FASTER REMITTANCES  SEEN WITH  THRIFT  BANKS' FCDUs

MANILA, March 27, 2006
 (BULLETIN) By FIL C. SIONIL - The delivery of remittances to the beneficiaries of overseas Filipino workers (OFWs) in the countryside is expected to be fasttracked with the granting of FCDU (foreign currency deposit unit) license to rural bank, cooperative banks and thrift banks.

Chamber of Thrift Banks (CTB) Executive Director Suzanne Felix said the easing of the regulation in handling FCDU accounts by thrift banks through the reduction in capital base will allow member-banks in the countryside to channel resources to improve the quality of service.

This as market players believed that the relaxation is another one of those steps the monetary authorities are adopting to closely monitor the inflow and outflow of dollars in the country.

"This (referring to the relaxation of rules on FCDU) is a welcome move for the members," Felix commented.

Foreign currency dealers, on the other hand, foresaw the decision as "part of the monitoring process" of the Bangko Sentral ng Pilipinas (BSP), plug any loopholes in dollar inflow and outflow.

"It could, also, mean an improvement in the balance of payments position as net income receipts increase with the capture of dollar inflows in the countryside," a currency market player said.

The Monetary Board, the policy-making body of the BSP, last week relaxed the granting of FCDU license to rural banks and cooperative banks as well as brought down the capital requirements for thrift banks with FCDU operations to, among others, encourage the flow of foreign exchange into the banking system which can be channeled into productive economic activities.

For thrift banks, in particular, the authorities reduced the capital requirements for FCDU operations from P650 million and P150 million, to P325 million and P52 million for thrift banks with head offices in Metro Manila and those with head offices located outside Metro Manila, respectively.

Felix said the new regulation will not only ease the servicing of remittance, but, will, more Importantly, remove the financial burden for CTB-members to capital build-up their capital as earlier required by the regulators.

The BSP eased the capital requirement for an FCDU license, saying that capital adequacy ratio (CAR) of 12 percent, which is two percentage points higher than the 10 mandated, is considered equally effective in measuring the financial soundness of a bank-applicant.

It, too, is four percentage points more compared to the eight percent CAR required by the Bank for International Settlement.

With this Felix explained CTB-member banks wanting to have an FCDU license "will no longer worry about the capital build-up."

Prior to this, the authorities consider FCDU applications, on condition that banks must beef-up their capital base, though, on a staggered basis. "This will no longer be a concern," pointed out Felix.

According to the CTB director, member-banks that have started to build-up their capital, such as in the case of Queen City, can now channel their resources earlier allocated for the purpose, to other operations and services.

Other requirement is a CAMELS rating of three. CAMELS is another barometer used by the authorities to gauge the financial soundness of a bank. It refers to capital adequacy asset qualitymanagement quality-earnings- liquidity-sensitivity to market risk. The highest CAMELS rating is five.

The regulators have agreed to give FCDU license to members of the Rural Bankers Association of the Philippines (RBAP) and co-op banks on condition that these institutions have a minimum networth of, at least, P20 million.

Also, the authorities will only consider giving an FCDU license to rural banks and thrift banks for as long as these institutions have no outstanding major supervisory concerns on safety and soundness from the last BSP annual examination.

The relaxation of the regulations on FCDU license for rural and thrift banks will give flexibility to OFWs and their beneficiaries an alternative to maintain a foreign currency deposit or exchange remittance proceeds through the banking system into a local currency.

Gov’t to borrow 0 M this year By LEE C. CHIPONGIAN (BULLETIN)

Finance Secretary Margarito B. Teves said yesterday the national government is returning to the foreign debt markets to borrow 0 million despite talks of adjusting the borrowing mix.

"We will still pursue that (0 million) but right now we are enjoying some flexibility. It is only March," he told reporters.

Depending on the interest rate environment, Teves said it is likely they would issue new bonds before September at the latest for the remaining 0-million foreign borrowing requirements.

Last January the NG issued .2 billion bonds comprising of .5 billion 25-year ROPs and EURO500 million ten-year bonds. The transaction covered more than half of the country’s borrowing needs worth .1 billion this year from commercial sources.

"We just need to fill up the requirements (remaining 0 million) plus the programmed loans and ODA (official development assistance) funds," Teves said. The expected ODA monies this year is about billion.

The DoF chief added the government would go back to the global bonds market when the pricing environment is "encouraging enough." However, Teves emphasized that the main objective is still debt reduction. NG debt is now P4 trillion while external debt is billion.

The NG borrowing profile in 2006 on paper is 58:42 but the ratio usually changes towards the middle portion of the year. "If the dollars come in and the strong inflows are sustained, then we will get more peso borrowings," National Treasurer Omar Cruz said.

Total government including BSP will have maturing loans worth billion this year. The borrowing requirement is billion of which .2 billion is done.

Politicians such as Congressman Joey Salceda said the government could afford to borrow less than this amount or about billion, since dollars will continue to swap the market from migrant workers’ remittances, portfolio investments and exports.

However Cruz said they will tap what the NG program allows, but perhaps they will get more from domestic sources to lessen the foreign exchange risks.

This year the government’s borrowing profile favored more foreign borrowing.

In the meantime the government will temper its foreign borrowing next year. The Budget department said it would make sure that dollar sourcing would not exceed 50 percent of total borrowings.


Chief News Editor: Sol Jose Vanzi

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