banking finance

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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GSIS to offer Php10k educational subsidy to 10,000 children, dependents of members

October 21, 2019

State pension fund Government Service Insurance System (GSIS) is set to open a yearly Php100 million educational subsidy program for children or dependents of its low-income members through the GSIS Educational Subsidy Program (GESP).      “In support of the social development policy of President Duterte to provide wider access to quality college education to the marginalized sector, GSIS aims to augment the means of its  low-income members in sending their children or dependents to college through the grant of  a P10,000 yearly allowance through GESP. It  complements Republic Act No. 10931 or the 2017 Universal Access to Quality Tertiary Education which provides free tuition and miscellaneous fees to enrolees of state colleges and universities. To extend aid to more recipients, we are offering GESP to a wide number of members. We will select 10,000 children or dependents of  members with the lowest annual basic salary from among the applicants nationwide, ” GSIS Chairman and  concurrent Acting President and General Manager  Rolando Ledesma Macasaet said.      The pension fund chief said that the program is open to all active GSIS members with permanent employment status who are occupying salary grade 24 (or its equivalent) and below; with updated GSIS premium payments and no unpaid or underpaid loan amortization for more than three months for the duration of the grant; and have college student dependents in any year level who have been  accepted in or taking up any four- or five-year course in any university or college recognized by the Commission on Higher Education (CHED).        “The grantees will continue to receive educational subsidy until they finish their college course for as long as they meet the scholastic requirement of 80% general weighted average with no failing grade or incomplete mark incurred in any subject within the preceding semester or term of the academic year,” Macasaet added.      GSIS will release the allowance to the students through electronic crediting to their account at the Land Bank of the Philippines  that will be opened by GSIS for the purpose.      Interested members may apply by submitting the GESP application form that may be downloaded from the GSIS website (www.gsis.gov.ph), dependent’s birth certificate issued by the Philippine Statistics Authority, and certificate of employment of the member and/or certified true copy of service record duly signed by the Agency Authorized Officer of the member’s employer.      In addition, they should submit an affidavit stating that the student is not a recipient of any other educational or financial assistance program (including the GSIS Scholarship program) for the duration of the grant, a certification from the school stating that  that the student is accepted or enrolled during the current academic year along with the student’s  course, year level and the duration of the course, and a report card or school certification stating that the general weighted average of the applicant’s dependent is at least 80% with no failing grade and incomplete mark incurred in any subject within the preceding semester or term of the academic year.      Application forms, requirements, and terms and conditions are available online through the GSIS website, www.gsis.gov.ph.      Interested members may email gsisscholarship@gsis.gov.ph or call (02) 8-976-4970 for inquiries or clarifications.

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Bangko Sentral exec cites needs to further enhance capital market

September 28, 2019

THE need to introduce further improvements to the Philippines’ capital market has risen especially in recent years to help address the dovish interest rate outlook and slower global growth, among others.      Reliance on banks as major fund source for corporates should be lessened. Instead, businesses should have greater access to the capital market.      Bangko Sentral ng Pilipinas (BSP) Assistant Governor Johnny Noe Ravalo, in a briefing on the release of the Financial Stability Report for the first half of 2018 until 2019 at the central bank Wednesday, said members of the Financial Stability Coordination Council (FSCC) has recommended three interventions to ensure financial stability in the domestic economy.      These measures are namely fewer but deeper benchmark tenors, indexed bonds, and tenor-based pricing.      Revelo said these proposed interventions are very timely because interest rates are falling and so it financing.      In an interview by journalists, he explained that reducing dependence on banks for funding cannot be done overnight since an economy needs an efficient capital market first to really change the market landscape.      He pointed out that an efficient capital market reflects fair prices of risks and fair price of risks for a particular tenor, which investors can compare.      “So by giving out fair prices, tenor-based, you’re allowing people choices. Do I borrow one-time seven years or do I borrow five years and then borrow two years after the fifth year? Those are the decisions that have to be made,” he said.      To date, some listed companies are now issuing their bond debt papers, thus, Ravelo said the change will not start from zero because there is already a market for these instruments.      “What we’d like to do going forward is polish whatever we have right now so that a lot more of the SMEs (small and medium enterprise) can go to the capital market instead of just going to the banking industry,” he said.      The BSP executive explained that while there is nothing wrong from borrowing from banks, these financial institutions also get part of their funds from deposits, which account holders can withdraw anytime they want.      This, he pointed out, “comes in a market friction cost and market development cost.”      “Whereas compared to the capital market when an issuer says I’m raising 10-year money those who buy the 10-year bond are saying we have 10-year money. So the tenor mismatch is removed,” he said.      “From that alone that’s going to be a massive improvement already. So it’s the next step but just to be absolutely clear we’re not starting from zero,” he said. “That’s also why we are growing by six percent because we have a financial market that allows for the economic activities to be financed,” he added. (PNA)

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