Stay prudent amid volatile market conditions, Bangko Sentral tells fund managers

(Updated 6:52 p.m.) Economic uncertainties in the US and the ongoing debt crisis in Europe have ushered in new challenges for the financial sector, that fund manager in the Philippines to remain prudent and prepare for steeper regulation in the face of volatile market conditions.   “The asset management industry, as a whole, faces a market landscape that has fundamentally changed in the last four to five years,” BSP Gov. Amando Tetangco Jr. told members of the Fund Management Association of the Philippines (FMAP) Thursday.   “Today we live in an environment of more stringent capital requirements, steeper yardsticks of governance and higher standards for consumer protection,” Tetangco said.   Volatile market conditions will likely persist because of the difficulties the US and the eurozone countries are going through, noted the Bangko Sentral chief.   “Thankfully, for the asset management industry in the Philippines, all of this gloom and doom across the globe appears to contrast with what we have here today,” Tetangco said.   “With the proactive collaboration amongst stakeholders, the outstanding volume of assets managed under a fiduciary arrangement has significantly increased,” he added.   FMAP members are now managing P3.8 trillion,  more than twice the P1.7 trillion as of September 2008. Thus, the growth of fund management and the domestic financial market should not be isolated from global parameters, Tetangco noted.   The financial market is now more vulnerable to external developments as capital become increasingly mobile across global financial centers.   “The uncertainties across the globe have become more easily translated into volatilities in the domestic financial markets, complicating both how you manage funds and how we manage policy,” Tetangco said. Reasons why gains decline  Such developments in the rapidly changing market landscape emphasize the fiduciary responsibility of fund managers amid declining values of capital under management in the face of significant declines in interest rates, he noted.   Fund managers must be able to convey to their clients the reasons why gains from risk-taking may not be substantially higher than the joys of outright consumption.   “Indeed, prudence must take precedence so that we maintain a balance between what clients would like and what the market can offer,” Tetangco added. To protect investors and depositors, Tetangco announced that the Bangko Sentral revised the corporate governance and compliance frameworks for financial institutions including banks and fund managers.   “Now, more than ever, prudence and proper perspective are key to working within a global market that remains unpredictable. If the Philippine market is to avoid the same volatilities, we must ensure that we move forward with deliberate circumspect,” he said.   “But a disorderly or massive deleveraging of banks could deepen recession fears in Europe as a whole, and then translate to weakness in the economies of its trading partners among the emerging markets, including the Philippines. Indeed, we have seen some of this weakness gets reflected in our own lower trade numbers,” he noted.   Tetangco said the BSP will continue to monitor developments in the United States to see if the positive economic numbers can be sustained in terms of jobs and housing turnover. — VS, GMA News