RP BANKS NEED NO BAILOUT -- BSP
MANILA, SEPTEMBER 23, 2008 (STAR) By Des Ferriols Tuesday, September 23, 2008 The Bangko Sentral ng Pilipinas (BSP) sees no need to bail out any local bank despite the global shockwaves from the US financial crisis.
“Our regulatory policy reforms have served their purpose,” BSP Governor Amando Tetangco said yesterday. “First of all, only a few financial institutions are affected and even those that have exposures have kept them at manageable levels.”
Tetangco issued the statement amid reports that Washington was pushing other governments to bail out ailing financial institutions.
Banks with exposures in troubled US financial institutions are now considering hedge options available to them, and the central bank sees no urgency to take further action outside of its readiness to provide liquidity if needed.
The BSP said no bank has tapped the facility for liquidity support and there have been no reports of heavy bank withdrawals.
The BSP said the early disclosure of loss provisioning by the major banks exposed to the defunct Lehman Brothers helped prevent panic among depositors who were immediately apprised of developments involving their banks.
Tetangco said banks with disclosed exposures in institutions like the Lehman Brothers were already taking the necessary steps to address their concerns.
But as the world’s largest central banks have taken action to calm down markets worldwide, Tetangco said the BSP is still monitoring the volatilities in the global financial markets.
“We’re particularly concerned with how these could impact local banks,” Tetangco said. “But at the moment, we see no further need for supervisory action.”
Tetangco said local financial institutions are closely considering hedge options available to them while the BSP is prepared to provide liquidity support as needed through its regular repurchase window.
“We would also be willing to make refinements to this as appropriate,” he added.
Tetangco, however, said it is still too early to determine whether regulatory adjustments are needed to ensure the stability of local banks in the event of a similar problem in the future.
He said any new policy measure, if at all one is needed, should have to do with gathering more information and determining which data to monitor for better “threat analysis.”
“As in the other jurisdictions, credit standards by individual banks may become stricter, depending on each bank’s situation,” he said.
Deputy governor Diwa Guinigundo also said no bank has approached the BSP for support, although he said the facility remained open.
“I don’t think anyone will actually borrow, considering that the exposure of Philippine banks have so far been much less compared to their capital base and total assets of the banking system,” Guinigundo said.
He said this could mean there is enough liquidity in the system. “When we talk of liquidity, [we ask], is there enough money for the general public? I think there is enough money for the general public considering that number one, the banks are liquid, and number two, the banks are lending,” he explained.
Guinigundo said one reason behind the resilience of depositor confidence in the banking system is that banks themselves have disclosed that they were making provisions for Lehman-related losses.
“When you start talking, that means you can overcome these problems,” he said. “You have the confidence to disclose and to be transparent to the market about some of these financial challenges,” he said.
“If you are not confident, you have no courage to come out in the open and say that we are making provisioning for these types of exposures,” Guinigundo added. “But they came out because they have that confidence.”
Guinigundo said protecting market confidence is paramount under the circumstances because loss of confidence can trigger a cascade of more troubling events.
“No matter how big a bank is, if confidence falls and deposits start pulling out, that will weaken the bank,” Guinigundo said. “There are a lot of rumors about withdrawals but so far no one has been able to prove that that is actually happening anywhere.”
US pushing for bailouts The United States is “aggressively” pushing other countries to forge bailouts for their financial institutions similar to the unprecedented $700-billion rescue it is planning for Wall Street, US Treasury Secretary Henry Paulson said Sunday.
Paulson said the Treasury’s proposal to Congress for authority to spend $700 billion to buy toxic mortgage-related assets from financial institutions could serve as a blueprint for foreign authorities.
“We have a global financial system and we are talking very aggressively with other countries around the world and encouraging them to do similar things and I believe a number of them will,” Paulson said on ABC’s This Week program.
Paulson did not provide further details, but US financial authorities have been working closely with their counterparts in Europe and Japan over the past 10 days to prevent a collapse of the interwoven global financial system.
British Prime Minister Gordon Brown said on Friday that his government would “do everything in our power to ensure the stability of the (financial) system.”
Britain’s Financial Services Authority acted rapidly Thursday to halt short-selling in financial shares – when investors borrow company stock to sell it in anticipation of profiting from a fall in value – and Brown said other actions were being considered.
“We are now working with our international partners about broader intervention we are in a position to take,” he said.
Paulson also clarified that the US bailout plan sent to Congress on Friday and centered on a government purchase of toxic mortgage-based assets would also cover non-US institutions with operations in the United States.
“If a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution,” he said.
“The key here is about protecting the system,” he said.
“Remember, our system is a global one.” Paulson also said that the intent of the plan submitted to Congress “right now wouldn’t be to buy from hedge funds” – private investment funds that specialize in aggressive risk-taking.
Regarding the unprecedented rescue plan unveiled to congressional leaders late Friday, Paulson, a former Goldman Sachs president, said: “I hate the fact that we have to do it.”
“This is a humbling, humbling time for the United States of America as we go around the world and talk to people about our financial system. We’ll work through this. We need to stabilize it first and take steps to clean things up.”
Rehab sought for 2 Lehman subsidiaries in RP By Michael Punongbayan and Ted Torres Tuesday, September 23, 2008
The Metropolitan Bank & Trust Co. (Metrobank), the country’s largest bank, is asking a Makati City court to put two local subsidiaries of the collapsed investment bank Lehman Brothers under rehabilitation.
Metrobank said it petitioned the court to place Philippine Investment One Inc. and Philippine Investment Two Inc. – subsidiaries of the Singapore-based Lehman Brothers South East Asia Pte Limited – under tation is a preemptive move to protect Metrobank against possible dissipation of assets by foreign claimants,” Vicente Cuna, Metrobank executive vice president, said.
The case was raffled off to Judge Cesar Untalan of Branch 149.
Metrobank disclosed earlier a loan exposure amounting to some P2.4 billion in the two Philippine-based Lehman Brothers subsidiaries.
It stressed that the operations of both the PIOI and PITI remain normal despite the collapse of the giant US investment bank.
“Metrobank is confident that it will recover in full its loan principal given the amount and quality of assets that the two companies are holding,” Metrobank said, adding that the amount was used to purchase foreclosed properties of the Development Bank of the Philippines and the United Coconut Planters Bank, among others.
Metrobank said that without court intervention, “the companies will suffer setbacks in meeting their financial obligations while they are being beleaguered by the attempts of some creditors to enforce payment of their claims to the detriment of other creditors, especially with the recent act of default by Lehman Brothers.”
Metrobank said the filing of petitions for corporate rehabilitation is necessary “to prevent any undue preference to certain creditors and ensure that both companies are properly preserved during the period.”
PIOI and PITI are special purpose vehicles whose business is to acquire non-performing assets or bad loans from banks or other financial institutions under the terms of the Special Purpose Vehicle Act of 2002.
An SPV is a joint venture between a bank and an asset management company.
As a joint venture company, an SPV is registered with the Securities and Exchange Commission. It is also required to secure a certificate of eligibility or COE from the Bangko Sentral ng Pilipinas.
Chief News Editor: Sol Jose Vanzi
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