PHILDEVFINANCE (old news)

Friday, March 18, 2011

BSP shuts down Banco Filipino

BSP shuts down Banco Filipino

By Lawrence Agcaoili (The Philippine Star)
Updated March 18, 2011 12:00 AM

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) ordered yesterday the closure of Banco Filipino Savings and Mortgage Bank of the Aguirre family for insolvency after its liabilities overwhelmed its assets by P8.4 billion, prompting monetary authorities to prepare charges against the board of directors and officials of the bank.

At a hastily called press conference, BSP Deputy Governor Nestor Espenilla Jr. said the central bank’s seven-member Monetary Board (MB) decided yesterday to place Banco Filipino under the receivership of the state-run Philippine Deposit Insurance Corp. (PDIC).

Espenilla pointed out that Banco Filipino has insufficient realizable assets to meet its obligations, with its net realizable value at -P8.4 billion.

“Banco Filipino cannot continue in business without involving probable losses to its depositors and creditors,” Espenilla stressed.

He explained that the MB also took note of the failure of the board of directors and management of Banco Filipino to restore its financial health and viability despite considerable time given to address its financial problems.

The BSP extended P3.5-billion worth of emergency loans to Banco Filipino in 2002, of which P2.6 billion remains outstanding.

On Monday, the MB rejected Banco Filipino’s plea for another P3-billion emergency loan to cover its huge “overdraft” amounting to over P900 million.

“It has therefore decided to prohibit Banco Filipino from doing business in the Philippines and to place its assets and affairs under receivership,” he said, citing section 30 of Republic Act 7653 or the New Central Bank Act.

The decision, he said, would provide immediate relief to the bank’s 177,652 depositors.

Of the total number of depositors, Espenilla said 97 percent can be considered small depositors and covered by the deposit insurance of P500,000 each.

The BSP official said the PDIC took over the head office of Banco Filipino in Makati City yesterday afternoon to secure vital records and documents as well as prevent further dissipation of the bank’s assets.

“The BSP is coordinating closely with PDIC so that deposit insurance can be paid out as soon as possible. In this connection, the condition, coverage, and quality of the records and documents of Banco Filipino will be material in ensuring immediate service to depositors,” Espenilla said.

The BSP said depositors with balances of P5,000 and below accounting for about 53 percent of the total account holders need not file their deposit insurance claims as the PDIC would immediately process and mail payments within the week, while those with balances above P5,000 would still have to be validated and need to file their claims.

“For depositors with account balances of more than P5,000, claim forms will be distributed during Depositors’ Forums to be conducted nationwide next week. During the forums, procedures, instructions and requirements for filing claims will be discussed. The schedule for claims receiving will be announced shortly after the examination of bank records,” PDIC president Jose Nograles said in a statement.

Espenilla said the MB authorized the filing of appropriate cases against the directors, officers, and other individuals who may be found liable for violation of banking laws and BSP rules and regulations that led to the bank’s financial travails.

He revealed that Banco Filipino lost around P2 billion a year from 2007 to 2009, and P277 million every month in the first nine months of last year.

Aside from interest payments amounting to P1 billion a year, Espenilla said Banco Filipino had incurred huge expenses – P500 million for compensation, which was 2.5 times its gross income; and legal fees amounting to P131 million or about 61 percent of its gross income.

“Their expenses are way above industry levels,” he stressed.

Furthermore, he added that more than half of its outstanding loans amounting to P4.1 billion went to directors, officers, stockholders and related interest (DOSRI).

Several branches of Banco Filipino began shutting down last Tuesday after officials announced the bank was “suffering from extraordinary panic caused by a well orchestrated smear campaign, quoting BSP as the source of inaccurate and malicious imputations.”

Banco Filipino has been seeking P25-billion worth of financial assistance and regulatory relief as well as P19 billion in compensation for its alleged illegal closure in 1985.

A Makati court issued an order on Nov. 18, 2009 directing the BSP and the MB to immediately implement Banco Filipino’s approved business plan.

Likewise, the Supreme Court also affirmed a decision by the Court of Appeals (CA) ordering a court to proceed with the P18.8-billion damage suits filed by Banco Filipino against the Central Bank Board of Liquidators (CBBoL) in connection with the bank’s closure in 1985.

The bank, with a popular slogan “Subok na Matibay, Subok na Matatag,” was founded in 1964 by Tomas Aguirre. It has 32 branches in Metro Manila and nearby areas as well as 30 branches in the provinces.

In its website, Banco Filipino claimed that it was ordered closed by the Central Bank in 1985 due to alleged insolvency despite the bank’s outstanding performance. In 1966, Banco Filipino emerged as the biggest savings bank in the country with 92 branches prior to its closure.

In 1994, the bank opened 15 of its 92 branches. It now has 62 branches nationwide.

Banco Filipino vice chairman and former Securities and Exchange Commission chairman Perfecto Yasay Jr. said he would file the necessary case against BSP.

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Dutch Microfinance Investor Oikocredit Announces 2010 Financial and Social Returns

MICROCAPITAL BRIEF:

Dutch Microfinance Investor Oikocredit Announces 2010 Financial and Social Returns

by MicroCapital on Friday, March 18, 2011 at 1:03pm

Oikocredit, a Netherlands-based, ecumenical, co-operative financial institution, has announced its financial and social returns.

As of December 31, 2010, Oikocredit has reported a total of 43,000 investors, 863 investees, 592 of which are microfinance institutions (MFIs) [1]. During 2010, Oikocredit reports that total assets grew 19 percent to EUR 640 million (USD 895 million) and its development financing portfolio increased 22 percent to EUR 481 million (USD 673 million) [1]. Oikocredit also reported an increase in support from investors, with net capital inflow of EUR 64 million (USD 89.5 million) [1].

In addition to financial performance, Oikocredit monitors social performance indicators of its partners. As of December 31, 2010, 68 percent of Oikocredit’s microfinance partners reported on these metrics indicating that a total of 20 million borrowers were reached, of which 86 percent are female and 44 percent in rural areas [2]. In order to increase its social performance reporting abilities, Oikocredit has appointed social performance management specialists to its regional offices to work with its project partners [1].

About Oikocredit: Oikocredit is a Netherlands-based, ecumenical, co-operative financial institution that provides credit to economically disadvantaged people. Oikocredit finances cooperatives, microcredit institutions and small and medium-sized enterprises (SMEs) through partners in 80 countries primarily in Asia, Eastern Europe, Latin America and Africa. Established in 1975, Oikocredit obtains its capital through the issuance of shares to its members: churches, support associations and individuals. As of December 31, 2010 Oikocredit has 43,000 investors, 868 project partners and EUR 481 million (USD 673 million) in capital outstanding.

