Banking and Finance Industry

[Weina]

PDIC wants stronger oversight

THE PHILIPPINE Deposit Insurance Corp. (PDIC) posed no objection to the increase in the maximum deposit insurance coverage but stressed that this move should be accompanied by measures to beef up its capital and strengthen its oversight powers.

In a statement, PDIC President Jose C. Nograles asked for a package of "corollary measures" to accompany the increase in the insured deposit ceiling to P500,000 from P250,000.

These measures are:

* an increase in the PDIC capitalization;
* authority to conduct independent bank examinations;
* authority to assess risk premium on banks;
* authority to determine which deposits are covered by insurance; and
* a bridge bank authority.

Mr. Nograles said these measures are necessary to ensure that the increase in the maximum deposit insurance coverage would translate into higher depositor protection, better depositor confidence and a stronger banking system.

House Bill 5315 has been filed at the House of Representatives, seeking to double the insured deposit ceiling by 100%. Its authors, House Speaker Prospero C. Nograles and Manila Rep. Jaime C. Lopez, chairman of the banks and financial intermediaries committee, said it is imperative that depositors remain confident in banks amid the global financial meltdown.

Mr. Nograles said that 97.2% of all bank deposits would be covered by insurance if the ceiling were raised to P500,000, up from 95.1% at present.

He pointed out, however, that a capital infusion into PDIC is needed if the Deposit Insurance Fund, where insurance payments are sourced, were to remain adequate given the higher insured deposit cap.

The fund stood at P54.3 billion as of December, of which P3 billion represented the government contribution. Mr. Nograles wanted the fund strengthened to P100 billion.

He also said PDIC should be allowed to conduct bank examinations without first seeking permission from the Monetary Board and to hold these examinations even before a year is up.

Present rules require a Monetary Board go-ahead, while examinations are banned within a year from the last examination. Mr. Nograles said "the inability of the PDIC to move swiftly increases its exposure."

As a result of its examination, the PDIC should be allowed to impose additional risk premium over the existing 20-basis-point flat rate on banks at risk.

"Imposing additional risk premium... will enable PDIC to manage its risks as an insurer," Mr. Nograles said.

To allow PDIC to manage its risks, it should be furthermore allowed to examine which deposits are covered by insurance.

And lastly, Mr. Nograles is asking for a bridge bank authority as bank failure resolution.

A bridge bank authority would allow the government to take over a failed bank by acquiring its assets and assuming the liabilities until a final resolution is reached. It deviates from the "paybox" system where the PDIC automatically acts as receiver and liquidator of a failed bank.

[jvl]

^I think it is about time PDIC raise the ceiling for Deposit Insurance to encourage more depositors. Is that 250,000 applicable to rural and trift banks as long as they are member of PDIC?

[-TC-]

Originally Posted by jvl

^I think it is about time PDIC raise the ceiling for Deposit Insurance to encourage more depositors. Is that 250,000 applicable to rural and trift banks as long as they are member of PDIC?

Yes that includes all thrift and rural banks that are members of PDIC.

[espresso1018]

Hmm, how much is the deposit insurance right now? 100,000 pesos pa rin ba? Oo nga noh? Why don't the PDIC increase deposit insurance. I agree that it would increase the confidence of the depositors in the banking system even if there are not so good times in the economy or in the financial industry. In that way depositors won't panic and it will keep them stable.

[Lucentino]

Article said PDIC insurance is 250,000 Pesos.

I think people are comfortable and satisfied with the performance of Philippine Banks. And i guess the BSP at this point has a certain degree of capability to bail out a bank in trouble.

And yes, increasing the insurance would greatly boost the confidence of depositors, but what will be it's implications to the banking industry?

[-TC-]

Originally Posted by Lucentino

Article said PDIC insurance is 250,000 Pesos.

I think people are comfortable and satisfied with the performance of Philippine Banks. And i guess the BSP at this point has a certain degree of capability to bail out a bank in trouble.

And yes, increasing the insurance would greatly boost the confidence of depositors, but what will be it's implications to the banking industry?

It has been at 250k for a few years already.

Implications of increasing PDIC coverage? Well, this would mean lower interest rates for placements of depositors since banks now would have to pay bigger premiums to PDIC. Remember that higher insurance coverage means higher premiums.

