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Regulatory Environment Boosts Development of Philippine Microfinance
Recent data from The Economist Intelligence Unit (EIU) and the German Development Corporation (GIZ) show that regulation of Philippine microfinance over the past five years has successfully spurred development of the industry, with corresponding benefits for broader financial inclusion. A study produced by GIZ, in cooperation with the Philippine Insurance Commission (IC) and the Philippine Department of Finance, found a 600 percent increase in the number of microinsurance providers between 2006 and 2015. “The Philippine policy and regulatory framework crafted over several years in dialogue with the industry and with support of development partners, has oriented the private sector and the public authorities on its path to inclusion,” the report said. “[Policies] chosen back in 2010 allowed stakeholders to make the right moves.” Among the factors cited as driving significant growth in Philippine microinsurance were the saturation of traditional risk-management markets, strong interest from industry leaders, and a “favorably-structured” regulatory environment. A separate report by the EIU rated the Philippines as having the best regulatory environment for microinsurance among Asian countries. Metrics considered in the EIU report included credit reporting systems, regulation and supervision of branches and agents, market-conduct rules, and grievance redress and operation of dispute-resolution mechanisms. The EIU said the Philippines attained perfect scores in almost all of these categories, an achievement which it attributed to an enabling regulatory environment. Both studies credit the BSP for promoting for financial inclusion through the adoption of regulations that encourage the entry of new financial-service providers, and through products that broaden financial inclusion while also ensuring the safe provision of such services. Despite their optimistic outlook, the reports emphasized continued obstacles to the development of microfinance the Philippines. The EIU in particular noted a chronic need for financial education and consumer-protection initiatives across both regulated and non-regulated institutions. The GIZ report is available here, while the EIU report can be obtained here.
National Focus on E-Payments in the Philippines, Thailand, and Indonesia
On December 9, Bangko Sentral ng Pilipinas (BSP) formally launched the Philippines’ long-anticipated National Retail Payment System (NRPS), a framework which is intended to guide the creation of a safe, interoperable, and reliable platform for e-payments. The framework defines high-level policies, standards, and governance principles covering retail payment operations and infrastructure. It aims to fast-track the establishment of an effective electronic retail payment system, improve efficiency, and broaden financial access among Filipinos. One of the program’s first deliverables is the creation of a Payment System Management Body (PSMB), a juridical body which will comprise officials from commercial banks, non-bank firms, and e-money issuers. Among other functions, the PSMB will be responsible for the creation of clear standards and rules to bind all payment system participants. BSP Governor Armando Tetangco strongly supports the move to e-payments, stating a switch from check to direct credit would save the country’s banking sector US$1.52 per payment. Data from the Better Than Cash Alliance, a local economic think tank, indicates that only one percent of the 2.5 billion payment transactions made by Filipinos per month, worth US$74 billion, are electronic despite the capabilities of being a country with a high mobile penetration rate. The untapped portion of the population could save financial institutions millions of dollars annually, and if effectively integrated into a national e-payment system could greatly increase e-commerce as well. According to recent comments by senior BSP officials, full implementation of the NRPS framework will occur by mid-2017.
In related news, Thailand’s e-payment initiative is approaching its final stages of implementation. Conceived under the Payment System Roadmap 2012-2016 (which can be reviewed here), the national e-payment system should be operational by the end of next year. Finance Minister Apisak Tantivorawong anticipates the first two modules, Any ID and the expansion of Electronic Data Capture (EDC), to be implemented in the first half of 2016. EDC units help track and facilitate online transactions. Any ID will enable anyone to transfer money and make financial transactions using their ID card, mobile number or email address, this new process will help fill the gap for those without bank accounts by utilizing other forms of personal verification. Minister Apisak wants all companies registered with the Commerce Ministry to be equipped with the EDC system, but also noted an additional two million EDC units will be needed. The other modules of the national e-payment system will link e-payments to the Revenue Department’s taxation system, help the government subsidize low-income earners, and create a campaign offering incentives to make the switch to e-payments.
In Indonesia, Bank Indonesia (BI) has reaffirmed its commitment to develop Indonesia’s own master plan for an integrated national payment system, known as the National Payment Gateway (NPG). In comments to the Jakarta Post on December 14, BI deputy governor Ronald Waas said that BI anticipated completion of a preliminary version of the NPG by early 2016. Currently, Indonesia has four private switching companies that provide a network for e-banking payments. While the separate networks have a degree of interoperability, the NPG is intended to create of a new central institution capable of more effectively overseeing interconnectivity for all e-payments.