[1] Oikocredit Press Release: “2010 figures: Oikocredit sharpens financial and social return in 2010″, http://www.oikocredit.org/en/publications/press/press-releases/2010-figures-oikocredit-sharpens-financial-and-social-return-in-2010

[2] Oikocredit Publication: “Facts & figures – 4th quarter 2010″http://www.oikocredit.org/en/publications/facts-figures

MicroCapital.org Article, September 22, 2010, “Social Investors Investigate Criteria for Environmental, Social and Governance (ESG) Performance of Microfinance Institutions (MFIs), Triple Jump, Oikocredit Hold Meeting to Mull Harmonization of ESG Evaluation”, http://www.microcapital.org/microcapital-brief-social-investors-investigate-criteria-for-environmental-social-and-governance-esg-performance-of-microfinance-institutions-mfis-triple-jump-oikocredit-hold-meeting-to-mull-h/

MicroCapital.org Article, August 23, 2011, “Oikocredit Invests $5m in Alalay Sa Kaunlaran Inc of the Philippines, Capital Aid Fund for Employment of the Poor (CEP) of Vietnam, The TYM Fund of Vietnam and Thaneakea Phum (Cambodia) Limited”, http://www.microcapital.org/microcapital-brief-oikocredit-invests-5m-in-alalay-sa-kaunlaran-inc-of-the-philippines-capital-aid-fund-for-employment-of-the-poor-cep-of-vietnam-the-tym-fund-of-vietnam-and-thaneakea-phum-camb/

MicroCapital.org Article, June 16, 2010, “Oikocredit Releases First Social Performance Report”, http://www.microcapital.org/microcapital-brief-oikocredit-releases-first-social-performance-report/

MicroCapital.org Article, March 29, 2010, “Oikocredit, an Investor in Microfinance Institutions, Reports Capital Inflow Reached $83.8m and Total Assets Grew by 13% in 2009″, http://www.microcapital.org/microcapital-brief-oikocredit-an-investor-in-microfinance-institutions-reports-capital-inflow-reached-838m-and-total-assets-grew-by-13-in-2009/

MicroCapital’s Microfinance Universe: Oikocredit,http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Oikocredit

Browse the MicroCapital Universe and add your entry to the wiki at http://www.microcapital.org/microfinanceuniverse/

Thursday, March 17, 2011

Growth in remittances eases for a second month

Growth in remittances eases for a second month

By Lailany P. Gomez, Reporter

REMITTANCES from overseas Filipino workers (OFW) continued to show strength at the start of the year, according to the central bank.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said money sent home by Filipinos abroad went up 7.6 percent to $1.48 billion in January from $1.37 billion in same month in 2010.

BSP Governor Amando Tetangco Jr. said the positive development reflected increased remittances from both sea- and land-based workers, with their transfers rising by 13.3 percent and 6.2 percent.

The bulk of inflows came from the United States, Canada, Saudi Arabia, Japan, the United Kingdom, Singapore, the United Arab Emirates (UAE) and Italy.

Cash transfers from these countries accounted for more than four-fifths, or 80.1 percent, of the total inflows reported by local banks, the BSP said.

“Remittance flows into the country remained resilient on the back of sustained demand for skilled [OFW] in different destinations worldwide,” Tetangco said.
Data from the Philippine Overseas Employment Administration (POEA) showed that of the 99,926 approved job orders for land-based workers for the period January 1 to February 28, more than two-fifths represented processed job orders for service, production and professional, technical and related workers.

Most of the processed job orders are intended for manpower requirements in Saudi Arabia, UAE, Qatar, Taiwan and Kuwait.

The Department of Labor and Employment’s office in Rome, Italy reported that a new quota decree was signed last November, allowing the entry of 100,000 foreign workers, of which 4,000 new hires were allotted to the Philippines.

The POEA also reported that the country’s seafaring industry aims to capture at least 50 percent of the global requirement in the future.

“The continued enhancement of financial services worldwide through tie-ups with foreign financial institutions, establishment of remittance centers and marketing offices abroad, as well as the stronger partnerships forged with correspondent banks and branches/representative offices abroad also helped shore up the flow of remittances into the country,” Tetangco said.

Hong Kong and Shanghai Banking Corp. (HSBC), however, said the moderate growth in remittances was “not the best start.”

Despite a sequential rebound in January, year-on-year remittances growth moderated for the second consecutive month, HSBC said.

The lender said gradual economic recovery in the West coupled with healthy growth in Asia provide support for the Philippine remittances outlook.

“Therefore, a sharp slowdown in remittances is unlikely in the near term,” Sherman Chan, an economist at HSBC, said.

“Although headline remittances growth has slowed for two straight months, it is too early to conclude that a downward trend is emerging. In fact, there are signs of improvement in January when looking at the seasonally adjusted data on a sequential basis.

Remittances are a key support to private consumption, which accounts for about three-quarters of Philippine [gross domestic product]. Therefore, we need to keep a close watch on the remittances data when assessing the country’s overall outlook,” she added.

With the Middle East accounting for only roughly 15 percent of Philippine remittances in the past five years, HSBC said economic developments in the West and in Asia still carry larger implications.

“Hence, we do not expect a slowdown in remittances from the Middle East to weigh too heavily on overall growth. Indeed, with the Philippine peso likely to appreciate through the year, and overseas Filipino workers keen to maintain the level of remittances in local currency terms, we may even see a pickup in remittances in US dollar terms in coming months,” Chan said.

The BSP had said its policy-making Monetary Board will review its remittance growth target as well as its forecast for the country’s external payments position in light of the troubles in the Middle East.

For 2011, the BSP projects remittances to grow by $20 billion, or 8 percent higher than the $18.8 billion recorded for the full-year 2010.

BSP Approves Establishment of Microfinance Institutions in Underserved Areas of the Philippines

MICROCAPITAL BRIEF:
Bangko Sentral ng Pilipinas (BSP) Approves Establishment of Microfinance Institutions in Underserved Areas of the Philippines

» Posted by Trevor Kwong in Category: Asia, Regulation at 2:00 am

Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, announced that microfinance institutions (MFIs) can now start operations in cities and rural areas that had no programs aiming at low-income groups.

MFIs can set up microbanking offices (MBOs) in these areas and accept microdeposits, disburse microloans, sell microinsurance and provide remittance services, as authorized under BSP Capital circular 694 published in 2010. At least half of the total transactions carried out by MBOs must be related to microloans or microinsurance policies.

The MFIs of the Philippines reporting data for 2009 to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, have an aggregate loan portfolio of USD 548 million, total assets of USD 801 million and 2.7 million active borrowers.

About the Bangko Sentral ng Pilipinas (BSP):

Established in July 1993, Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of the Philippines. BSP has three regional offices performing cash operations and cash administration and eighteen branch offices. BSP participates in advocacy programs concerning microfinance, financial education and consumer protection.

By Trevor Kwong, Research Assistant

Bangko Sentral ng Pilipinas (BSP) Study Indicates High Density, Advanced Technology, Larger Profits in Philippine Banking Sector

MICROCAPITAL BRIEF:

Bangko Sentral ng Pilipinas (BSP) Study Indicates High Density, Advanced Technology, Larger Profits in Philippine Banking Sector

» Posted by Medha Ravi in Category: Asia, Technology, Trends/Challenges at 12:03 am

According to a report from the Malaya Business Insight, a Philippine newspaper, a study by Dr Johnny Noe E Ravalo of Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, offered a range of data on the banking sector in the Philippines including that the bank density is 8.6 banks per 1,000 square kilometers, at least five banking offices exist in every municipality or city, there are approximately 10,700 persons per banking office, 207 microfinance banks exist nationwide and the largest concentration of banks (32 percent) occurs in the capital. The actual report by Dr Ravalo is not available online.

