance (ESG), and sustainability principles in their strategic direction, as well as in their corporate governance and risk management frameworks; that banks shall conduct scenario analysis and stress testing of its business exposures to assess their vulnerabilities over several ESG scenarios; and that banks will be required to disclose their sustainability agenda in their annual reports, including risk appetites in the ESG field.      Diokno said the coming circular is just one of many circulars on sustainable finance. He explained that the BSP has a two-pronged approach to promoting sustainable finance — capacity building and awareness campaigns, and enabling regulations.      “We have to be even more proactive in green financing, especially so that the Philippines is cited as among the highly vulnerable countries to the effects of climate change,” said Diokno.      Presently the BSP is an active participant in the ASEAN Task Force on the Roles of Central Banks in Addressing Climate and Environment-Related Risks and a member of the International Finance Corporation-supported Sustainable Banking Network. It is also working with the British Embassy in Manila for the Low Carbon Energy Programme of the UK Prosperity Fund, according to Diokno.

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