[Lucentino]

I think its ok, as long as deposits are secure at this point in time. Most people place their money in banks primarily for security reasons. If they want their money to earn.

Recently, most industrialized countries gave full government guarantee on bank deposits.

[Weina]

BPI to raise up to P15B for acquisitions

MANILA, Philippines -- (UPDATE) Bank of the Philippine Islands, the country's third biggest lender, said on Thursday it would raise as much as P15 billion ($313 million) via a lower tier 2 capital issue to fund possible acquisitions.

The bank's parent, Philippine conglomerate Ayala Corp., said earlier this month it was interested in acquiring the Philippine flagship of the American International Group Inc.

Prominent local businessmen such as Henry Sy of SM Investments Corp. and Alfonso Yuchengco of Rizal Commercial Banking Corp. have also expressed interest in the Philippine American Life and General Insurance Co (Philamlife), the country's biggest insurer.

BPI said in a statement its board of directors had approved a plan to raise P10-P15 billion in a lower tier 2 issue "in anticipation of possible emerging acquisition opportunities."

"This move will allow the bank to effectively respond to any opportunity that may arise," BPI said.

BPI, a 157-year old bank with a market value of $2.9 billion, has grown over the years mainly through mergers and acquisitions. In the current decade, it gobbled up Far East Bank and Trust Co. in 2000, the local unit of DBS Bank in 2002, and Prudential Bank in 2005.

The lender also owns BPI/MS Insurance Corp., which was formerly known as FGU Insurance Corp, Universal Reinsurance Corp., Ayala Life Assurance, Ayala Health Care, and pre-need firm Ayala Plans.

AIG has yet to decide whether it would sell the $3.6 billion Philamlife and its units in one transaction or break up the group and sell to various investors.

Jose Cuisia, Philamlife chief executive, told reporters on Thursday the company would decide next week on which investment banks to hire to handle the Philippine divestment of AIG.

Cuisia said AIG has received offers from about 10 local and foreign groups for Philamlife after it was declared among the assets being sold by the US insurer to pay off its costly lifeline loan from the US government.

[-TC-]

Reposting...

Originally Posted by lancetrn

BPI to expand in Europe despite slowdown
BusinessWorld
October 14, 2008

AYALA-led Bank of the Philippine Islands (BPI) will proceed with its plans of expanding its presence in Europe despite the challenging economic conditions worldwide.

Remittances from that part of the globe should remain robust, said BPI, which beat rival banks last year in terms of cornering the overseas Filipino market. "We believe in infrastructure building. We believe things will be better in the long run," Teresita B. Tan, BPI senior vice-president and head of the Overseas Banking and Channel Services Group, told BusinessWorld on the sidelines of a briefing yesterday.

BPI is currently preparing to open four new branches of its London-based subsidiary, BPI Europe Plc. The four new branches, which will be in Milan and Rome in Italy, and Madrid and Barcelona in Spain, were slated to open sometime in June or July next year, Ms. Tan said. The bank opened its European subsidiary in Threadneedle Street in London last year. It opened its first branch in Earl’s Court Garden, also in London, last month.

The countries were selected on the basis of high concentration of Filipino workers and migrants, whom BPI provides remittance-related services to, Ms. Tan said.

http://www.bworldonline.com/BW101408/content.php?id=023

[red_jasper]

BSP exec: Traveling persons must declare cash amounting to over $10K
10/20/2008 | 10:20 AM

MANILA, Philippines - A Bangko Sentral ng Pilipinas (BSP) official on Monday said "administrative sanctions" await those who go out of the country without declaring if they carry more than $10,000.

BSP corporate affairs director Fe dela Cruz made the statement over radio dzBB amid the scandal involving former Philippine National Police comptroller, Director Eliseo dela Paz who was held in Moscow, Russia last week for failing to declare 120,000 euros (P6.9 million) in "contingency funds" he brought for other police officials who attended the 77th Interpol Assembly.

"Pag hindi dineclare may administrative sanctions na pinaguusapan," said dela Cruz. "Merong mga konting kaparusahan na kaakibat non."

Dela Cruz said that while the BSP has liberalized its rules regarding the bringing of foreign currency to other countries, the amount must be declared to Philippine airport authorities.