Yangon Stock Exchange Opens
Marking a milestone in the economic modernization of Myanmar, the Yangon Stock Exchange (YSX) opened on December 9. Deputy Finance Minister and SEC Commission Chair Maung Maung Thein announced six companies have joined YSX at the start: First Myanmar Investment Company, First Private Bank Limited, Great Hor Kham Public, Myanmar Agribusiness Public Corporation, Myanmar Citizens Bank, and Myanmar Thilawa SEZ. Trading is expected to commence in February or early March 2016. Pending Myanmar’s passage of a new Companies Law is passed, only domestic companies will be allowed to list on the exchange. Even then, because it is majority owned by the Specially Designated Nationals (SDN)-listed Myanmar Economic Bank, the exchange itself is technically a proscribed entity off-limits to US businesses and investors. There are concerns the YSX will suffer the same fate as the Cambodian and Laos Exchanges, whose listings remain in the single digits. In addition to barriers to foreign investment, its foundational rules on disclosure, shareholder voting, and annual general meetings are still under development. Only three of the 10 companies granted provisional underwriting licenses have been announced. Furthermore, IPO requirements remain prohibitively stringent. Registering companies need two years of profits, proof of tax compliance, and must have a minimum of 100 shareholders. Despite these structural challenges, the relative size and momentum of the Myanmar economy, set to grow 8.3 percent this year, has generated considerable enthusiasm over the future of the exchange.
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| Market Development
Brunei: New financial reforms will provide more options for consumers, enterprises ASEAN Briefing 15th Dec 2015
The Autoriti Monetari Brunei Darussalam (AMBD) recently announced new regulatory financial reforms. The changes will make a wider variety of financial products accessible to consumers. Meanwhile, the reforms will also ease the access to financing for entrepreneurs. The central bank amended several regulations to relax the conditions to obtain unsecured personal credit, financing and credit cards. In addition, the new regulations will include variable, rental and business income in the ‘gross monthly income,’ thus making it easier for financial institutions to access credit. Local experts believe that the new changes will make the financial climate more conducive for businesses. Easier access to financing will allow businesses to expand their operations. In addition, easy availability of credit for consumers will ensure a robust domestic demand for goods and services, which will contribute to a healthier economic climate. The new regulatory reforms are a part of Brunei’s larger project of modernizing the financial market to bring it at par with other developed markets.
Indonesia pushes back deadline for Islamic megabank merger The Star 15th Dec 2015
The difficulties in forming a megabank in the US$2 trillion (RM8.7 trillion) Islamic finance industry are becoming clear as Indonesia pushes back deadlines for its plan after failures in Malaysia and the Middle East. Financial Services Authority Director Dhani Gunawan Idat is the latest official to repeat Indonesia’s goal for such an entity after two years of trying, with a plan to merge the syariah-compliant units of PT Bank Mandiri, PT Bank Negara Indonesia, PT Bank Rakyat Indonesia and PT Bank Tabungan Negara. He put the time frame as 2017 in an interview Friday, while his chairman Muliaman Hadad said in January it may happen this year. Gatot Trihargo, deputy minister for government-run enterprises, said in June that 2016 was the target. Indonesia’s falling Islamic banking assets highlight the need to create an institution with the financial clout to contend with bigger conventional rivals and achieve its aim of competing as a syariah-compliant hub with Malaysia, which has unsuccessfully tried to get a megabank off the ground for at least six years.
Third worldwide: Philippines still Asia’s microfinance leader – EIU The Philippine Star 14th Dec 2015
The Philippines maintained its rank as the microfinance leader in Asia and the third best in the world this year, according to a survey conducted by the Economist Intelligence Unit (EIU). The country got a score of 81 in the Global Microscope 2015, which assessed the regulatory environment for financial inclusion in 55 countries. The country’s score was Asia’s best and ranked third in the world, next to Peru’s 90 and Columbia’s 86. India placed fourth with a score of 71, followed by Pakistan with 64, and Chile with 62. Haiti was ranked last with a score of 24. “The Philippines continues to achieve considerable local and global milestones in its pursuit of financial inclusion, owing to the country’s success in terms of the variety of players, which provides a wide range of financial services and products to the public,” the EIU said in the report.
PH lands in top 3 on financial inclusion Inquirer 13th Dec 2015
The financial inclusion environment in the Philippines is the third best in the world, although there remain challenges to ingrain such efforts among Filipinos, according to The Economist Intelligence Unit’s (EIU) “The Global Microscope 2015: The enabling environment for financial inclusion” report. Out of the highest possible overall score of 100 across 12 indicators, the Philippines scored 81, up by two points compared with the previous report. The country this year also kept its global standing behind Peru and Colombia. The country posted a perfect 100 in five of the 12 indicators: Government support for financial inclusion; regulatory and supervisory capacity for financial inclusion; regulation and supervision of credit portfolios; regulation and supervision of branches and agents, and grievances redress and operation of dispute resolution mechanisms.