In arguing that an advanced level of technology exists in the sector, Dr Ravalo cites indicators such as the following: Philippine-owned banks have 56 automatic teller machines compared to seven owned by foreign banks and 20 Filipino banks offer mobile and internet transactions compared to three foreign banks offering the same.

Dr Ravalo further states that low interest rates in the Philippines encouraged growth in the banking sector and that this has been reflected in the return on equity (ROE) for banks, which stood at 10.2 percent in 2010, up from 2 percent in 1999.

On lessons learned from the 2008 financial downturn, Dr Ravalo suggests that the Philippine banking sector prioritize the “implementation of other innovative mode[s] of asset clean up; implementation of a time-bound prompt corrective action (PCA) framework; and harmonization of corporate governance standards with other financial regulators” [1].

By Medha Ravi, Research Associate

About Bangko Sentral ng Pilipinas (BSP):
Established in July 1993, Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of the Philippines. BSP has three regional offices performing cash operations and cash administration and eighteen branch offices as of 2008. BSP participates in advocacy programs concerning microfinance, financial education and consumer protection.

Source and Resources:

Business Insight news article, “High bank density and bigger profits”, http://www.malaya.com.ph/jan31/busi1.html

MicroCapital.org story, October 19, 2010, “MICROCAPITAL BRIEF: Bangko Sentral ng Pilipinas (BSP) Approves Establishment of Microfinance Institutions in Underserved Areas of the Philippines”, http://www.microcapital.org/microcapital-brief-bangko-sentral-ng-pilipinas-bsp-approves-establishment-of-microfinance-institutions-in-underserved-areas-of-the-philippines/

MicroCapital.org story, June 17, 2010, “MICROCAPITAL BRIEF: Two Thirds of Philippine Households Lack Bank Accounts, Says Central Bank Official”, http://www.microcapital.org/microcapital-brief-two-thirds-of-philippine-households-lack-bank-accounts-says-central-bank-official/

MicroCapital’s Microfinance Universe Profile: Bangko Sentral ng Pilipinas (BSP),
http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bangko+Sentral+ng+Pilipinas+%28BSP%29%2C

Browse the MicroCapital Universe and add your entry to the wiki at: http://www.microcapital.org/microfinanceuniverse/

Banco Filipino waits for rescue loan funds from Banko Sentral

DEPOSITORS TOLD TO WAIT
Banco Filipino waits for rescue loan funds from Banko Sentral

For the second day, thousands of worried depositors of Banco Filipino waited for their money—or an explanation.

They got neither.

The self-declared bank “holiday” that started Tuesday continued with the thrift bank still waiting for the Banko Sentral ng Pilipinas (BSP) to rescue it with an emergency loan and to defuse what it called a “smear campaign” that has set off heavy withdrawals.

Banco Filipino executives and BSP pointed to each other as the one to give an explanation for the bank’s financial troubles, which are the subject of a court case and a P75-billion rebuilding plan, which Banco Filipino badly needs after it was “illegally” closed in 1985.

Malacañang said it would not intervene.

The BSP has the “competence and supervisory powers over banks,” said presidential spokesperson Edwin Lacierda.

He said the Palace has “every confidence in BSP Governor Amado Tetangco.”

In Cebu City, an irate depositor told radio dyLA he had a P2-million deposit and was worried over what would happen to his money.

Another mother, who just deposited P18,000 in her grade-school son’s account for his tuition in June, wanted to know if she could use the money in time for enrollment.

Banco Filipino has three branches in Cebu, part of a nationwide network of 62 branches.

In its last March 14 memo from BF executive vice president Maxy S. Abad to “all concerned,” the bank said, “We have been suffering from extraordinarily financial panic caused by a well-orchestrated smear campaign quoting BSP as the source of inaccurate and malicious imputations.”

Abad said the bank is “asking the BSP to stave off the heavy withdrawals by denying the derogatory news articles attributed to them and by providing emergency loan assistance after submitting sufficient collateral.”

Banco Filipino, owned by the Aguirre family, was founded in 1964, and grew to be one of the country’s largest banks with the slogan “Subok na Matibay, Subok na Matatag.”

It currently has about P17-billion worth of deposits in 62 branches, 32 in Metro Manila and 30 outside the metropolis.

The bank was closed for insolvency in 1985 by the Central Bank, just before the EDSA People Power uprising, but the Supreme Court in 1991 ruled the closure was illegal and arbitrary, and the bank reopened in 1994.

The BSP has asked Banco Filipino to clarify its financial situation and to respond to complaints from depositors across the country that many Banco Filipino branches were closed since Tuesday without explanation.

Banco Filipino director and former Securities and Exchange Commission head Perfecto Yasay Jr. blamed the BSP for the bank’s woes, citing in particular the non-implementation of a P25-billion rebuilding plan. Yasay said that while Banco Filipino branches are open Wednesday, they will not entertain withdrawals. “Bukas kami pero ipapahayag namin sa depositor di namin mapagbigyan ang withdrawals hanggang di maaksyunan ng BSP ang aming request for support at emergency loan (We will open but we will tell the depositors we cannot service their withdrawal requests until the BSP heeds our request for support and an emergency loan),” he said in a separate interview on radio dzBB. He also accused the BSP of mismanaging Banco Filipino, saying the bank’s management cannot move without the BSP’s approval. He said the bank had been under the BSP’s strict supervision since it reopened in 1994 after it was closed in 1985.

“Pag sinasabing we are mismanaged (If the BSP claims the bank is mismanaged), the BSP is the one mismanaging us because they are practically the ones making the decisions for us,” he said. Banco Filipino is seeking P25-billion worth of financial assistance and regulatory relief as compensation for what it alleged as the “illegal closure” of the bank in 1985 by the BSP.

Banco Filipino traced its woes to a Court of Appeals decision, which stopped the Makati Regional Trial Court from implementing an order that would have directed the BSP to provide about P19 billion in financial aid to the bank.

On Feb. 14, the CA special 10th division chaired by Associate Justice Hakim Abdulwahid issued a writ of preliminary injunction that stopped the Makati RTC Judge Joselito Villarosa from conducting further proceedings on the civil case that Banco Filipino filed to get P25 billion in rehabilitation assistance and P18.8 billion in damages from the BSP.

The appellate court ruled that the BSP and the Monetary Board “have a clear and legal right to be protected against the immediate enforcement of the assailed order, and stand to suffer grave and irreparable injury” from the continuance of the proceedings in the case.

The case stemmed from a 1985 order of the BSP’s predecessor, the Central Bank of the Philippines, which closed the Banco Filipino for being insolvent.

The Supreme Court in 1991 ruled the closure was illegal, arbitrary and made with grave abuse of discretion. Eight years later, the high court decided with finality that the bank was entitled to damages arising from its illegal closure.

In 2009, the Supreme Court allowed the Makati RTC to proceed with hearing the P18.8-billion damage suit filed by the Banco Filipino. The case remains pending but its resolution was effectively stopped by the appellate court injunction./INQUIRER WITH A REPORT FROM AILEEN GARCIA-YAP

Close Banco Filipino if it’s problematic—Enrile

Close Banco Filipino if it's problematic—Enrile
By Maila Ager
INQUIRER.net
First Posted 19:48:00 03/16/2011

MANILA, Philippines—If Banco Filipino is problematic, then it should just close down its operation, Senate President Juan Ponce-Enrile said on Wednesday.