"Niliberalize na ng Central Bank yung pagdadala ng foreign currency," said Dela Cruz. "Pero ang kailangan pagdating natin sa airport ideklara mo na meron kang dala...kumbaga kung more than $10,000 dollars, ide-declare mo."

Dela Cruz said those who carry more than $10,000 must fill out forms at the airport: one for airport authorities, one for the Anti Money Laundering Council, and one for the traveler.

Dela Paz is expected to arrive in the country Tuesday, where a Senate grilling awaits him and other PNP officials over the cash scandal. - Johanna Camille Sisante, GMANews.TV

[jpdm]

Originally Posted by red_jasper

BSP exec: Traveling persons must declare cash amounting to over $10K
10/20/2008 | 10:20 AM

MANILA, Philippines - A Bangko Sentral ng Pilipinas (BSP) official on Monday said "administrative sanctions" await those who go out of the country without declaring if they carry more than $10,000.

BSP corporate affairs director Fe dela Cruz made the statement over radio dzBB amid the scandal involving former Philippine National Police comptroller, Director Eliseo dela Paz who was held in Moscow, Russia last week for failing to declare 120,000 euros (P6.9 million) in "contingency funds" he brought for other police officials who attended the 77th Interpol Assembly.

"Pag hindi dineclare may administrative sanctions na pinaguusapan," said dela Cruz. "Merong mga konting kaparusahan na kaakibat non."

Dela Cruz said that while the BSP has liberalized its rules regarding the bringing of foreign currency to other countries, the amount must be declared to Philippine airport authorities.

"Niliberalize na ng Central Bank yung pagdadala ng foreign currency," said Dela Cruz. "Pero ang kailangan pagdating natin sa airport ideklara mo na meron kang dala...kumbaga kung more than $10,000 dollars, ide-declare mo."

Dela Cruz said those who carry more than $10,000 must fill out forms at the airport: one for airport authorities, one for the Anti Money Laundering Council, and one for the traveler.

Dela Paz is expected to arrive in the country Tuesday, where a Senate grilling awaits him and other PNP officials over the cash scandal. - Johanna Camille Sisante, GMANews.TV

This policeman dont get it.

The government is doing everything to bring in money form other countries and yet this guy just brought out hundreds of thousands of foreign currency for a junket.

Masyado na yata talagang makakapal at walang pakialam ang ibang Pinoy lalo na yung ibang mga kawani sa pamahalaan.

[espresso1018]

Originally Posted by Lucentino

Article said PDIC insurance is 250,000 Pesos.

I think people are comfortable and satisfied with the performance of Philippine Banks. And i guess the BSP at this point has a certain degree of capability to bail out a bank in trouble.

And yes, increasing the insurance would greatly boost the confidence of depositors, but what will be it's implications to the banking industry?

Hehe, sorry 250,000 Pesos pala.

[espresso1018]

Originally Posted by jpdm

This policeman dont get it.

The government is doing everything to bring in money form other countries and yet this guy just brought out hundreds of thousands of foreign currency for a junket.

Masyado na yata talagang makakapal at walang pakialam ang ibang Pinoy lalo na yung ibang mga kawani sa pamahalaan.

I think the Ombudsman has started gathering information about the issue on the 6.9 million pesos carried by the retiree. It's really weird knowing that he could not have gotten out of the country so easily had he declared he had such a huge sum with him.

But I have this doubt if the money was really brought from the Philippines to the conference. What if it was amassed in Moscow? Hmm. The Ombudsman must look into this matter so that the PNP rank may be cleaned from erring officials too.

[-TC-]

http://business.inquirer.net/money/b...t-likely-in-RP

Credit squeeze not likely in RP
By Doris Dumlao
Philippine Daily Inquirer
10/19/2008

THE UNPRECEDENTED CREDIT SQUEEZE now clogging western financial markets is not likely to spread to the Philippine banking system, European financial giant Deutsche Bank said.

The Bangko Sentral ng Pilipinas nevertheless announced on Friday new measures to boost the flow of money in the local financial system and minimize any backlash from a potential global recession arising from extraordinary financial stress and high commodity prices.

In a commentary dated Oct. 7, Deutsche Bank shared the view that the Philippine financial system seemed a “picture of calm amidst the global storm.”

