banking finance

DOF chief sees ‘pretty good’ Q2 GDP growth

July 23, 2021

IMPROVEMENT in the employment situation is expected to make the country’s second-quarter economic growth “pretty good”, Finance Secretary Carlos Dominguez III said.       In an interview over Bloomberg TV on Wednesday, Dominguez declined to give specific figures, saying he is “not big on predictions” but cited the drop in unemployment and underemployment last May.       “The fact that we’ve created about two and a half million new jobs over the last year seems to be good signs for us,” he said.      Philippine Statistics Authority (PSA) data show that the labor force participation rate last May improved to 64.6 percent from the previous month’s 63.2 percent.       Employment rate increased to 92.3 percent in May from last April’s 91.3 percent, while the underemployment rate declined to 12.3 percent from 17.2 percent.      Unemployment rate thus went down to 7.7 percent from 8.7 percent.      Authorities have attributed the increase in employment rate to the continued re-opening of the economy which allows more workers to land a job.       The second-quarter gross domestic product (GDP) report is scheduled to be released on August 10.       In the first three months of 2021, the country’s GDP posted a contraction of 4.2 percent, better than the -8.3 percent in the previous quarter.       Economic managers’ growth target for this year ranges between 6 percent to 7 percent, while it is 7 percent to 9 percent for next year and 6 percent to 7 percent for 2023-2024.       With the pandemic still expected to linger, Dominguez said it is important to continue to remain “fiscally responsible.”       “We want to make sure that we have enough resources to tackle any problems in the future, such as surges in the pandemic. We also want to make sure that we have enough money to protect our citizens and that is providing them with enough vaccines,” he said.       Dominguez said the government’s USD3-trillion borrowing program for this year, same as last year, would remain to be primarily sourced domestically at around 75 percent.      The balance would be tapped overseas “depending on the situation in the market”, he said.       “We’re keeping ourselves open to financing from domestic or international sources. And essentially it’s going to be the same amount,” he added.       To date, the government has issued around PHP150 billion (USD3 billion) worth of dual tranche, 10.5-year and 25-year US dollar-denominated bond; EUR2.1-billion multi-tranche, 4-year, 12-year, and 20-year global bonds; and JPY55 billion three-year zero-coupon fixed-rate yen-denominated Samurai bond.      Dominguez said these borrowings help finance government programs this year, including the procurement of vaccines against the coronavirus disease 2019 (Covid-19).       He said nearly 30 million doses of vaccines have arrived in the country as of July 21 while around 70 million doses are expected in the third quarter and around 55 million doses in the last quarter.  “That’s certainly enough to vaccinate 100 percent of our adult population,” he said, adding the vaccination program is the government’s primary method of fighting the virus.  (PNA)

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BSP sees more foreign investments in digital banking

June 28, 2021

THE Bangko Sentral ng Pilipinas (BSP) is seeing more investment inflows from foreign banks for digital banking in the country.      Governor Benjamin Diokno said in a press conference Friday that since the start of the country's digital banking framework in December 2020, the central bank anticipates growth in foreign investment in digital banking.      “In fact, a number of new and incumbent foreign banks have expressed intent to establish a new digital bank or convert their existing license to a digital bank license,” Diokno said.      BSP Policy and Specialized Supervision Sub-Sector managing director Lyn Javier said the central bank has received queries and interest from foreign banks in Europe and Asian regions.      At least three banks have completed phase one of the licensing process for digital banks, Javier said, adding that the BSP will continue to evaluate other applications upon submission of complete documents.      Moreover, Diokno said aside from opportunities in digital banking in the Philippines, foreign banks have huge prospects in partnering with the private sector in promoting investments in infrastructure and sustainable finance.      “Foreign banks have the capacity to pool funds to finance infrastructure projects in key sectors such as renewable energy, low carbon transport, sustainable water management, and sustainable waste management,” the BSP chief said.      He added that foreign banks have financing opportunities for big-ticket and long-term projects under the Build Build Build program.      There is also a growing acceptance for green and sustainable finance in the country, Diokno said.      “With global market expertise, foreign banks can facilitate the underwriting of green, social, or sustainability bonds or develop innovative sustainable finance instruments. Given their global market expertise, foreign banks can facilitate underwriting of green, social, or sustainability bonds or finance infrastructure projects in key sectors such as renewable energy and low carbon transport,” he said.      With the liberalization of the entry of foreign banks, there are now 29 foreign banks operating in the country, of which, 12 are included in the 2020 list of Global Systemically Important Banks.      Diokno said that as of end-April 2021, the combined assets of these foreign banks amounted to PHP1.4 trillion, or 7 percent of the banking system’s total assets.      Deposits in foreign banks grew by 43.4 percent since the liberalization of the banking sector in 2014, “indicating trust and confidence in foreign banks even amid the pandemic”, Diokno added.      He said investment activities of these banks also reached PHP377.5 billion as of end-April this year. (PNA)

