BSP: RP Ahead in Risk Management

Article excerpt

The Philippines is ahead of the curve in instituting stringent measures that include good governance, risk asset management and setting of prudential ceilings to offshore investments of structured products thus, the limited effect of the US financial meltdown on the domestic banking industry.

This basically summarized the presentation of Bangko Sentral ng Pilipinas (BSP) Assistant Governor Dolores Yuvienco at the ongoing "Restructuring Beyond the Subprime" conference sponsored by the Asian Development Bank.

Although, structural reform measures are still work in progress, Yuvienco told participants of the forum that the BSP has been steadfast in its thrust of pursuing high market practice standards to maintain the soundness of the financial system.

BSP only allows banks to take structured products such as collateralized debt obligations (CDOs) as part of its pool of investments only if it is rated "triple A." These are mostly corporate tranches instead of those asset-backed securities (ABS) with sub prime mortgage receivables as the underlying securities.

This prudent regulatory process safeguards any over exposure to CDOs by banks and prohibits them from raking-in CDOs of ABS tranches. And as a result, only a handful has exposures to Lehman Brothers Investments Inc.

BSP placed the total exposures to Lehman Brothers of universal and commercial banks combined between 0.3 percent and 0.4 percent, on the high side, out of the total assets.

Top tier commercial banks in the country have CDO holdings, among them, Metropolitan Bank and Trust Company, estimated at $80 million; Rizal Commercial Banking Corporation (RCBC) with roughly $60 million and BDO Unibank Inc. with about $30 million.

Yuvienco cited that these banks have actually been forthright with their positions and make disclosures before the Philippine Stock Exchange. Despite their exposure, albeit minimal, the BSP official stressed that the "healthy positions of banks will help them weather the strains of the crisis."

Aside from this, Yuvienco reiterated that the BSP is just ready to provide liquidity to banks if the need arises. …