It noted that the country’s biggest bank, Metropolitan Bank and Trust Co., had recently issued P5.5 billion of subordinated notes qualifying as tier 2 or supplementary capital at an interest rate of 7.75 percent, a mere 32-basis point spread over the equivalent government debt issuance.

It also cited Banco de Oro Unibank Inc., which recently raised P5 billion worth of hybrid notes qualifying as tier 1 or core capital at 6.5 percent.

“In fact, over the last five months alone, local banks have raised P32 billion worth of paper at quite thin spreads over the local risk-free rate. This is happening at a time when the likes of triple A-rated GE (General Electric) in the US can only get funding at 10 percent in US dollar,” the commentary said.

“It is important to note, in our view, that these funds were raised not to shore up damaged balance sheets. They were instead used to either fund maturing obligations (at much lower cost than the ones replaced) or to fund future growth,” it stressed.

The German bank noted that the local banking sector was growing its loan book at the fastest pace since the 1997 Asian currency crisis. Based on the latest Bangko Sentral data, lending by Philippine commercial banks net of placements with the central bank grew at a faster pace of 21.1 percent year-on-year in August from 18.5 percent in July despite the worsening credit crunch in the western world.

In 2007, loan growth was about 8 percent, already an improvement from the contraction seen from 1999 to 2006. But loan-to-deposit ratios were still less than 60 percent, the bank pointed out, which means that for every P1 generated as deposit, less than 60 centavos were lent out.

“The banking sector loans are still less than 30 percent of gross domestic product (GDP) compared to nearly 60 percent in 1997,” Deutsche Bank said. “There is no evidence of over-leverage (overborrowing) in the system.”

At the same time, the non-performing loan ratio of 3.98 percent as a ratio of total loans was the lowest level seen since the Asian crisis.

Deutsche Bank said a case could also be made that Philippine banks -- particularly Bank of the Philippine Islands -- could be considered a “defensive” stock worth holding on despite an uncertain environment.

[-TC-]

http://business.inquirer.net/money/b...equity-in-PDIC

Gov’t eyes P45-B equity in PDIC
By Doris Dumlao
Philippine Daily Inquirer
10/19/2008

THE GOVERNMENT PLANS TO INFUSE P45 BILLION IN FRESH equity into state-owned Philippine Deposit Insurance Corp. using a similar scheme being worked out to recapitalize the Bangko Sentral ng Pilipinas.

The move is expected to boost local banking regulation and depositor protection given the global financial meltdown.

In an interview at the sidelines of his meeting with top BSP officials last week, PDIC president Jose Nograles said the cash infusion would beef up the country’s deposit insurance fund, or source of insurance payments, to P100 billion from P55 billion.

Upon the suggestion of presidential economic adviser and Albay Gov. Joey Salceda, Nograles said the plan was for the national government to issue a multi-year obligation authority (MYOA) or written commitment to allot additional funds for PDIC, the central bank’s co-regulator of the banking system.

“It’s really part of defensive financial strengthening. We’ll have authority to access some money if needed. We’re in a stable position so we don’t have to raise the funds immediately,” Nograles said.

The P45-billion cash infusion is among the key reform measures sought by PDIC now that Congress is keen on amending its charter to pave the way for the doubling in deposit insurance coverage to P500,000 a depositor.

Based on discussions with legislators, Nograles said it was possible that the PDIC charter amendments would be passed within the year. He said congressmen would like to prioritize this piece of legislation to shield the country from the worst financial shakeout to hit the United States and Europe since the Great Depression in the 1930s.

“It’s because of the urgency of shoring up our deposit insurance fund. This is part of confidence-building -- that people know that we can access up to P100 billion and government can fund us up to P100 billion,” Nograles said. “It’s a defensive, preemptive measure. If you look at other countries, some even gave blanket guarantees.”

The PDIC chief’s brother, Speaker Prospero Nograles, and Manila Rep. Jaime Lopez have already filed a bill in the Lower House seeking amendments to the PDIC charter. A counterpart bill has been filed in the Senate by Sen. Francis Escudero.

At the proposed P500,000 level of insured deposits, 97.2 percent of all deposit accounts in the banking system will be fully covered by insurance, compared to 95.1 percent at present, based on the PDIC’s estimate.

“At 97.2 percent (insurance coverage), that means we can protect immediately all the small depositors,” Nograles said.