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Big banks fail to meet MSME credit quota

June 2, 2021

BIG AND thrift banks failed to hit the quota for small business loans required by law in the first three months of 2021, data from the Bangko Sentral ng Pilipinas (BSP) showed.      Loans extended by these banks to micro-, small-, and medium-sized enterprises (MSME) amounted to P448.458 billion in the January to March period or just 5.24% of their total loan portfolio of P8.564 trillion.      This was also 16% lower than the P534.767 billion in loans they extended to the sector in the same period in 2020.      Lenders are mandated by the Republic Act 6977 or the Magna Carta for MSMEs to allocate 10% of their credit portfolio for small businesses to boost the sector — 8% for micro and small enterprises (MSEs) and 2% for medium-sized enterprises.      However, banks have long opted to incur penalties for noncompliance instead of taking on the risks associated with lending to small businesses.      Broken down, MSE loans extended by banks amounted to P174.925 billion in the first quarter, which was just 2.04% of their total loan portfolio and well below the 8% quota.      On the other hand, lending to medium-sized enterprises stood at P273.533 billion in the period, equivalent to 3.19% of these banks’ credit book and beyond the 2% minimum requirement by law.      Based on the type of bank, BSP data showed universal and commercial banks disbursed P113.748 billion in credit to MSEs, equivalent to only 1.47% of their P7.719-trillion loan portfolio.      Meanwhile, their lending to medium-sized enterprises hit P227.447 billion or 2.95% of their loan book.      Thrift banks were also unable to meet the quota for MSE credit as they only extended P31.498% or 4.36% of their P722.079-billion loan portfolio to the sector.      However, these lenders went beyond the credit quota for medium enterprises as their loans to the sector hit P32.027 billion or 4.44% of their portfolio.      Meanwhile, rural and cooperative banks extended loans worth P29.679 billion to MSEs, equivalent to 24.11% of their P123.077-billion credit book, well above the amount required by law. These banks’ lending to medium enterprises hit P14.059 billion or 11.42% of their loan portfolio.      To help prop up the MSME sector during the coronavirus pandemic, the central bank last year allowed banks to count MSME loans as alternative reserve compliance. Loans extended to the sector likewise were also given reduced credit risk weight.      The BSP has also been working with the Japan International Cooperation Agency for a credit risk database project meant to help banks evaluate the creditworthiness of small businesses.

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BSP sees May average inflation at 4.4%

June 2, 2021

PHILIPPINE monetary officials eye rate of price increases to average at 4.4 percent for May 2021, with the range projected between 4-4.8 percent, driven by higher meat prices.       Aside from higher meat prices, the elevated domestic petroleum prices, as well as uptick in power rates in areas being serviced by the Manila Electric Company (Meralco), are also expected as upside risks to the inflation rate in the fifth month this year, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno told journalists in a Viber message on Monday.      However, Diokno said these factors are seen to be countered by the drop in the prices of rice, vegetables, and fish due to improved supply conditions along with the appreciation of the peso.      “Moving forward, the BSP will remain watchful of economic and financial developments to ensure that the monetary policy stance remains consistent with the BSP’s price stability mandate,” he added.       Last April, inflation was steady at 4.5 percent relative to the previous month’s level.       Average inflation in the first four months this year stood at 4.5 percent, above the government’s 2-4 percent target band until 2024.      Inflation breached the government’s target band last January when it accelerated to 4.2 percent from last December’s 3.5 percent.       Its highest so far this year was in February when it surged to 4.7 percent.       Monetary officials see an elevated inflation rate until the third quarter of this year but the full-year average is expected to be around 3.9 percent. (PNA)