Philippines push to list SMEs Borneo Post 12th Dec 2015
A drive to highlight the benefits of listing on the Philippines Stock Exchange (PSE) to small and medium-sized enterprises (SMEs) is gaining pace. Officials will be hoping that the push to persuade more SMEs to list sets the scene for heightened activity on the exchange in 2016, after fewer than expected initial public offerings (IPOs) were carried out this year. While micro and SMEs account for 99 per cent of businesses operating in the Philippines and almost two-thirds of employment, only a handful of SMEs have listed on the PSE’s restructured Small, Medium and Emerging Board (SMEB) since it was first launched in 2001.
Indonesia to introduce sovereign bond futures next year The Straits Times 10th Dec 2015
Indonesia plans to introduce sovereign bond futures next year as it seeks to deepen its financial markets and help investors manage the risk of holding Asia's most volatile debt. The national bourse will list contracts for benchmark local-currency government notes as early as the second quarter, Poltak Hotradero, the head of research and development at the Indonesia Stock Exchange, said in a phone interview from Jakarta on Wednesday (Dec 9). The introduction of the futures, a type of derivative used to hedge risk or for speculation, is still subject to regulatory approvals, he said.
3 startups in Indonesia that lend money to the poor Tech in Asia 10th Dec 2015
Indonesia’s vast and young population sounds like a great market opportunity. But there is one catch. The majority of Indonesians don’t have the financial freedom to purchase goods and services beyond bare necessities. Out of a population of 252 million, 28.6 million Indonesians currently live below the poverty line, according to the World Bank. Approximately 40 percent of all people remain clustered around the national poverty line set at IDR 330,776 per person per month ($22.6). People at the “bottom of the pyramid” have a hard time getting access to loans because classic financial institutions don’t have much incentive to serve this segment – and they don’t offer the right products. So-called microfinance institutions have sprung up to fill that gap. But some of their lending schemes, especially in Indonesia’s rural areas, have earned a bad rap. They might ask for high interest rates and have shady debt collecting methods.
Myanmar opens first stock exchange but will have to wait until next year to start trading South China Morning Post 9th Dec 2015
Myanmar officially launched its first modern bourse on Wednesday, but without a single stock to trade until next year, as the nation’s latest drive for economic revitalisation struggles to take flight. Aung San Suu Kyi’s pro-democracy party swept elections last month, boosting confidence in the former junta-run nation's reforms, which have also nudged open the door to a once reclusive economy. The Yangon Stock Exchange (YSX) was launched with the clanging of a gleaming ceremonial bell on Wednesday, marking an ambitious new stage in the nation’s efforts to ignite investment.
Asset Management
More incentives needed to attract REIT investment The Jakarta Post 15th Dec 2015
The government may have to offer more incentives to attract investors and boost issuance in the local Real Estate Investment Trust (REIT) market, as current regulations are deemed unattractive compared to other countries, according to a Financial Services Authority’s (OJK) official. Fahri Hilmi, supervisor for capital market II at the OJK, said the agency and the Finance Ministry were discussing plans to revise a new tax incentive for REIT, so that local REITs could be appealing for both investors and companies.
New foreign bank licences to be granted in 2016 Myanmar Times 15th Dec 2015
The aim is to licence banks from “additional neighbouring and important trading partner economies”, the Central Bank said. “The main objective of the second round of licensing is to further promote existing economic cooperation.” Foreign banks headquartered in countries that successfully obtained a licence in the first round – namely Australia, China, Japan, Malaysia, Singapore and Thailand – will not be allowed to participate in the second round, the notice said. Foreign banks with representative offices in Myanmar or which are in the process of obtaining one will be permitted to participate. The licence will be for onshore wholesale banking through a branch, and a call for expressions of interest will be made in early 2016, the Central Bank said. In the last, hotly-contested bidding round, nine foreign banks won licences on October 1 last year, and winners were given a year to prepare operations to meet the approval of the Central Bank.
Securities firms told to provide exchange capital Eleven 14th Dec 2015
Myanmar Security Exchange Supervisory Commission has instructed securities companies to contribute capital investment to the Yangon Stock Exchange by the end of December. Currently, the commission has picked up 10 securities companies. Preparations for the launch of the exchange are almost complete. There will be about five listed companies and 18 criteria for the listed company have come out. The commission has fixed the licence fees ranging between Ks30 million and Ks13 billion for the listed companies; Ks15 billion for an underwriter licence; Ks10 billion for a dealer licence and Ks7 billion for a broker licence and Ks30 million for a consultant licence. Securities companies which have got the green light from the commission will launch their services in December. Among the companies which applied for securities licences, applications for underwriter licences are the lowest as the capital investment is huge while the applications for adviser licences are the most numerous. The exchange is scheduled to open this month.