The scheme considered for PDIC’s fund-raising, similar to a framework developed to raise P40 billion in additional capital for the BSP, will allow the deposit insurer to get new money while the cost to the government will be staggered over a long-term period.

Based on such concept, the government through the Department of Budget and Management will sign the MYOA to appropriate from its budget a certain amount each year, for instance for the next 10-15 years. The government will set up a special purpose trust (SPT) that will float bonds backed by the state’s multi-year written commitment.

[-TC-]

http://business.inquirer.net/money/b...weather-crisis

JP Morgan expects RP to weather crisis
By Doris Dumlao
Philippine Daily Inquirer
10/19/2008

THE PHILIPPINES HAS “SIGNIFICANT” exposure to an emerging global recession but has built up internal buffers to cushion against external shocks, American banking giant JP Morgan said.

In its latest emerging market research dated Oct. 16, JP Morgan held the view that local monetary and fiscal policymakers were well-positioned to act, if needed, to help perk up domestic output given the uncertainties in the global economy.

JP Morgan estimated that every percentage point drop in US growth would shave 0.4-0.5 percentage point from the growth in the Philippines’ gross domestic product (GDP), or the sum of all goods and services produced by the local economy in a given period.

Remittances are also directly exposed since more than 30 percent of overseas Filipino workers (OFWs) are based in the United States, the research said.

But JP Morgan noted that there had been minimal bond financing by Philippine corporations. It added that real estate and stock market prices have previously moved up but still lagged many of their regional peers, thus dismissing concerns that they were nearing “bubble” type levels.

“Bank foreign funding both as a percent of GDP and as a share of total bank liabilities is manageable and derivatives licenses had been given out prudently, so there has been no excessive activity there,” it said.

And as inflation has peaked and now on track to slow down to single-digit levels by February or March next year, JP Morgan said a return to the 2.5-4.5 percent range would be possible by the middle of 2009.

“Rice itself, which alone makes up 9.36 percent of the CPI (consumer price index) basket, has seen its price start falling in August and forecasts point to favorable weather through early 2009,” the research said.

After a series of interest rate increases sanctioned since June this year, the Bangko Sentral ng Pilipinas paused on its monetary-tightening campaign now that price pressures were softening and inflation expectations also easing.

“Fiscal policy is also well-positioned. The postponement of the balanced budget target to 2010 was already a compromise, done in reaction to concerns over global growth. And if needed, additional fiscal stimulus measures could be deployed,” JP Morgan said.

The International Monetary Fund defines global recession as a slowdown in global growth to 3 percent or less. In its latest world economic output forecast, the IMF has projected such a major downturn by next year.

Meanwhile, JP Morgan said the Philippines’ balance of payments (BOP) would be under strain but still looked resilient on receipts from overseas Filipinos, tourism as well as the fast-growing business process outsourcing (BPO) sector.

The BOP measures the foreign exchange transactions between the local economy and the rest of the world. Any transaction that gives rise to outflows like a pullout of foreign investments, importation or debt servicing is a deficit item in the BOP, while any that gives rise to inflows like borrowing, exporting or overseas remittance is a surplus item.

“OFW remittances continue to grow and importantly, should be more resilient as the quality of workers deployed has improved, as reflected in the rise in their average incomes,” the paper said.

“Tourism receipts are rising as we head toward the peak season in the fourth quarter,” it added.

Inflows from BPO operations, largely relocating from India and China, are also diversifying from just call centers to areas, such as software development, medical and legal transcription and are now bringing in $3-$4 billion a year, the research noted.

“As costs are cut in developed markets in a global recession, BPO activities could actually rise,” JP Morgan said.

It said the country’s gross international reserves were expected to end the year higher at $37 billion, despite the decline in the current account surplus.

“Lastly, in terms of an external liquidity buffer, recall that the Philippines has about $30 billion in foreign currency deposit units in the banking system which can be used for the US dollar needs of local (firms),” it said.

[teresa1]

Is GSIS bankrupt? Rumors is that they invested people's savings to the bankrupt Lehman Brothers in the US. If the answer is yes, the future of millions of matatanda is similar to Russian Roulette. Someone should be punished for this!!!

[swahi]

bankrupt or corrupt? What do you call investing in a Philippine painting of some dead pinoy painter just so that we can say welcome home, philippine heritage? What will the GSIS member say? So bankrupt or corrupt? Or is there no difference between the two?

