banking finance

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)

ADB cuts 2019, 2020 growth forecasts for PH

September 27, 2019

THE Asian Development Bank (ADB) has slightly reduced its economic growth forecast for the Philippines for the next two years amid a slowdown in the global economy and domestic investment, even as the country remains one of Asia’s best performers.      In an update of its flagship annual economic publication, Asian Development Outlook (ADO) 2019, the Manila-based multilateral bank revised its forecast for Philippine gross domestic product (GDP) growth to 6 percent in 2019 and 6.2 percent in 2020, against its previous forecast of 6.4 percent for both years.      In a press conference on Wednesday, ADB Country Director for the Philippines Kelly Bird attributed the downward revision to slowdown in global economy and in domestic investment in first half of the year caused mainly by the 2019 budget impasse.      “Public spending should regain traction for the rest of 2019, with the government committed to catching up with its spending plans, especially as new and larger infrastructure projects get underway,” he said.      Bird sees the recovery in public spending also boosting private consumption, which is currently well supported by steady overseas workers’ remittances, moderate inflation, and low unemployment.      The ADB said public expenditure next year is expected to provide a further boost to the economy amid the proposed 12-percent increase in the 2020 national budget, with higher spending particularly on infrastructure, social services, and income transfers to poor households.      “Public and private investment should regain traction as new and larger infrastructure projects get under way,” it added.      The multilateral bank said the outlook for exports remains weak in light of the slower-than-expected economic growth in major industrialized economies, which are among the Philippines’ largest export markets.      The country’s GDP growth rate averaged 5.5 percent in the first semester.      “Philippine economic growth is resilient despite weak external environment,” Bird said, noting that strong macroeconomic policy settings help build resilience.      The ADB further expects inflation to slow to 2.6 percent in 2019 and 3 percent in 2020, significantly lower than previous ADB forecasts, largely on improved domestic rice supplies following the lifting of quantitative rice import restrictions in February this year.      “That drop in inflation was due to better supplies of rice in the domestic market as a result of rice reforms and quantitative restrictions, but also as the monetary tightening last year starts to lower inflation expectations,” Bird said.      In the long term, Bird cited proactive policy reforms that are laying the foundation for higher growth, including the Tax Reform for Acceleration and Inclusion (TRAIN), Ease of Doing Business Act, and rice reforms, among others.      “Further relaxing restrictions on foreign investment and creating a national competition policy can also promote long term growth and more quality jobs,” he added. (PNA)

Land Bank to expand banking services in remotest provinces

September 4, 2019

THE Land Bank of the Philippines (LBP) will expand the coverage of its banking services by setting up additional satellite centers and deployment of mobile tellers in remotest and depressed provinces nationwide.      In an interview with the Philippine News Agency, LBP First Vice President for Strategic Planning Elcid Pangilinan said the bank has approved in principle the opening of over 250 banking outlets in an effort to strengthen and improve the financial infusion for un-banked areas.      The bank has targeted to complete the project in the next five years aimed at improving the urgent need for financial infusion in areas not being reached by the LBP.      Pangilinan explained the deployment of mobile tellers was in line with bank’s objective of educating people, specifically the farmers and fisherfolk in far-flung provinces, to appreciate the value of the bank.      He noted that majority of those in the farm and fisheries sector have not been exposed or introduced in rightful way of depositing and withdrawing their hard-earned money.      Citing the Bangko Sentral ng Pilipinas report, Pangilinan said there are about 533 unbanked provinces and municipalities and "it is our aim to reach out to these places and serve the people."      Of the approved over 250 places deprived of the banking services, the LBP branches will be set up in the northern part of Luzon, Visayas in its eastern part, and in western part of Mindanao.      While he did not divulge the amount which the bank will infuse in the two projects, Pangilinan assured that it has sufficient money to carry out its commitment, noting that LBP has been named as top four in terms of assets and deposits.      Pangilinan was one of the official representatives to the two-day meet on Reducing Disaster Risks Towards a Resilient Agricultural Sector hosted by the Southeast Asian Regional Center for Graduate Studies (SEARCA) here from Aug. 29 to 30, 2019. (Lulu R. Principe/PNA)