Indonesia C.Bank Gov Says Will Maintain Presence in FX Market Ahead of Fed The Jakarta Globe 14th Dec 2015
Indonesia's central bank will maintain a presence in the foreign exchange market to guard against volatility in the rupiah ahead of the Federal Reserve's policy decision this week, its governor said on Monday. The rupiah fell one percent on Monday's opening to its weakest level since Oct. 7. It has regained some of its losses during trading hours and was traded at 14,060 per dollar at 04:30 GMT. "We are monitoring things ahead of (the Fed) meeting and there has been a lot of pressures in the rupiah, not only because of that but also because of demand for maturing offshore loans," Governor Agus Martowardojo told reporters. "BI will always be in the market to guard against (rupiah) volatility."
Iskandar Malaysia records over RM187b in cumulative committed investments New Straits Times 14th Dec 2015
Iskandar Malaysia, the main southern development corridor in Johor, recorded RM187.96 billion in total cumulative committed investments from 2006 until November 2015, according to the Iskandar Regional Development Authority (IRDA). Of the total amount, 50 per cent or RM93.39 billion represents investments that have been realised as projects on the ground, IRDA said in a statement issued after the members of IRDA meeting chaired by Prime Minister Datuk Seri Najib Razak here today. IRDA, which is mandated to plan, promote and facilitate the Iskandar Malaysia development said Iskandar Malaysia secured RM29.83 billion in investments from January until November this year. It said domestic investments made up RM111.82 billion or 59 per cent of the total cumulative committed investments, while the remaining RM76.14 billion or 41 per cent was contributed by foreign investments.
Bullish on govt bonds in Malaysia, Indonesia Asia One 14th Dec 2015
Many emerging market currencies fell in value in August and September as various global worries took centre stage. Investors were concerned that China would suffer a hard landing as the economy slowed significantly after years of boom. In the world's largest economy, the United States Federal Reserve back then offered a relatively downbeat assessment of the global economy. There were also concerns that when the Fed finally raises interest rates - an event that could well come this week - capital would leave emerging markets. Dr Michael Hasenstab says, however, he saw at that time - and still sees - value in Malaysian and Indonesian government bonds. Conditions in Malaysia were nowhere near as bad as they were in the Asian financial crisis, yet the ringgit was trading at levels not seen since that currency meltdown in 1997-98. In his assessment, the currency is "easily more than 20 per cent undervalued".
Bright Prospects For Financial Planning Industry Bernama 14th Dec 2015
The financial planning industry has bright prospects and is poised to play an important role in transforming the financial system in Malaysia. Malaysian Financial Planning Council (MFPC) President, Md Adnan Md Zain, said the Association of Financial Advisers data showed that Malaysia had only 971 financial adviser representatives serving a population of about 30 million. Singapore had 3,000 fully licensed individuals catering to a population of 5.4 million, he said. "In reality, not many Malaysians are capable of managing their financial affairs, although they are financially knowledgeable," he said at the launch of the MFPC Johor Chapter here Sunday. Also present were MFPC Johor Chapter Chairman, Kenny Tan Kock Un and MFPC Executive Director, Chung Kar Yin.
SGX launches OTC Asian bond trading platform The Straits Times 11th Dec 2015
Singapore's first over-the-counter Asian bond electronic trading platform was launched yesterday in an effort to create a liquid secondary market for such assets issued by Asian companies. SGX Bond Pro, which began trading Asian corporate bonds in US dollars, euros and the yen, with Asian local currencies to follow, was set up under the Singapore Exchange's unit, SGX Bond Trading. It connects buyers and sellers of Asian bonds and provides them with multiple trading protocols that cater to their funding and investment needs. The trading protocols facilitate access to liquidity for accredited investors, which include global asset managers and private and investment banks. "The successful launch of SGX Bond Pro underpins our role as a leading market infrastructure provider, and is an important step in diversifying SGX's business mix," Mr Loh Boon Chye, CEO of SGX, said.
Philippine equity capital raising may reach US$4b next year The Star 11th Dec 2015
Philippine companies could increase equity capital raising on the local stock exchange to 200 billion pesos (US$4.2 billion), the head of the country's bourse said, adding that eight to 10 firms were likely to pursue a listing. Market volatility has taken its toll on listings this year with property firm D.M. Wenceslao and Associates Inc delaying a US$150 million-US$200 million IPO and homebuilder and contractor Datem Inc postponing an offering of up to US$75 million. Equity fundraising via the bourse, through either listings or secondary share offerings, has so far come to 184.6 billion pesos, exchange data showed. A figure above 200 billion pesos next year would mark the highest level since 2012 when a record 219 billion pesos was raised.