[barrera_marquez]

Kapag mga titser kaharap, walang pera pero kapag Meralco buyout ang usapan... malala pa sa PNP Russia Scandal ang kaya nilang ilabas...

Ang katotohanan - Ang GSIS ay KUMITA na 5% sa kanilang overseas investment.
Ang GSIS ay kumita ng 1.25 Billiong PISO. .

Beware of the ABS-CBN and Meralco and LowPus smear campaign on Garcia. Garcia did a heroic job of exposing Meralco's Scam Practices.


GSIS ekes out 5% gain despite market turmoil
http://www.manilastandardtoday.com/?...ews1_oct6_2008
By Joyce Pangco Pañares

DESPITE the global financial crisis, the state-owned pension fund Government Service Insurance System claims to have gained $30 million, or a 5-percent increase, on the investment it made in the United States five months ago.
GSIS president and general manager Winston Garcia announced the earnings even as Palace officials urged the government employees’ pension fund to release information on the Global Investment Program it started in April, when the US was already in a financial crisis.

“The proof of the pudding is in the eating. This is a significant achievement, especially since we’re barely five months into the program,” Garcia said in a statement announcing that the $600 million it had invested with US fund managers in April had earned a return of $30 million (P1.25 billion) as of Sept. 30.
“Based on the early results, I can assure our members that we are headed in the right direction,” Garcia added, dismissing his critics’ demand that he release a detailed accounting of the fund’s foreign investments over the past 12 months.
Opposition Senators Mar Roxas, Francis Escudero, and Aquilino Pimentel Jr. earlier made the demand after the GSIS announced earlier this year that it would undertake a three-year, $1-billion Global Investment Program overseas, with ING Investment Management and Credit Agricole Asset Management as fund managers and US-based Citibank N.A. as custodian.
The pension fund has since declined to reveal where its managers had invested the money or the basis of the 5-percent profit it claims to have made.

But top presidential aides said it was standard practice for international fund managers to treat their clients’ accounts with confidentiality. Still, Executive Secretary Eduardo Ermita and Press Secretary Jesus Dureza agreed that the GSIS should be more transparent to assuage public fears.

“They have to tell us if there was exposure because that is the public’s money they are using,” Ermita said in a telephone interview, referring to American financial institutions Lehman Brothers and American International Group that have sought financial assistance from the US government.
Dureza said it was understandable that some GSIS investors would raise confidentiality issues if the fund managers were required to disclose its investment strategies.

“We have to contend with investors who do not want to publicly release information on the investments, but as a whole, releasing this information would assuage the concerns of the public. There is a need for transparency,” Dureza said in a separate interview.
“The GSIS’ investment is just a drop in the big ocean of the US credit problem, but we must provide our public with as much information as we can to end the speculation.”

But Garcia repeated his earlier statement denying any exposure in the US financial giants that are facing difficulties. “May I reiterate that we exactly have zero exposure in Lehman and AIG,” he said.

He said the pension fund had to invest its money overseas because “the absorptive capacity of the local market is just too limited for the investible funds of the GSIS.

“At the same time, when things go bad, we should not press the panic button immediately. We’re in for the long haul. Any educated judgment on the performance of the investment should be rendered at the end of the program, not a few months into it. That’s why it’s called long-term investment.”

Garcia said the pension fund’s foreign investments were fully diversified geographically and in asset quality, thus shielding those from the effects of the current US crisis.
He said the GSIS required that it deal only with fund managers who had at least $100 billion in assets under their management.
The fund managers were allowed flexibility to determine their investment strategy, but they were also required to comply with an absolute annual return requirement of 8 percent and a ceiling of 7 percent on portfolio volatility.
Besides, Garcias said, the pension fund’s investment “was able to withstand the full, initial impact of Lehman’s fold-up,” but declined to reveal details.
Garcia said initial returns on the GSIS’ investments showed it could proceed to the second stage of the investment program.
“We are proceeding, although as a matter of prudence, we have required all our potential bidders to disclose their exposure in the US market because of this economic turmoil,” he said.
“That will be a part of our consideration. We have to require them to make the proper disclosure, especially their asset-backed or mortgaged-backed investments.”
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