Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, issued a temporary restraining order for banks to increase the ATM interbank fees for the next month. The reason stated by the BSP is that they need to study the hike because it affects the consumer welfare. Consumers may withdraw free of charge from their respective banks. The fee would be from 11 pesos to 15 pesos per interbank transaction.

Banks push for the increase of ATM interbank fees due to higher cost the interbank networks. Megalink, Nationlink, Bancnet and Expressnet are some of the interbank networks that connect different banks together. ATM’s are often used for small withdrawal transactions and small retail remittances within the same bank or to other banks. Although the BSP considers the welfare of the consumers in the increase of ATM fees, they should also weigh the welfare of the banks as well. Big banking companies such as BDO, Metrobank and BPI had announced the increase of ATM fees due to higher cost. Thus, the profitability of the banks would be compromised if BSP would restrain the banks for the price hike. 



Del Rosario, Keren Michelle P.
Desamparado, Lorenze Matthew G.
Somes, Elliane P.
 
According to the Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, loans provided for by commercial and universal banks went up to P3.60 trillion from the P3.23 trillion last year. Although it is slower than the 13% growth recorded during the month of June this year, it still increased at a growth rate of 11.7%, which is still significantly good. Basing from the graph that follows, the gross total loan portfolio of commercial and universal banks grew at more than 10% for the past 3 years. With the entry of the month of July this year, the total loans still increased at a growth rate that is above 10%.

As one of the most important function of commercial and universal banks, the issuance of loans and credits to borrowers represent one of the major demand determinants of the industry. Banks, in general, provide loans to many types of consumers; from individual customers, business firms, corporations, or whole industries. Since 2005, banks have been offering much of its loans to auto loans, real estate loans, and consumer loans. In fact, the growth from 2009 until today is generally attributed to real estate loans, according to the BSP. In the data provided for by the BSP in the article, real estate loans were at P614.47 billion, the highest portion during the month of July this year. The high loans attributed to the real estate sector can be traced from the legislation of “The Act Providing Regulatory Framework for Real Estate Investment Trust” last 2009. The bill aims to stimulate the development of the real estate sector in the Philippines, which can be seen from the productivity of the sector in the past 5 years.

 Moreover, consumer loans also jumped up to P269.08 billion in July at a 12.3% increase from last year. Consumer loans are those that are provided to individual customers and business firms. In fact, this is also one of the main drivers of the demand for loans in the banking industry. When looking at the input-output table of the banking industry since the year 2000, personal consumption has always been at the top three most important destinations of outputs for banks. This means that most of the outputs, at this point it would refer to loans, go directly to personal businesses or transactions by ordinary consumers.

 The high growth rates of the bank lending this month of July only represents how strong the demand for banking services is. Moreover, it generally represents that the banking industry is already a strong industry. This smooth liquidity and flow of money could be the main support for the economic growth of the Philippines. This, of course, is to be monitored by the BSP closely to be able to relate to the central bank’s financial stability objectives.


Del Rosario, Keren Michelle P.
Desamparado, Lorenze Matthew G.
Somes, Elliane P.
 

 
UNIVERSAL AND commercial banks’ bad debts declined as of May from a year ago, reflecting their strong credit risk management, the Bangko Sentral ng Pilipinas (BSP) said in a statement yesterday.

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Due to the nature of services offered by banks, the threat of illiquidity is always present. It is because of the diverse payment habits of their borrowers. There are trustworthy borrowers who pay on or before maturity dates while there are borrowers who pretend to have Alzheimer’s disease, forget about their debt and just run away. Most of the time, banks encounters the latter type of clients leaving them with billion of bad debt. It is the entry any financial and non-financial institution and corporations wouldn’t want to record in their financial statements since a high debt ratio corresponds to a high risk of being bailed out.


Being the most important banking institution holding 80% of trust fund, it is actually great to hear that collection of non-performing loan portfolio increased by 0.48% - from last year’s 103.92 billion to 101.37 billion this May. Perhaps, the credit committee was stricter in managing risk especially in evaluating clients. However, 101 billion is still a huge amount that has to be collected and quite impossible to retrieve everything.

Hence, Bangko Sentral ng Pilipinas requested that all financial institutions should be more transparent in reporting their non-performing loans portfolio so as to see the full extent of allowances for probable losses. This would justify whenever financial institution would call for an increase in interest rate to reduce bad debt and increase total loan portfolio. 

News: http://www.bworldonline.com/content.php?section=Finance&title=Banks’-portfolios-see-decline-in-bad-loans&id=74689

Members:

Del Rosario, Keren Michelle
Desamparado, Lorenze Matthew
Somes, Elliane

 


 
Lloyd Edgar G. Reyes


Rizal Microbank, a microfinance arm of Rizal Commercial Banking Corp. (RCBC) is planning to expand. Currently, the bank has ten branches in Luzon and four in Mindanao.  The expansion would focus on Mindanao because they said that Luzon is too saturated already. Microfinance institutions provide financial services to people in poorer areas. In the Philippines, microfinance banks are a new type of banking system that emerged in the Philippines. The plan of Rizal Microbank to expand would greatly help and benefit the less fortunate people especially in Mindanao.


The Mindanao region of the Philippines includes Region 9, 10, 11, 12, 13 and ARMM.
Photo from http://www.philippinen-reisen.com/amain/index.php/staedte-and-doerfer/mindanao/

Based from NSCB’s statistical data (first semester of 2012) regarding the state of poverty in the country, Mindanao region is still the poorest region in the Philippines, with poverty incidence ranging from 28-46% (see Table below). Through the expansion of Rizal Microbank in Mindanao, financial services would me more accessible in Mindanao. One important aspect of microfinance is granting loans to these people would be able to have an opportunity to open up a small business. Due to this, there is a possibility that poverty incidence of Mindanao especially if more microfinance banks would eye for Mindanao.
Members:
Yanie Somes
Lorenze Desamparado
Keren del Rosario
 

Article by Prinz Magtulis

The Bangko Sentral ng Pilipinas (BSP), under Circular 803 dated July 5, allowed for lenders to exceed their single borrowers limit (SBP) whenever they decide to lend to oil companies. The SBL is created by the BSP as a tool to make sure that banks do not lend too much money to any entities. Basing from the regulations, banks are allowed to lend only up to 25 percent of the net worth of an individual or an entity in the economy. However, with the current program, lenders are allowed to contravene their SBL by adding 15 percent more whenever they fund for oil importations.

Although it may look as if the financial stability of banks would have adverse impacts, the BSP reprimanded that it would be avoided due to the increased exposure of the program. The possibility of concentrating the credit risk on oil companies can be reduced if a bank would be very keen in assessing its overall risk profile and management during the year that the program is being implemented. Also, there are other financing ways for oil firms to raise fundings, such as the capital market, as what BSP Deputy Governor Nestor Espenilla Jr. said.

The new circular generally proves how oil-based the Philippines is becoming due to the current high amounts oil importations. By the end of 2012, the Philippines imported around 338,400 barrels of oil per day, probably for production, manufacturing and service purposes. Moreover, the focus of the BSP to finance oil importations, which is the primary goal of this circular, can be positively taken considering the current governmental and political issues around the top oil-producing nations, particularly those in the Middle East. Funding the oil companies for their oil importations can also be a way of preparation in case any mischievous happenings may breakout in the Middle East and the oil production would be embargoed. 



Authors:
Del Rosario, Keren Michelle
Desamparado, Lorenze Matthew
Somes, Elliane