'Peso most resilient among ASEAN currencies vs global risks' ABS-CBN News 11th Dec 2015
The Philippines gets a fresh vote of confidence coming in to the New Year with the country more resilient than its ASEAN peers against global risks. Hartmut Issel, executive director of the chief investment office at Singapore-based lender UBS, said the Philippines' credit cycle is the most resilient in the region, saying the peso has fallen the least among ASEAN currencies. He added that unlike other central banks in the region, the Bangko Sentral ng Pilipinas (BSP) will not pull the trigger on monetary easing due to the country's robust economy, and an upside risk to inflation. "However, the Philippines is a bit of an outlier if you will. The Philippines’ credit cycle was a relatively late one this time around. So we’ve only recently seen it pulling down, so the credit impulse of the Philippines is still a bit stronger than all of the ASEAN members. Therefore, we think BSP will be quite prudent and do not allow rate cuts,” said Issel.
Banking
Wholly-foreign owned banks land in Vietnam Viet Nam Net 15th Dec 2015
Foreign banks are flocking to Vietnam. Specifically, this year Kasikorn Bank (Thailand) has opened two representative offices in Hanoi and HCM City. Public Bank Berhad (Malaysia) has completed procedures to become the 6th wholly-foreign owned bank in Vietnam. DBS Bank (Singapore) and Maybank (Malaysia) have opened more branches in Vietnam. UOB Bank (Singapore) has asked to upgrade from a branch into a wholly-foreign owned bank.
Forex-starved lenders ask Central Bank for policy shift Myanmar Times 14th Dec 2015
Private financial institutions want the use of Nostro accounts — held in a foreign country and denominated in the currency of that country — to become mandatory for banks making import payments on behalf of clients, according to sources at private banks. The Yangon Foreign Exchange Market Committee submitted the policy request to the Central Bank at a meeting on December 7, said U Mya Than, the committee’s chair. Private banks no longer have sufficient foreign exchange reserves to facilitate import payments, he said. The central bank has yet to issue instructions on import payments, but is investigating the issue and will make an announcement soon, said one official with knowledge of the monetary authority’s plans. The central bank has been examining the volume of foreign exchange transactions across private and state banks since December 1, the official added.
Higher rates won't rescue banks' thinning margins, analysts warn Singapore Business Review 14th Dec 2015
If 2015 holds any clue as to what awaits Singapore banks next year, then analysts are not too bullish on the effects that higher interest rates will have on lenders’ margins. A report by DBS highlighted that the spike in short-term interest rates in the 2015 did not fully translate to higher margins for banks, as surplus liquidity from the decline in greenback-denominated trade loans led to a redeployment to lower-yielding assets. Although the SIBOR is expected to rise to 1.4% by the first quarter of 2016, DBS said that its effect on interest margins will not be as high as expected. "We have imputed slightly higher NIM in 2016 to account for the expected rate hike but we believe the NIM uptick may be muted as: (1) we expect funding costs to catch up, dampening the impact of loan yield increases on NIM; (2) in addition, with the S$ loan-to-deposit ratio now at a high of 87% from 79% two years ago, there may be little room left for banks to leverage on; and (3) the wildcard on whether Singapore banks still carry surplus US$ liquidity may dampen overall asset yields and hence NIM," said DBS.
Commercial banks rush to buy finance companies Voice of Vietnam 14th Dec 2015
Four commercial banks have taken over finance companies, and other banks are consulting with their shareholders about buying such firms to expand their consumer lending. The four bank deals included Maritime Bank and Vinatex’s Finance Company, Techcombank and Vinachem’s Finance Company, MBBank and Song Da Finance Company and SHB Bank and Vinaconex-Viettel Finance Company. Meanwhile, BIDV, one of the largest commercial banks, has submitted a plan to shareholders to obtain a finance company. Either BIDV would buy an existing finance company or shift its existing finance leasing company into a finance company. VietinBank, also a large bank in which the State holds controlling stakes, is considering developing a part of PG Bank into PG Finance. The other banks, ACB, Sacombank and NamA Bank, have submitted to shareholders a plan to establish finance companies of their own with chartered capital of VND500 billion.