"Kailangang isara kung may problema (It must be closed down if there's a problem). Why should you allow a bank that is mismanaged to operate?" Enrile told reporters.

"Dapat nun, pasukin ng Bangko Sentral 'yun at tingnan kung ano ang problema nung bangko na yun (What the BSP could have done is mediate and find out what's the problem)," he said, "You know, the money there does not belong to the bankers, it belongs to the depositors. Kawawa ang mga depositors (The depositors are the ones at a losing end), they have to be protected."

Enrile was with the Department of Finance when Banco Filipino first shut down its operation during the Marcos regime. But he said they prevented its closure because the Central Bank had infused cash to help the bank.

"Ngayon na naman nagkakaroon na naman sila ng problema, ibig sabihin nun masama ang management (Now they have a problem again. That means, they are being managed badly)," said the Senate leader.

And should the bank finally close down its operation, Senator Ralph Recto, chairman of the Senate committee on ways and means, said the Bangko Sentral ng Pilipinas and the Philippine Deposit Insurance Corporation should see to it that its depositors should be protected.

But first, Recto said the BSP should run to the rescue of the Banco Filipino "not to save its owners and board of directors but the hapless depositors who are now jittery over the fate of their money deposits."

"We want to know from the BSP and its monetary board why the thrift bank has not been given its much needed court-sanctioned attention so that the protectors are protected," he said in a statement.

The BSP, he said, should have infused P25 billion in financial assistance to Banco Filipino under the rebuilding plan approved by the Makati Regional Trial Court when Supreme Court ordered the reopening of the bank in 1994.

"The BSP, regardless of the real story behind Banco Filipino's money woes, should calm the banking sector by ensuring the depositors that their money are safe and intact," said the senator.

"The tsunami of withdrawals must be stopped before the contagion spreads out to other small troubled banks and trigger an 8.9 magnitude quake in the banking sector," he added.

Philippines Looks to Curtail Direct Microfinance Lending by Government Agencies

MICROCAPITAL BRIEF:

Philippines Looks to Curtail Direct Microfinance Lending by Government Agencies

by MicroCapital on Tuesday, March 15, 2011 at 1:03pm

In an effort to counter political patronage, the administration of Philippine President Benigno Aquino III has indicated its intention to alter current microfinance policies, which confer power to government agencies to lend directly to poor people.

In 1998, the President of the Philippines at the time, Joseph E Estrada, established the “National Strategy for Microfinance”, which limited government microfinance activities to wholesale lending to microfinance institutions (MFIs) through government financial institutions (GFIs) such as the Development Bank of the Philippines and the Land Bank of the Philippines. The directive was issued in response to a number of defaults in the government’s direct lending programs. The directive was repealed in 2006 by President Estrada’s successor, Gloria Macapagal-Arroyo, who replaced it with another directive that currently allows government agencies such as the Department of Social Welfare and Development (DSWD) and GFIs to launch their own microcredit initiatives in unbanked regions of the Philippines.

President Aquino said, “We will work to institutionalize the National Strategy for Microfinance that was formulated in 1998. We will also make sure that microcredit will not be used as a tool for political patronage.” [1]

Joselito S Almario, Executive Director of the National Credit Council (NCC), a division of the Department of Finance that focuses on credit policy and the provision of financial services to low-income individuals, stated that there is a need for a more permanent framework in the form of a law to govern the microfinance sector. He also stated that in the remote regions of Philippines, where DSWD is active in lending, the government’s main focus must not be to provide financial services but to first create an environment more conducive to economic activity [1].

By Medha Ravi, Research Associate

Source and Resources:

BusinessWorld news article, “Aquino proposes adoption of new microcredit tack”, http://www.bworldonline.com/content.php?title=Aquino+proposes+adoption+of+new+microcredit+tack&id=27427

MicroCapital.org story, March 1, 2011, “MICROCAPITAL BRIEF: Bangko Sentral ng Pilipinas (BSP) Study Indicates High Density, Advanced Technology, Larger Profits in Philippine Banking Sector”, http://www.microcapital.org/microcapital-brief-bangko-sentral-ng-pilipinas-bsp-study-indicates-high-density-advanced-technology-larger-profits-in-philippine-banking-sector/

MicroCapital.org story, October 19, 2010, “MICROCAPITAL BRIEF: Bangko Sentral ng Pilipinas (BSP) Approves Establishment of Microfinance Institutions in Underserved Areas of the Philippines”, http://www.microcapital.org/microcapital-brief-bangko-sentral-ng-pilipinas-bsp-approves-establishment-of-microfinance-institutions-in-underserved-areas-of-the-philippines/

MicroCapital.org story, September 8, 2009, “MICROCAPITAL BRIEF: Philippine Microfinance Industry Reaches $200m and Reflects on Challenges for the Future”, http://www.microcapital.org/microcapital-brief-philippine-microfinance-industry-reaches-200m-and-reflects-on-challenges-for-the-future/

Browse the MicroCapital Universe and add your entry to the wiki at: http://www.microcapital.org/microfinanceuniverse/

Palace leaves Banco Filipino mess to BSP

Palace leaves Banco Filipino mess to BSP
By Christine O. Avendaño, Jerome Aning, Jhunnex Napallacan, Joey A. Gabieta, Inquirer Visayas
Philippine Daily Inquirer
First Posted 05:46:00 03/17/2011

MANILA, Philippines—Though it is concerned about the situation at Banco Filipino, Malacañang said it would not intervene in a matter that only the Bangko Sentral ng Pilipinas (BSP), the central bank, was competent to handle.

The Palace was not intervening in the Banco Filipino problem because the BSP has the “competence and supervisory powers over banks,” said Presidential spokesperson Edwin Lacierda.

He said the Palace has “every confidence in BSP Governor Amado Tetangco.”

The BSP has asked Banco Filipino to clarify its financial situation following reports that the bank had declared a voluntary bank holiday. The central bank also asked the thrift bank to respond to complaints it had been receiving from depositors from various parts of the country that many Banco Filipino branches were closed without explanation.

Depositors’ complaints

Lacierda said Malacañang was aware of depositors’ complaints and advised them to “refer their complaints to the BSP.”

Banco Filipino executive vice president Maxy Abad released a statement on Tuesday saying the bank was encountering an “extraordinary financial panic caused by a well-orchestrated smear campaign quoting BSP as the source of inaccurate and malicious imputations.”

The bank blamed the BSP for its woes, citing in particular the non-implementation of a P25-billion rebuilding plan.

Banco Filipino currently has about P17 billion worth of deposits in 62 branches, 32 in Metro Manila and 30 outside the metropolis.

Banco Filipino has traced its woes to a Court of Appeals decision which stopped the Makati Regional Trial Court from implementing an order that would have directed the BSP to provide about P19 billion in financial aid to the bank.

On Feb. 14, the appellate court’s special 10th division chaired by Associate Justice Hakim Abdulwahid issued a writ of preliminary injunction which stopped the Makati RTC Judge Joselito Villarosa from conducting further proceedings on the civil case that Banco Filipino filed to get P25 billion in rehabilitation assistance and P18.8 billion in damages from the BSP.

