Moody’s Bank Risk Monitor slapped the Philippine banking sector with a negative outlook and a "Ba3" ratings on deposits and "D-" ratings on the whole banking and financial sector scoring, the lowest ratings in the Asia Pacific region.
According to its latest review, Philippine banks’ system ratings and outlooks is the only one with a negative mark, while Indonesia’s own outlook is positive and the rest – Malaysia, Hong Kong, Singapore, Taiwan, China, Korea, and Japan are all accorded with stable outlooks.
Bangko Sentral ng Pilipinas Deputy Governor Amando M. Tetangco Jr. said this is why the central bank is pushing for banking and financial sector reforms to encourage more domestic savings and further stabilize the domestic credit market. This will contribute to maintaining a stable inflation, interest rate and foreign exchange rate environment and a more resilient financial system.
"The BSP has introduced reforms to strengthen the banking sector including moves to clean up the non-performing loans, strengthen capital position as we move towards Basle II," Tetangco said.
Basle II, formed in the Basle Convention in Geneva is the guidelines for the management and operational risks besetting banking sectors worldwide. The agreement includes a rulebook for international banks, to strengthen the stability of the financial system and to change how banks lend money, market monitoring, internal credit risk system and anti-money laundering.
The central bank has also complied with enhancing rules on corporate governance, improving legal protection for the supervisory and the establishment of a central credit information bureau.
According to Tetangco, "we have also made improvements in banks’ asset valuation which would strengthen the banking system."
He said the BSP is also supporting the extension of the Special Purpose Vehicle law by another two years to help banks unload their non-performing assets. (LCC)
BSP Governor Rafael B. Buenaventura said earlier that the banking sector would dispose
P100 billionworth more of bad assets this year if the law is extended. This would bring to P200 billion the amount of NPAs that banks will take care of. With this amount solved, the ratio of NPLs of 13-14 percent will be reduced to 7.5 percent by the end of 2005.
Banks sold
P26.2 billion of NPAs last year with P53.8 billion more of NPAs with pending applications for Certificates of Eligibility transferred under the Special Purpose Vehicle Act of 2002.
In the meantime the incentives under the SPV law will expire on April 8. "There isn’t much time left and there is a probability of an extension on the basis of strong representations being made by the banking industry. (But) as a practical matter, the BSP will not object to an extension although we will have serious concerns over an overly long extension that will only likely weaken the resolve to face the music," Buenaventura said.
The SPV Act is intended to help banks dispose their NPAs by granting tax exemptions and reduced registration and transfer fees. SPVs buy non-performing assets at substantial discounts, turn them around, and then sell them once the market has recovered.
The latest bank risk review is Moody’s Investors Service’s tenth edition. The Moody’s Bank Risk Monitor is a credit-monitoring analysis of banking issues.