MAA Takaful Maps Out Strategies For 2016 Bernama 14th Dec 2015
MAA Takaful Bhd's (MAA) two-day nationwide gathering ending tomorrow is a platform to reconnect with its top agency leaders and producers, as well as to share the company's goals and strategies for 2016. The gathering, comprising the "Mega Kick Off 2016" and the "Annual Planning Conference 2016", held at the Berjaya Times Square here, marked the launch of MAA new initiatives with its new tagline and spirit, "Be A S.T.A.R" as it looks towards 2016. In a statement Monday, MAA said the "S.T.A.R" abbreviation stands for "S = Start Beyond Normal", "T = Trained to be the Best", "A = Action Leads to Result", and "R = Race to Win" -- its catalyst to outperform and go beyond excellence. MAA Executive Vice-President Saiful Nizam Esahak singled out recruitment as the key to ensure that the company would deliver a better performance in 2016.
BRI to Spend Rp 2.5t on Insurance, Multifinance Expansion Jakarta Globe 12th Dec 2015
Bank Rakyat Indonesia, the country second largest lender, will set aside Rp 2.5 trillion ($179 million) over the next two years to beef up capital in its newly acquired life insurance unit and take full control of a financing joint venture from its Japanese partner. The lender has secured shareholders' approval to inject Rp 1.5 trillion into Asuransi Jiwa Bringin Jiwa Sejahtera, or BRIngin Life, in order to expand the insurance business, BRI finance director Haru Koesmahargyo said on Monday. Shareholders also approved BRI's plan to acquire 91 percent of BRIngin Life from BRI Pension Fund. The BRI Workers Welfare Foundation holds the remaining shares. Haru did not elaborate on the value of the deal but he said that it would be equivalent to 1.69 times the insurance book value per June 2015.
Analyst: Chances Limited for Indonesian Lenders as AEC Approaches Jakarta Globe 11th Dec 2015
Indonesian lenders need to increase their competitiveness as the Asean Economic Community (AEC) approaches, otherwise the pact will open the country's banking sector to foreign lenders, but offer far fewer chances abroad for their unprepared Indonesian counterparts, says David Sumual, chief economist at Bank Central Asia. "In the future, the banking and financial sectors will be more liberal. We'll be a target for other Asean countries," David said on Thursday. The AEC aims to minimize economic barriers among the members of the Association of Southeast Asian Nations (Asean), easing the flow of goods, services, skilled labor and capital across the region. It comes into effect at the end of the year. Financial integration within Asean will be officially established at the end of 2020. Back in December 2014, central bank governors of the Asean countries agreed to endorse the Asean Banking Integration Framework, under which each country must facilitate the entry of foreign banks, eliminate discrimination against foreign banks and help streamline banking regulations in the region.
Rediscount loans continue decline Business World 10th Dec 2015
Loans taken out from the central bank’s peso rediscount window dipped anew at end-November as rates went up amid ample liquidity, the Bangko Sentral ng Pilipinas (BSP) said. Thrift and rural banks borrowed P434 million from the BSP’s rediscount facility from January to November, down from the year-ago figure of P1.23 billion by 65.4%. “Availments under the Peso Rediscount Facility and the EDYRF (Exporters Dollar and Yen Rediscount Facility) have declined due to the increase in rediscounting rates and ample liquidity in the financial system,” the BSP said in a statement yesterday. Of the total rediscount loans secured by the banks, bulk went to commercial credits at 86.8%. Production credits made up 5.2%, while 8% of the credit went to other loans, such as housing (5.1%), permanent working capital (1.6%), and capital expenditures (1.3%).
PSBank targets strong growth in loan portfolio The Philippine Star 10th Dec 2015
Philippine Savings Bank sees a sustained double-digit growth in its loan portfolio next year amid the thrift bank’s expanding customer base PSBank president Vicente Cuna Jr. said the bank continues to aim for a double-digit growth for loans in 2016. “To achieve that, we have several initiatives. It’s through expansion of our customer base and also through increasing our selling capability. No change (in strategy), it is more of the same,” Cuna added. PSBank, a unit of Metropolitan Bank & Trust Co., recorded a 17.6 percent growth in its gross loan portfolio to P111.8 billion in the first nine months, led by the robust growth in auto and mortgage loans. Its consumer loan bookings jumped 29 percent. Even with the growth in its loan portfolio, PSBank kept its non-performing loans (NPL) ratio low at 1.1 percent. As of end September, NPL coverage was at 84 percent.
Banking on Asean banks to step up with AEC The Straits Times 9th Dec 2015
Local banks looking to grow over the long term are prone to look to the regional South-east Asian or Asean market. While it has not always been easy for banks to expand in the region, the launch of the Asean Economic Community (AEC) by the year end will change things for the better. The launch of the AEC promises to open up Asean markets to Asean banks. This is a highly attractive prospect as the region is home to a young population of over 600 million severely "underbanked" people with rapidly growing incomes. The middle class is expected to swell by as much as three times over the next two decades, and these consumers will need bank accounts, insurance policies and investment portfolios. Even now, there is scope for banks to grow within Asean. In Indonesia alone, the banking penetration rate stands at just 30 per cent - there are about 170 million Indonesians today without a bank account. Singapore banks, with their deep pockets and cross-border expertise, are poised to benefit from an opening up of Asean markets.
