PHL banks are attuned to global standards, risk factors — BSP, reports

Local banks have kept pace with regulatory, technological and customer service developments in the financial world, according to the government and private sector analysts’ assessments that were released in recent days.   The Bangko Sentral ng Pilipinas (BSP) said in its latest Status Report on the Philippine Financial System that Philippine banks have become “more streamlined, more technologically driven and inclusive to cater to the diverse service delivery needs of modern Filipino banking clients.”   “Banks remained solvent during the semester in review as capital adequacy ratio (CAR) was above regulatory and international standards,” the BSP said.   High earnings characterize the whole financial system with profits boosted by “improved interest-based revenues and cost-efficient operations,” it observed.   “Net profit stood at P108.1 billion, 19.2 percent higher than last year’s P90.7 billion,” the BSP said.   In terms of resources, the banking system grew by 6.2 percent to P7.34 trillion from P6.91 trillion. The P7.34 trillion in assets “were channeled mostly to loans at 47.2 percent and portfolio investments at 22.8 percent.”    “Deposit liabilities rose by 5.0 percent to P5,375.1 billion from last year’s P5,120.7 billion, which was indicative of sustained depositor confidence in the banking system,” the BSP also said. Euro zone risks   The BSP report pointed out the “need to properly measure, monitor and mitigate possible exposures of the domestic banking system to European bank debts regardless of the size and magnitude of such exposures.”   It noted that pressures on European banks have intensified on the back of the ongoing Greek debt tragedy besetting the current European financial stage.”   Oxford Business Group (OBG), a London-based consultancy and think tank, said in its 2012 report on the Philippines, that “European banks withdrew about 20 percent of their lending in the Philippines” in the wake of the recession of 2008-09.   “Chances are any major withdrawal by European banks may be less than the post-Lehman levels given better preparedness and the Philippines’ solid fundamentals proven in the past three years,” Nicholas Kwan, regional research head for Asia of Standard Chartered, was quoted as saying in October last year by the OBG. Risk tests and analysis   The think tank noted that stress tests the BSP did on the banks middle of last year showed that the country’s 55 universal, commercial and thrift banks can absorb:  

• A write-off on loans as large as 50 percent;
• An increase of 5 percent in peso and dollar interest rates; and
• A 30 percent depreciation of the pesos against the dollar.

  A second round of stress tests focusing on liquidity and liability risks in expected “in the near future.”   Risk factors were also identified by SunGard Banking as among the “ten trends shaping the banking industry in 2012 as banks look to capitalize on change through transparency, efficiency and networks.”   The ten trends were laid out in a press briefing by Sanjay Varma, managing director for banking of SunGard Asia Pacific.   Varma said banks also want to “understand the true risk profile of their individual business to help them make decisions about asset divestiture and potential acquisitions, in order to reorganize their business models to more risk-averse areas.” Varma also explained that banks "need clarity on their cost of cash" to make sure that surplus cash and capital reserve strategies will not have heavy effects on return on equity, profit and growth. — ELR, GMA News