banking finance

BSP's accommodative stance to boost PH recovery

July 26, 2021

BANGKO Sentral ng Pilipinas (BSP) Governor Benjamin Diokno has highlighted the need to keep the central bank’s accommodative stance to boost economic recovery, after citing the improvement in domestic activities as the government eases movement restrictions.       In a virtual briefing for the 2021 second quarter inflation report, Diokno said average inflation in April to June, although still above the government’s 2 percent to 4 percent target band, decelerated to 4.3 percent from the previous three months’ 4.5 percent.       He attributed this to the impact of non-monetary interventions to address domestic supply constraints on pork, among others, which was hit by the African swine fever.       Diokno said this development is expected to result in a within-target average inflation rate this year, which monetary authorities forecast to be around 4 percent.      He said the smaller growth contraction in the first quarter of this year, at -4.2 percent from quarter-ago’s -8.3 percent, may be traced to the “government’s calibrated approach in mitigating the transmission of the virus.”      “Higher frequency indicators of domestic demand also suggest a recovery in economic activity with the gradual easing of lockdown restrictions,” he said, but added that risks remain because of the emergence of more transmission variants of coronavirus disease 2019 (Covid-19).       Diokno thus stressed the need to keep the current monetary policy stance “in order for the economic recovery to gain more traction.”       “Keeping an accommodative stance shall also help counteract risk aversion among banks, which continues to temper lending activity despite ample liquidity in the financial system,” he added. (PNA)

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Banks still open to loan restructuring amid pandemic

July 26, 2021

BANKS continue to understand the plight of their borrowers amid the pandemic, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said, citing resolutions on complaints filed with the central bank.       In a virtual briefing on Friday, Diokno said while requests for debt collection and restructuring of credit card loans accounted for only 3 percent of the nearly 12,000 consumer complaints in the first half of the year, almost one-third, or 31 percent, “were resolved in favor of the consumer.”       He said 32 percent of the total “are still for evaluation and coordination with the clients while 21 percent are still awaiting action or reply from the concerned financial institutions.”       Complaints that were not resolved in favor of the consumers were about 13 percent, he added.       Diokno said these numbers show that banks and the borrowers “do their direct coordination, (and) find common ground in negotiating their obligations.”      He said banks are “largely open for consideration.”      “Even with the current difficulties experienced by their clients, concessions given by banks to their clients include waiver or reduction on fees, interest, and penalties; implementing a more favorable payment scheme; providing options, especially for payments made through post-dated checks and auto-debit or auto-deduct arrangements; and granting extensions or adjustments of loan maturity,” he added. (PNA)

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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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