ICPT Implementation Neutral On TNB Bernama 9th Dec 2015
The impact of the implementation of the Imbalance Cost Pass-Through (ICPT) is neutral on Tenaga Nasional Bhd (TNB) and will not have any effect to its business operations and financial position. "The ICPT is a mechanism approved by the government and implemented by Suruhanjaya Tenaga since Jan 1, 2014 as part of a wider regulatory reform called the Incentive-Based Regulation. "The ICPT mechanism allows TNB to reflect changes in fuel and generation costs in consumer's electricity tariff every six months, subject to the government's decision and approval," it said in a filing to Bursa Malaysia Tuesday. The government had announced an ICPT rebate of 1.52 sen/kilowatt hour (kWh) effective Jan 1, 2016 until 30 June 2016, it said. TNB said this would be applicable to all consumers, except domestic, with monthly consumption of 300 kWh and below. "The rebate is given following the RM762.03 million of net savings," it said. It said the savings were on the back of savings in fuel and generation costs for the period of July 2015 to December 2015.
Banks called on to improve efficiency Vietnam Investment Review 9th Dec 2015
The rapid integration requires urgent improvement in the legal framework of credit institutions to enhance operation efficiency and competitiveness amid anticipated rising competition, a conference heard yesterday. Nguyen Hong Son, principal of the Economics University under the Viet Nam National University, Ha Noi said that along with the economic integration, many foreign lenders would penetrate the domestic market offering various choices in banking services for customers. To date, Viet Nam participated in 15 bilateral and multilateral trade agreements, ranking fifth among 10 ASEAN member countries. In terms of the foreign trade-to-GDP ratio, or trade openness ratio, Viet Nam ranked second in the ASEAN region. This required local commercial banks to be well prepared for integration through hastening of restructuring to develop a healthy banking system with safe credit operations and improved capacity of raising social resources for efficient investments, Son said.
Local banks urged to be proactive in economic integration VietnamPlus 9th Dec 2015
The banking sector needs to be more proactive in economic integration in anticipation of fiercer competition in both domestic and global playgrounds, according to speakers at a workshop in Hanoi on December 8. Rector of the University of Economics and Business under the Vietnam National University Nguyen Hong Son said once the Trans-Pacific Partnership (TPP) agreement is signed, customers will have a variety of choices for overseas banking services in Vietnam. This means Vietnamese commercial banks must stand ready to join global integration, since the protection for the domestic market would not be as high as at present, and fiercer competition from foreign bankers is unavoidable.
E-Payments
Major lenders see gold in e-commerce boom Jakarta Post 14th Dec 2015
Major domestic lenders are racing to get a foothold in the growing e-commerce industry, as more people are using digital transactions for online shopping. As digital infrastructure improves and more people access the internet, big and small businesses in the country are taking to the online world to expand their marketing and boost sales, according to Bank Central Asia (BCA) consumer card head Santoso. Santoso said he was convinced that that trend would last, given that the government had thrown its support behind online marketplaces in a bid to boost economic activity in the digital age. “E-commerce will be prospective for the future of Indonesian businesses. It’s not impossible for local e-commerce firms to become global players like Amazon and eBay someday,” he said recently.
BI working on integrated national payment system Jakarta Post 14th Dec 2015
Bank Indonesia (BI) has reaffirmed its commitment to a long-delayed master plan for an integrated payment system, called the National Payment Gateway (NPG), as part of the central bank’s drive to reduce cash transactions and boost efficiency. BI deputy governor Ronald Waas said the road map for the NPG, which was expected to be completed next year, would focus on building interoperability between local interbank network providers, also known as switching companies, to support the rise of electronic payments. The implementation of the payment gateway scheme, which has been postponed since 2012, will pave the way for the establishment of a central institution overseeing interconnectivity of all electronic payments through various tools, including debit and credit cards as well as e-money, Ronald said. “BI supports the establishment of a domestic principal that will create interoperability between switching companies,” he said recently, adding that the payment gateway scheme would become the main infrastructure for financial services and payments.
BSP adopts National Retail Payment System Manila Bulletin 10th Dec 2015
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said that with the National Retail Payment System (NRPS) – which the central bank launched late Wednesday – Filipinos will be encouraged to transact using electronic payments more in the coming years. At the moment, only one percent of the 2.5 billion payment transactions per month amounting to about $74 billion are paid through electronic systems. “With NRPS, we hope to see the one percent share of electronic payments increase to at least 20 percent by 2020,” said Tetangco in a speech during the formal launching.