The appellate court ruled that the BSP and the Monetary Board “have a clear and legal right to be protected against the immediate enforcement of the assailed order, and stand to suffer grave and irreparable injury” from the continuance of the proceedings in the case.

The case stemmed from a 1985 order of the BSP’s predecessor, the Central Bank of the Philippines, which closed the Banco Filipino for being insolvent.

The Supreme Court in 1991 ruled the closure was illegal, arbitrary and made with grave abuse of discretion. Eight years later, the high court decided with finality that the bank was entitled to damages arising from its illegal closure.

In 2009, the Supreme Court allowed the Makati RTC to proceed with hearing the P18.8-billion damage suit filed by the Banco Filipino. The case remains pending but its resolution was effectively stopped by the appellate court injunction.

Left wondering

Lawyer Rose Versoza is one of the Banco Filipino depositors who is left wondering if she can still get back her deposit.

Just two weeks ago, Versoza, a co-anchor of Cebu’s Balitang Bisdak, deposited P18,000 in the account of her 11-year-old son in the Banco Filipino branch in Mandaue City.

She had deposited the money, intended for the tuition of her son who will enter the fifth grade in June, so it would not be spent.

Though she knows she can still get the money from the Philippine Deposit Insurance Corp., Verzosa said she is worried about getting the amount in time for her son’s tuition.

An irate depositor at a Cebu City branch informed dyLA Radio on Tuesday that he had a P2 million deposit and was worried over what would happen to his money.

A young woman in her 20s and a depositor of the Gen. Maxilom Avenue branch in Cebu City, said her savings were small but she needed money to pay her bills.

Hard-earned money

Still another client, a manager of a Cebu City restaurant, said she had deposited P350,000 in the bank.

Lawyer Nick Esmale could not believe he could not withdraw the money he deposited in a Banco Filipino branch in Tacloban City, Leyte.

“It’s hard-earned money, (from) blood and sweat,” said Esmale, a Banco Filipino depositor for more than ten years.

Ritchel Gongora, another depositor at the Tacloban branch, said she was upset that her savings of more than four years could “vanish so easily.”

“When I was informed about it by a friend, I almost fainted and I cried. All I want now is to get back my deposit,” she said.

Wednesday, March 16, 2011

BIR chief retreats as solons swat AIR

BIR chief retreats as solons swat AIR

By Gil C. Cabacungan Jr.
Philippine Daily Inquirer
First Posted 05:13:00 03/16/2011

Filed Under: Government offices & agencies, Congress
MANILA, Philippines—For the second time in less than a year in office, Bureau of Internal Revenue (BIR) Commissioner Kim Henares has been forced to retreat on a controversial measure designed to boost revenues.

Henares has agreed to pull out an agency order mandating private individuals earning more than half a million pesos a year to submit what was practically a statement of assets, liabilities and net worth (annual information return or AIR) after getting a virtual lecture from more than half a dozen lawmakers at the House ways and means committee hearing Tuesday.

Henares told the lawmakers she would recommend the withdrawal of Revenue Regulation No. 02-2011 issued March 1 compelling individuals earning P38,462 a month to file an AIR with their annual income tax return on a voluntary basis initially this year and to become mandatory starting next year.

Cagayan de Oro Rep. Rufus Rodriguez said that Henares apparently realized her error after lawmakers “argued with passion” against the AIR.

Unconstitutional

“It is illegal because it did not pass Congress. It is unconstitutional because it violates an individual’s right to privacy. It is undemocratic because it was done without any consultation,” Rodriguez said.

Bayan Muna party-list Rep. Teodoro Casiño said: “I am happy that Commissioner Henares has seen the light on this matter. The BIR already has all the information needed to enhance revenues and go against tax evaders. They should just do their job properly rather than burden taxpayers with questionable and practically useless regulations like the AIR. I hope this is the end of it.”

Question Hour

Rodriguez said that should Finance Secretary Cesar Purisima refuse to heed Henares’ recommendation to withdraw the AIR, lawmakers would compel her boss to appear before the House committee in a Question Hour.

This is the second time that Henares had to take a step back on a policy measure after the Supreme Court issued a temporary restraining order against her proposal to impose a 12-percent value added tax on toll rates, a proposal which was also savaged by representatives and senators.

Tuesday, March 15, 2011

RP eyed as source of Pepsi coco water

RP eyed as source of Pepsi coco water

March 14, 2011, 11:04pm

MANILA, Philippines – Global beverage giant PepsiCo Inc. is looking at the distribution of ‘coconut water’ in the US market with the Philippines as primary source.

Trade officials said that Brazilian businessman Rodrigo Veloso, founder and CEO of One Natural Experience (O.N.E.), who came here over a year ago to explore for the sourcing of young ‘coconut water’, has renewed interest in the Philippines.

Based on the plan, O.N.E. will produce the ‘coconut water’ in the country but PepsiCo will take care of distribution in the US market.

“They should produce it here because the tendency for this kind of product is to produce it at source,” the official said.

The initial volume of ‘coconut water’ that O.N.E. would like to source from the Philippines is 10 containers a month. The country’s total coconut production is placed at 16 million tons a year.

Last year, PepsiCo and O.N.E., a Los Angeles, California-based coconut water company, has announced PepsiCo’s increased investment in O.N.E., thereby acquiring a majority stake in the company. This represents a second round of investment in O.N.E. by PepsiCo and Catterton Partners, a private equity firm based in Greenwich, Conn.

Coconut Water is one of the fastest growing categories in the U. S. beverage market.

The trade official, however, said that there is not enough supply of coconut water that can be produced in the country.

The number of productive coconut trees in the country has dwindled over the years because of neglect due to the lower price of copra. It was only lately that prices of copra have reached an all-time high of P60 per kilo following the strong demand of coconut oil in the world market.

Trade and Industry undersecretary Merly Cruz said the biggest producers of coconuts in the country are Davao , Bicol, Samar, Leyte and Quezon, but coconut production has dwindled over the years because there have been lesser coconut development programs and no more replanting.

She said there is also a huge demand for coconut water concentrates in the U.S. after a Thai supplier has stopped its export business.

Cruz said the government is pursuing an advocacy to develop high-value added products out of coconut by-products to create awareness among Filipinos that there is money in these lowly products and in doing so they would be encouraged to cultivate their coconuts and replant new ones. (BCM)

Banco Filipino branches closed for 'bank holiday'

Banco Filipino branches closed for 'bank holiday'

From: abs-cbnNEWS.com
Posted at 03/15/2011 2:51 PM | Updated as of 03/15/2011 4:50 PM

MANILA, Philippines (UPDATE) - Several branches of Banco Filipino on Tuesday said they were closed for a bank holiday.

A person in one branch said management is "fixing something with the BSP [Bangko Sentral ng Pilipinas]." Banco Filipino officials couldn't be reached for comment.

Banco Filipino has been seeking P25 billion in rehabilitation assistance and P19 billion in damages from the central bank for the 1985 closure that the Supreme Court said was illegal.

Bangko Sentral Governor Amando Tetangco and two deputy governors didn't immediately reply to text messages seeking a statement.

Spokeswoman Fe dela Cruz said a statement would be forthcoming.

