Banks need to report units’ performance

The country's largest banks are submitting better financial reports but need to be more transparent on how their subsidiaries perform, said an accounting professor at the University of the Philippines (UP). Arthur S. Cayanan, chairman of the Department of Accounting and Finance at the College of Business Administration at UP, found that the 2008 financial statements of eight of 15 banks listed on the stock exchange improved with respect to disclosing loans and receivables since a 2003 review. Mr. Cayanan’s study titled “An Assessment of the Financial Reporting Practices of Some Listed Philippine Banks in 2008," was presented during a lecture series sponsored by UP and the central bank that ended on Wednesday. “The disclosures related to loans and receivables and the maturity profile of financial assets and liabilities have substantially improved," the report read. However, listed lenders were deficient in disclosing how their various units performed. “The disclosures on segment information remain insufficient. There are still cases of unconsoli-dated subsidiaries and now, special purpose vehicles," the report read. “The non-consolidation of these entities may improve the financial position and operating performance of the banks." In a telephone interview yesterday, Mr. Cayanan said it was important for banks to be more transparent given the crucial role they play in the economy. “The economy is very much dependent on banks for financial services... public savings are also at stake...," he said. “Financial reporting should allow the public, analysts and regulators to see more of what’s happening with them." Mr. Cayanan added: “If you are a company and have different business segments, there has to be separate disclosures on how those units are performing. Normally, banks just present one but as an analyst you want to have an idea how each perform." Covered by his study were Banco de Oro Unibank, Inc., the Bank of the Philippine Islandas, China Banking Corp. Metropolitan Bank & Trust Company, Philippine National Bank, Philippine Savings Bank, Rizal Commercial Banking Corp. and Security Bank Corp. Mr. Cayanan noted they accounted for 89% of total assets of banks listed on the Philippine Stock Exchange. The study added that some banks were also opaque in divulging events that enabled them to reverse or recognize losses. Some lenders also continued to stagger losses, which is not consistent with accounting standards. -- Don Gil K. Carreon, BusinessWorld