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DOF exec cites need to further push for fiscal reforms

May 27, 2021

A DEPARTMENT of Finance (DOF) official has cited the need to further push for fiscal reforms, noting its benefits for the government and the people during the pandemic.      In an economic bulletin on Friday, Finance Undersecretary Gil Beltran said “the fiscal reforms adopted by the Duterte administration boosted the tax effort to its highest first-quarter level in history”.      “These reforms made the country one of the few emerging economies to maintain investment-grade rating and avoid a credit rating downgrade which would have pushed up interest rates and delayed nascent economic recovery,” he said.      He said the pandemic has increased the need for government to hike expenditures given the need to address the impact of the virus-induced crisis.      Bureau of the Treasury (BTr) data showed that government spending rose by 19.86 percent year-on-year in the first quarter this year to P1.017 trillion.      However, revenues by the national government fell by 8.73 percent during the same period to P696.5 billion.      This resulted in a budget gap of P321.5 billion, up 273.11 percent against the P86.2 billion deficit in end-March 2020.      Amid the drop in revenues, Beltran noted the rise in tax revenues during the same period.      Tax revenues jumped by 7.09 percent year-on-year in March this year to P190.1 billion while it rose by 0.87 percent year-on-year in the first quarter this year.      He attributed the first quarter results to the 0.18 percent year-on-year rise of Bureau of Internal Revenue’s (BIR) collection during the period and the 2.66 percent expansion in collections by the Bureau of Customs (BOC).      He said “other taxes which include motor vehicle taxes and forestry charges also rose by 10.8 percent” but “non-tax revenues declined by 50.6 percent as dividend remittances normalized after last year’s huge dividend remittances from GOCCs (government-owned and controlled corporations) as mandated by Bayanihan to Heal as One Act and Treasury income was reduced by lower interest rates.”      He said that while revenue effort fell by 1.14 percentage points to 16.03 percent from 17.16 percent in the first quarter of 2020 because of non-recurrent revenues, this was offset by the improvement in tax effort.      He said tax effort posted its record-high of 14.41 percent in the first quarter this year after it rose by 0.44 percentage points from 13.96 percent same period last year.      “Robust collections from BIR and BOC were boosted by the implementation of tax reforms,” he said.      He, thus, stressed the need for the government to “continue to adopt fiscal reforms, particularly tax reforms still pending in Congress, to sustain these fiscal gains.”      “Due to fiscal reforms, the country was able to fund the unprecedented fiscal requirements imposed by the pandemic and, at the same time, protect its strong macroeconomic fundamentals,” he added. (PNA)

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BSP tightens bank employee screening policies

May 10, 2021

THE Bangko Sentral ng Pilipinas (BSP) has adopted a more stringent and risk-focused screening policy for BSP supervised financial institutions (BSFIs) to ensure the banking sector’s integrity and improve operational risk management.      In a virtual briefing Thursday, BSP Governor Benjamin Diokno said around 7,500 names are currently in the watchlist of dismissed BSFI employees but clarified that the list does not cover those disqualified to work on banks alone.      With the issuance of Circular No. 1112, or the know-your-employee (KYE) rules, he said it will be hard to predict if there will be 100-percent compliance on the circular, adding “if there continues to be some bad behavior on the part of the workers, it (the list) will continue to increase.”      He said the regulator “subscribes to the principle that the ‘tone of good corporate governance should come from the top’ thus, the KYE rule will not only address fraud and irregularities due to weak operational risk management but also foster confidence in the banking system.      “People are the very heart of every institution, especially in banking which is built on trust. Robust know-your-employee procedures foster a stable banking system by weeding out unprincipled personnel who may cause reputational risk to a bank and the financial system,” he said.      Lawyer Florabelle Santos-Madrid, BSP Financial System Integrity Department director, said the central bank’s watchlist database is updated every time the central bank receives new information from banks regarding disqualification of certain individuals.      She said reports of bank employees’ participation in financial system-related crimes is among the red flags for the issuance of KYE rules.      “One of the primary reasons that we are tightening the rules on KYE is to prevent these cases from happening. So definitely, if there will be bank personnel involved in money laundering cases, that will be a red flag in terms of the robustness of their KYE processes,” she added during the same briefing. (PNA)

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