In a separate development, Banco Filipino's thinly traded stock was delisted by the stock exchange last week, together with four other companies, for failure to submit regular reports.

'Extraordinary financial panic'

At the Butuan and Zamboanga branches of the bank, a notice, signed by Banco Filipino Executive Vice President Maxy Abad, said that the bank is "suffering from extraordinary financial panic" which they attributed to "a well-orchestrated smear campaign," by the BSP.

"The bank is exhausting all efforts to protect its depositors by asking the BSP to stave off the heavy withdrawals by denying the derogatory news articles attributed to them and by providing emergency loan assistance after submitting sufficient collateral," the statement read.

"Despite the urgency of all these requests, we have not recieved any official word from the BSP/MB [Monetary Board] on the action they have taken, if any. Furthermore, we have also reiterated the immediate implementation of the approved business plan as ordered by the Makati-RTC. Moreover, the court order prohibits the BSP/MB, its officials, agents and any persons acting for and in their behalf from committing any act prejudicial to the operation of the bank," it said.

"Kindly inform and clarify this matter to our depositors and assure them that as soon as we receive official notice of any favorable action taken by the BSP/MB we shall advise them accordingly," the statement ended.

Surprised depositors

Depositors in branches in Kamias, Timog, and Muñoz in Quezon City were surprised to find out the bank is closed Tuesday.

Medilina Balogomolon, a depositor, rushed to the bank's Kamias branch to check if the bank was really closed. She tried to withdraw money from the bank's ATM but was only able to get P400 before the machine showed the message "Terminal is unavailable."

Ricardo Galang, who owns a beer house beside the BF Kamias branch and is also a depositor, said the bank was still open Monday.

They saw the tellers counting money in the afternoon but nobody advised them that the bank will be closed today.

Vendors beside the BF Muñoz branch like Marilyn Flores are worried that they will be unable to get their money.

Depositors in provinces worried

Banco Filipino branches in the provinces were also closed Monday.

In Cagayan de Oro, the ABS-CBN News team was only able to talk to a lone guard at the bank. He said he was only directed to tell customers that the bank will be closed for the day.

In Naga City, several worried depositors rushed to the bank, only to be greeted by a security guard who told them that management suspended transactions for the day due to a meeting of bank officials in Manila.

The branch in Iloilo City was also closed, and the bank's ATM machine was also unavailable, customers said.

Branches in Dagupan and Isabela were also closed. Reports from ANC Business; Zen Hernandez, ABS-CBN News; Joyce Clavecillas, ABS-CBN Iloilo; Rizza Mozstar, ABS-CBN Naga; Richmond Hinayon, ABS-CBN Butuan; Nevi Calma, ABS-CBN Dagupan; and RJ Rosalado, ABS-CBN Zamboanga

Philippine remittances in 2010 reached $18.8 B

Philippine remittances in 2010 reached $18.8 B

Remittances to the Philippines reached $18.8 billion in 2010, according to the Bangko Sentral ng Pilipinas (BSP) report. In December 2010, money sent home by overseas Filipino rose 8.1% to $1.69 billion, bringing total remittances for the year to a record of $18.76 billion.

This record represents an 8% increase from the previous and beating the forecast of an 8% growth to $18.7 billion. Remittances for 2009 amounted to $17.3 billion.

“The stable flow of remittances continued to provide strong support to domestic demand, with the remittance level for the year accounting for close to 10% of the country’s gross domestic product,” the BSP said.

“The major driving factors that helped accelerate the growth in remittances were the diversity of the destinations and skills of overseas Filipinos combined with the expanding network of bank and non-bank service providers both here and abroad to capture a larger share of the global remittance market,” it added.

As of end-December, commercial banks’ established tie-ups, remittance centers, correspondent banks and branches/representative offices abroad expanded to 4,581 from 3,730 in the previous year.

Peso seen at P41.50:$1 this year

Peso seen at P41.50:$1 this year

In spite of the continuous strengthening of the Philippine Peso, London-based Barclays Capital says it sees the the peso at P41.50 to $1 instead of P40 to $1 this year. This is because of the continued increase in global oil prices.

According to the latest research note of Barclays Capital economist Prkriti Sofat, the investment bank is now expecting a lower balance of payments (BOP) surplus in light of higher oil prices.

Sofat also said Barclays Capital also lowered its BOP surplus forecast to $10 billion due to the rise in oil prices that would weigh on the trade balance and result to lower portfolio flows. Its earlier forecast was $13.5 billion.

Last year, the Philippines BOP surplus surged to a record of $14.4 billion because of the remittance of overseas Filipino workers (OFWs), as well as the strong foreign capital inflows. But Sofat said that the rising inflation differential would limit the appreciation of the peso against the US dollar this year.

Interest rate cap could force credit card firms to close shop, says BAP

Interest rate cap could force credit card firms to close shop, says BAP

By Jess Diaz (The Philippine Star) Updated March 15, 2011 12:00 AM

MANILA, Philippines - Banks and other credit card issuers warned congressmen yesterday that a cap on interest rates could force them to close their credit card business.

In position papers they submitted to the House committee on banks and financial intermediaries, the Bankers Association of the Philippines (BAP) and the Credit Card Association of the Philippines (CCAP) opposed bills seeking a ceiling on lending rates that credit card issuers could charge their customers.

According to the Bangko Sentral ng Pilipinas (BSP), there are about four million Filipinos using credit cards.

BAP president Aurelio R. Montinola III said although they recognize the laudable intention of the bills, in the ultimate analysis, an interest rate cap would harm consumers and could cause credit card companies to cease operations.

He said limiting lending rates results in “lower credit extension,” which is disadvantageous to consumers, many of whom would be forced to turn to the so-called “5-6” usurers, who charge at least 20 percent a month or 240 percent a year.

“Take the case of Japan where consumer lending dropped since companies can no longer take on higher risks thus lower income level individuals and families were deprived of credit extension. If the companies cannot compensate for the risks, then it is not prudent to extend credit,” he said.

“Given the proposed cap on interest rates, credit card businesses may be compelled to close operations...more of credit card holders will transfer or return to borrowing from informal sectors, which means exceedingly higher interest rates for customers and lesser taxes for the government,” Montinola stressed.

Simon Calasanz, CAAP president, expressed similar concerns.

“A credit card company is first and foremost a business. As such, it has to make a significant investment on infrastructure, systems, manpower, and the like before it can realize a profit,” he said.

“Capping the interest rate and the fees charged by these companies will, at best, effectively lengthen the time it will take for the company to recover and finance required new technology and infrastructure; at worst, capping interest rates will make the investment unrecoverable. This situation will eventually lead the credit card company to cease their operations and close shop,” he said.

“It takes years before a credit card company recovers its investments through the interest rates that it places on the credit card,” he said.

He added that credit card companies contribute a significant amount in tax revenue to the government as transactions are easily legitimized, with the merchant compelled to issue a receipt on card purchases.

Calasanz pointed out that bills seeking an interest rate cap “will adversely impact the very consumers they are protecting.”

They will no longer have access to formal and regulated credit lenders and will be forced to turn to the black market like loan sharks, he said.

“Consumers who use cards for convenience like international spending, zero interest installment plans, and online transactions will be deprived of these facilities and benefits. Should card companies cease to grant credit, the 30 to 35 percent of consumer spending in retail outlets is automatically put in jeopardy,” he said.