Diokno vows another rate slash for 2019

August 30, 2019

BANGKO Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said yesterday there will be another 25 basis points (bps) cut in the benchmark policy rates by the end of the year, completing a 75 bps interest rates reduction for 2019.      Diokno said he could not say as yet which would come first, the policy rate cut or the reduction in banks’ reserve requirement ratio (RRR). He reiterated that both actions are “live issues” and could come at any time.      “There’s another 25 bps (before the end of the year),” Diokno told a forum organized by the Economic Journalists Association of the Philippines on Tuesday. He cited the global monetary easing actions and continued benign inflation as factors for the impending cut.      Diokno said they will again reduce the RRR this year, on top of the 200 bps RRR cut they implemented in tranches in May, June and July. He however said that it may not be as much as another 200 bps cut, equivalent to P190 billion in fresh liquidity.      “We have another RRR cut this year but maybe not 200 bps (it could be) 150 bps,” said Diokno. When asked if like before, the policy cut will happen prior the RRR cut, he said – “we don’t know yet (because) it’s a live issue. It could be before the late September (Monetary Board) policy meeting. It could be after … we will just look at the data.”      The Monetary Board’s next monetary policy meeting is September 26. It will have two more after, on November 26 and December 12, for a total of eight policy meetings for 2019.      “As we are all aware, the specter of slowing global economic growth looms larger than ever on the horizon as protectionist policies and geopolitical tensions continue to dominate the global growth narrative,” Diokno told forum participants. “Greater global economic uncertainty may lead to higher risk aversion as international investors turn to safe-haven assets, resulting in volatility in our domestic financial markets. When this happens, this could have adverse consequences on our price and financial stability objectives, and ultimately on the country’s growth momentum.”      Since global growth risks may “further escalate” because of the US-China trade conflict, Diokno said that in response, “central banks around the world, including the Philippines, have responded by easing their respective policy rates to stimulate their domestic economies. In fact, some central banks have surprised the markets by reducing their rates by more than what was expected. This indicates that the global monetary policy easing cycle could gather momentum and last longer and deeper than previously anticipated.”      The BSP policy rate was reduced by 25 bps last May 9 and by another 25 bps last August 8 for a total of 50 bps. During its last policy meeting, the BSP further slashed its inflation forecast for 2019 to 2.6 percent from 2.7 percent, while the 2020 and 2021 estimate was 2.9 percent, still within the two-four percent government inflation target.      Diokno has said that third quarter inflation average will drop below two percent due to base effects. He is also hoping that the last quarter’s inflation average could be “much lower” than what their flow charts show because of lower global oil prices      Inflation rate averaged at 3.8 percent in the first quarter 2019 before falling to three percent in the second quarter. With the latest July inflation of 2.4 percent, the year-to-date inflation averaged at 3.3 percent.      Diokno said the decision to reduce interest rates last May 9 came from its assessment that price pressures have continued to ease and that inflation expectations have also moderated further.      The main factors that contributed to the BSP’s benign inflation outlook and the revision of the forecasts came from the continuing relaxation of food price pressures.      Last year, the BSP raised interest rates by 175 bps to curb high inflation at the time, because of higher oil and rice prices. Inflation peaked at 6.7 percent in September and October.

BSP cuts TDF offering for next week

August 30, 2019

THE Bangko Sentral ng Pilipinas (BSP) will offer lower volume during the term deposit facility (TDF) auction on August 28.      In an advisory, the central bank said a total of P80 billion will be offered next week, lower than the P100 billion this week.      Specifically, the seven- and 14-day facilities will be offered for P20 billion each, while the 28-day offering is P40 billion.      During the auction on Thursday, a day late due to the holiday last Wednesday, the six-day facility was offered for P40 billion but was undersubscribed at P35.82 billion.      Banks also offered low bids for the 13-day facility after they submitted tenders amounting to PP26.055 billion against the P30 billion offering.      On the other hand, there was strong demand for the 27-day TDF after bids reached P41.119 billion, higher than the P30 billion offer.      BSP Deputy Governor Francisco Dakila Jr. attributed this week’s auction results to “appetite for longer-tenored term deposits.”      “At the same time, the results of the auction indicated the banks' preference to hold on to their cash in view of the long weekend and month-end liquidity requirements,” he said.      Dakila, however, noted that the total tenders received across all TDF tenors at about P103 billion were in line with the BSP's liquidity forecast for the week. (PNA)

SSS benefit, pension disbursements up

August 23, 2019

THE SOCIAL Security System (SSS) has released benefits and pensions worth P95.71 billion in the first six months to its 3.19 million members, with the bulk going to retirement funds.      In a statement on Tuesday, the state pension fund said it disbursed P55.7 billion worth of retirement benefits to 1.57 million pensioners from January to June, 8.6% higher than the P51.28 billion released in the same period last year.      Payouts for death claims by one million beneficiaries saw an increase of 4.8% to P28.63 billion in the first half from P27.32 billion a year ago.      Disbursements for disability and funeral benefits in the January-June period respectively totalled P3.59 billion, up 7.8% year-on-year, and P2.14 billion, up 9.7%, and went to 208,863 recipients.      Sickness benefits also climbed 14.9% to P1.51 billion in the first semester from the P1.32 billion logged in the same period last year, and went to 235,000 members.      SSS President and Chief Executive Officer Aurora C. Ignacio said in the statement that the growth in beneficiaries and claims may be attributed to the implementation of the Republic Act (RA) 11220 Expanded Maternity Leave Law in May and RA 11199 or the Social Security Act of 2018 signed into law last February.      RA 11220 increased the paid maternity leave to 105 days from 60 days, with an additional 15 days for solo mothers.      Meanwhile, RA 11199 adjusted SSS’ contribution rate to 12% from 11% and the monthly salary credits of its members to a minimum of P2,000 and P20,000 maximum.      “In the first half of 2019 alone, the number of beneficiaries and claims have already posted significant growth since the implementation of new laws and policies of the administration,” Ms. Ignacio said.      Meanwhile, total revenues of the state pension fund increased to P115.53 billion in the first half, up 20.9% from last year’s P95.55 billion, SSS said in the statement.      Broken down, contribution collections and investments and other income stood at P99.08 billion and P16.45 billion, respectively, in the first half, which SSS said climbed due to the higher contribution rate and monthly salary credit.      “Further, our investment and other income bounced back this period driven by strong and favorable market conditions,” Ms. Ignacio added.      SSS’ assets stood at P542.27 billion at end-June, 6% higher than the P511.47 billion booked in the comparable year-ago period.      “With our strong financial performance this semester, we are hoping to further strengthen the fund and ensure the continued service and providing for more and more members in the future until perpetuity,” Ms. Ignacio said.


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