CCAP predicted in its position paper that there would be an economic slowdown if there would be a decline in consumer lending.

Like banks and credit card companies, the BSP has opposed proposals to set an interest rate ceiling for credit card leading.

The BSP said it prefers rates to be dictated by market conditions like competition among card issuers.

It said the rates issuers charge their customers are not high.

New capital ruling for thrift banks induces further consolidation

New capital ruling for thrift banks induces further consolidation

By TPT (The Philippine Star) Updated March 15, 2011 12:00 AM

MANILA, Philippines - The latest ruling of the Bangko Sentral ng Pilipinas (BSP) increasing the minimum capital requirements for new entrants in the thrift banking sector will stimulate further competition and consolidation.

“There will be less entrants in the industry with the high capital requirement,” Patrick Cheng, president of the Chamber of Thrift Banks (CTB) and chief executive office of HSBC Savings Bank.

Last week, the BSP ruled that new entrants to the thrift banking industry would need a minimum capital of P1 billion (from P325 million) if the head office will be based in Metro Manila, and P500 million (from P52 million) if the head office will be based in the bustling cities of Cebu or Davao.

Likewise, the minimum capital requirement was raised from P52 million to P250 million if the head office of an existing thrift bank will transfer from one area to an area with a higher classification.

Aside from the high capital ruling, competition will also force thrift banks to consolidate in the face of increasing “incursions” by the rural and commercial banking sector into the consumer banking market, once considered the niche of the thrift banks.

After the recent financial crisis, commercial banks entered the consumer market, mainly automobile, property and the small and medium enterprise (SME).

“Independent thrift banks will have to adopt to changing conditions and the growing competition,” the CTB head said. “Commercial banks are entering our niche market.”

Independent thrift banks are banks that are not allied with the country’s conglomerates or with commercial banks.

However, the leading thrift banks are allied with major commercial banks, or are subsidiaries of foreign banks.

That includes BPI Family Savings Bank (under the Bank of the Philippine Islands), the Philippine Savings Bank (under the Metropolitan Bank & Trust Co.), the RCBC Savings Bank (under the Rizal Commercial Banking Corp.), HSBC Savings Bank (subsidiary of the Hongkong and Shanghai Banking Corp.) and Citi Savings Bank (subsidiary of Citibank NA).

Meanwhile, rural banks are increasingly expanding in reach as well as capital base. The most notable are One Network Bank with resources worth P11 billion and 80 branches throughout Mindanao, GM Bank of Luzon with 35 branches in Region II and III, Green Bank with 36 branches, 43 kiosks and total resources of nearly P2 billion, and Rang-ay Bank, a rural bank with resources of over a billion pesos and an extensive branch network in Region I and II.

These major rural banks are also products of consolidations, or mergers and acquisitions.

These rural banks are not only lending to micro-borrowers but are already competing for deposits and loans in the major cities outside Metro Manila.

Meanwhile, the thrift banking sector reported total assets of P577.8 billion in 2010, or an increase of nearly eight percent from the P536.6 billion in 2009.

The figures represent only 55 thrift banks that are members of CTB. The banking segment actually numbers 73 with the difference coming from savings and loan associations.

Deposit liabilities amounted to P464.88 billion and capital reaching P67 billion.

Saturday, March 12, 2011

Draft rules seek to limit PERA revenue losses

Draft rules seek to limit PERA revenue losses

DRAFT RULES implementing Republic Act (RA) 9505 or the Personal Equity and Retirement Account (PERA) Act of 2008 strictly limit annual contributions to reduce revenue losses from perks mandated by the law.

The regulations also specify who can apply for tax credit certificates (TCCs) to ensure that TCCs are not fraudulently used.

The draft, prepared by a technical working group at the Capital Market Development Council (CMDC) and up for a discussion later this year, state that annual contributions cannot go beyond P100,000 for an individual Filipino working and residing in the country and P200,000 for those working abroad.

Five PERAs can be maintained at any one time but the annual contributions must not exceed P100,000 or P200,000.

Resident Filipinos, meanwhile, cannot apply for TCCs to claim a 5% income tax credit provided under RA 9505. OFWs, however, can do so to reduce their internal revenue tax liabilities.

The draft revenue regulations, dated Feb. 15, supersede those dated Dec. 9, 2009 that allowed annual contributions higher than P100,000 and P200,000.

The older draft also stated that resident Filipinos could apply for a TCC, which they could use to reduce their income tax liabilities, while OFWs may use their TCCs to pay for any internal revenue tax.

Rescina S. Bhagwani, CMDC executive director, told BusinessWorld the annual contributions were deliberately capped at P100,000 and P200,000 to limit revenue losses for the government.

In addition to the tax credit equivalent to 5% of contributions, PERA investment and reinvestment income is also exempted from a slew of taxes such as the final withholding tax on bank deposits, 10% tax on cash or property dividends, and the stock transaction tax on shares traded through the stock exchange.

"[The rules are intended] to avoid the abuse of tax incentives because in PERA, as you know, everything has incentives: the initial you amount you put in, and the moment that amount is invested, that also has [tax perks]," Ms. Bhagwani said.
Finance Undersecretary Gil S. Beltran, in a separate interview, said: "If for example, you earn high, wouldn’t you want to invest more money [into a PERA] so your investment will earn more and then enjoy also more tax incentives?"

While resident Filipinos cannot apply for TCCs, they can get a certification from their administrators on their contributions which will be used by employers to adjust withholding taxes on compensation income.

Self-employed individuals and OFWs are the only ones who can apply for TCCs.
"[The] BIR is saying there seems to be a lot of fraud happening in the use of TCCs. The TCCs can be sold, so we want to avoid that," Ms. Bhagwani said.

Tax Commissioner Kim S. Jacinto-Henares said the CMDC was allowed to draft the new regulations because it was insistent that RA 9505 be finally implemented.

The PERA law was enacted in August 2008 to encourage Filipinos to save up for retirement. Implementing rules pertaining to PERA administrators and custodians were issued in October 2009 by the Bangko Sentral ng Pilipinas and the Securities and Exchange Commission (SEC), but the law could not be implemented sans BIR regulations governing the law’s tax provisions.

The CMDC has forwarded its draft to the BIR for review. "Hopefully it will be finalized during CMDC’s next meeting in May," Ms. Bhagwani said.

CMDC counts among its members the Finance department, central bank, SEC, Insurance Commission and private sector groups such as the Bankers Association of the Philippines and the life and non-life insurers industry groups.

Ms. Jacinto-Henares said she had yet to see a copy of the draft, which should also "consider the monitoring of PERA accounts."

"A PERA contributor is allowed to maintain five PERA accounts anywhere in the country. Just imagine how the BIR will be able to monitor each and every account to see if they are following the instructions not to exceed the allowable amount," she said.

Lina P. Figueroa, a principal at Punongbayan and Araullo, said capping the annual contributions "may discourage people from investing in PERAs."

She also questioned the planned issuance of TCCs to OFWs, noting the latter "are already exempted from income tax" and may have no use of the certificates.

Still, Ms. Figueroa said the draft had addressed "main issues" and raised the prospect of the PERA law finally being implemented.

The Finance department considers RA 9505 as a revenue-eroding law and has estimated annual losses of P12 billion once it is implemented.

"Obviously it has an impact on our revenue generation... but we also want to encourage Filipinos, especially OFWs, to invest their money so that the country can use them in its projects to improve the economy," Mr. Beltran said.

RCBC eyes P4.4B in capital

RCBC eyes P4.4B in capital

THE RIZAL Commercial Banking Corp. (RCBC) said it still needs to raise as much as P4.4 billion in capital this year even after raising P2.1 billion from a share sale to the International Finance Corp. (IFC).

RCBC President Lorenzo V. Tan told a press briefing yesterday the bank wants to raise a total of P6-6.5 billion this year to finance acquisitions and an expansion in its lending operations.

“Of the bank’s plan to raise P6 to P6.5 billion, there is a remaining P4 to P4.4 billion that we plan to raise through a share sale with a single investor,” he told reporters after RCBC, the country’s fifth largest bank, and IFC, the private sector investment arm of the World Bank, signed an agreement covering the share sale yesterday.

Mr. Tan said the share sale to raise P4-4.4 billion should take place in April at the earliest or May at the latest. He did identify the investor.

“[We are raising capital] to prepare for Basel 3, boost our organic growth as we try to open 15 branches a year and give us capital to make attractive acquisitions,” Mr. Tan added.

He pointed out the sale of 73.45 million common shares to the IFC -- valued at P2.1 billion and equivalent to a 7.2% stake in the bank -- was just the first leg of the bank’s Tier 1 capital-raising effort for the year.

Other large Philippine banks have raised Tier 1 capital in preparation for the Basel 3 standards, which were crafted to make banks stronger against stresses such as those seen during the financial crisis.

John G. Deveras, RCBC first senior vice-president and head of strategic initiatives, said IFC bought the shares at roughly P29 apiece.

RCBC shares closed at P27.50 each yesterday, 85 centavos higher than on Tuesday, when the bank disclosed its agreement with IFC to the stock exchange.

For his part, Jesse O. Ang, IFC resident representative, said “the Yuchengco Group of Companies is a prominent group not just in banking... The group has a major role in the country’s development.

We are pleased to have the opportunity to work with them.”

RCBC is a member of the Yuchengo Group.

“The fact the bank is moving into microfinance to cater to the underserved sector -- and it has a wide reach -- [makes it an ideal partner for IFC],” he added.

IFC is partnering with local banks to help these institutions expand their lending operations.

In response, Mr. Tan said “we have always considered our microfinance business to be a strong complement to the commercial bank’s lending operations.”

RCBC targets to disburse P300 million worth of microfinance loans this year, up from the P102 million released from July 2009 to December 2010.

The bank ventured into microfinance -- the first large bank to do so -- in July 2009 after buying Jose P. Laurel Rural Bank, Inc. based in Batangas in February 2009 and Merchants Savings & Loan Association, Inc., which had branches in Mindanao, in May 2008.

Asked about IFC’s plans, Mr. Ang said: “IFC is open to acquisitions and investments. We see a role in various financial institutions because they have a broad reach and they are excellent vehicles to provide credit to key populations. We will work with other institutions by investing in the form of equity or a risk-sharing facility.”

“We will look into the whole spectrum of financial players and niche institutions specializing in microfinance. We will also look at rural banks as they are closer to certain constituents we are interested in,” he added.

Mr. Deveras said “IFC’s investment brought RCBC’s Tier 1 capital adequacy ratio (CAR) to 13.4% and its combined CAR to 18.5%, well-above the central bank’s 10% minimum requirement.”

He also said the other investor expected to contribute as much as P4.4 billion in fresh capital to RCBC will claim a 13.5% stake in the bank. As a result, IFC’s holdings will be diluted to 6.9%.

Asked about RCBC’s acquisition plans, Mr. Tan said, “there is nothing [definite] but we have a few on our table... these are small banks.”

RCBC is the second large local bank where the IFC has made an investment.

IFC and the IFC Capitalization Fund invested $150 million in Banco de Oro Unibank, Inc. (BDO), the country’s largest, in April last year.

IFC has also made an investment in the Planters Development Bank.

It has also closed risk sharing agreements with BDO and the Bank of the Philippine Islands, the country’s third largest bank, for their sustainable energy finance programs. -- A. R. R. Gregorio

Thrift banks cheer BSP move raising capitalization levels

Thrift banks cheer BSP move raising capitalization levels
By Michelle Remo
Philippine Daily Inquirer
First Posted 21:19:00 03/09/2011

MANILA, Philippines—Competition in the country’s thrift banking industry is already stiff and the entry of new players may have an adverse rather than beneficial effect, industry officials said Wednesday.

As such, the Chamber of Thrift Banks (CTB), the umbrella organization of thrift banks in the country, said regulators moved in the right direction by effectively discouraging the entry of new industry players via the imposition of higher capitalization requirements for entities wanting to enter the sector.

“Competition in thrift banking continues to heat up as commercial banks go into our niche market,” CTB president Patrick Cheng told reporters.

Therefore, Cheng said, entry of more competitors in the thrift banking sector indeed has to be addressed.

As banks become more competitive, more of them offer new products and services to reach out to more clients. Consistent with this trend are recent moves by universal and commercial banks to tap smaller corporate and individual clients who used to be largely serviced by thrift banks.

This is the reason existing thrift banks said discouraging more competition, such as by making it more difficult for new entities to enter the thrift banking industry, is a welcome move.

Smart launches P500 phone

Smart launches P500 phone
By Paolo Montecillo
Philippine Daily Inquirer
First Posted 16:11:00 03/10/2011

MANILA, Philippines—Dominant carrier Smart Communications Inc. is bringing one of the world’s most affordable phones to the country to reach the people at the “base of the pyramid” that still do not have access to basic telecommunications services.

In a briefing on Thursday, Smart announced the launch of its “Panalo Phone,” which would sell at a price of P499 each. The new phone, which comes in two models made by the Chinese brand ZTE and local phone maker Cherry Mobile, is set to hit the market by March 21.

It will be sold through Smart’s budget brand Talk N’ Text, which only offers prepaid accounts.

Close to nine in 10 Filipinos today already have mobile phones, but the company said it would target the “D” segment of the market, made up of about 11 million Filipinos that still could not afford mobile phones.

“Offering quality services and making them affordable and accessible to what they now call the base of the pyramid is built into Smart’s DNA. This is where and how we grow,” the company’s chief wireless advisor Orlando B. Vea said.

The Panalo Phone, which comes with a Talk N’ Text SIM card that cannot be removed, comes preloaded with “Araw-Araw Text 10,” one of the brand’s new promos that allow users to send 40 text messages to other Talk N’ Text subscribers and another 25 messages to users of other networks.

“This allows us to offer real value to this fresh market of potential mobile subscribers,” Smart wireless consumer division head Danilo Mojica said.

The Panalo Phone allows for 2G connectivity for basic call and text services, an FM radio receiver, a flashlight and a basic monochrome screen.

Aside from the device itself being affordable, Smart said it would develop new “bucket-priced” promos specifically for Panalo Phone users.

“This is key to our overall strategy of slicing and dicing the market and making sure we have a unique and relevant product to offer this particular segment,” Mojica said.