Insurance
Trend in new premiums positive again despite economic slowdown The Jakarta Post 15th Dec 2015
Despite the economic slowdown, new premium income at the country’s life insurance companies bounced back during the first nine months of this year after declining by nearly 10 percent last year. Indonesian Life Insurance Association (AAJI) chairman Hendrisman Rahim said in Jakarta on Monday that the group recorded 16.7 percent growth in new premium income to Rp 57.60 trillion (US$4.1 billion) in the Jan-Sept period this year from about Rp 49.35 trillion in the same period last year. The growth in new premiums this year is in stark contrast to the performance in the same period last year, during which new premiums went down by 9.6 percent year-on-year (yoy) to Rp 49.35 trillion from Rp 54.58 trillion.
Life Insurers Shift Fund to Properties, Time Deposits After Shock in Stocks The Jakarta Globe 15th Dec 2015
Indonesian life insurers have shifted investment allocations to mutual funds, properties and time deposits after market volatility led to large losses in investment revenue. Insurers booked total losses of Rp 15.9 trillion ($1.13 billion) from investments in the second quarter of 2015, compared to Rp 30.21 trillion in the same period a year ago, according to the Indonesian Association of Life Insurers, or AAJI. AAJI chairman Hendrisman Rahim said the drop was caused by volatility in the stock market, exacerbated by the rupiah’s decline against the US dollar. “That’s when investment revenues started falling,” he said on Monday. The rupiah has lost 13 percent of its value against the greenback this year, trading at 14,076 on Monday.
AEC launch opens insurance opportunities in the pan-Asian market World Finance 14th Dec 2015
Viriyah Insurance is the best-regarded non-life coverage provider in Thailand. Now it is looking to the rest of the ASEAN Economic Community (AEC) for more opportunities The launch of the ASEAN Economic Community is finally upon us. At the end of next year, 15 of South East Asia’s most prominent economies will band together as key trading partners in a move unprecedented in the region. This, of course, will open many doors for industrial development, and there is no exception for the insurance industry. Viriyah Insurance is already a market behemoth in its native Thailand, and, with the launch of the AEC, it is poised to take the next step into the wider world of the pan-Asian insurance market. Pravit Suksantisuwan, Deputy Managing Director at Viriyah Insurance PCL, spoke to us about the challenges and opportunities this burgeoning market will offer insurance companies across the region.
BRI Officially Gains Control of Life Insurer BRIngin Life The Jakarta Globe 14th Dec 2015
State lender Bank Rakyat Indonesia (BRI), the second-largest bank in Indonesia by assets, is set to officially take over life insurer Asuransi Bringin Jiwa Sejahtera (BJS), following shareholders' approval of the plan. BRI is acquiring about 90 percent of Asuransi Bringin Jiwa Sejahtera, also known as BRIngin Life, from its pension fund, Dana Pensiun BRI at 1.69 times Bringin Life's book value in June, according to a statement. The lender received the green light from shareholders in an extraordinary shareholders meeting on Monday. Once the acquisition is completed, BRI will own 91 percent of BRIngin Life, while Yayasan Kesejahteraan Pekerja (YKP) Bank BRI, the welfare union of the lender's employees, will control the remaining 9 percent.
Indonesian Islamic Megabank Merger Plan Shifts From 2015 to 2017 Bloomberg 14th Dec 2015
The difficulties in forming a megabank in the $2 trillion Islamic finance industry are becoming clear as Indonesia pushes back deadlines for its plan after failures in Malaysia and the Middle East. Financial Services Authority Director Dhani Gunawan Idat is the latest official to repeat Indonesia’s goal for such an entity after two years of trying, with a plan to merge the Shariah-compliant units of PT Bank Mandiri, PT Bank Negara Indonesia, PT Bank Rakyat Indonesia and PT Bank Tabungan Negara. He put the time frame as 2017 in an interview Friday, while his Chairman Muliaman Hadad said in January it may happen this year. Gatot Trihargo, deputy minister for government-run enterprises, said in June that 2016 was the target.
Regulatory environment boosts country’s microinsurance sector Business World 13th Dec 2015
Rules issued in the last five years for the Philippine microinsurance industry have proven to be supportive of the sector, with substantial growth seen in the number of insurers and products availed offered to small during the period. A study produced by the German Development Cooperation (Deutsche Gesellschaft fur Internationale Zusammenarbeit or GIZ) with the Insurance Commission (IC) and the Department of Finance-National Credit Council bared a sixfold increase in the number of insurers in the country offering microinsurance, jumping to 63 of 138 firms in 2014 from only nine companies in 2006. “The Philippine policy and regulatory framework crafted over several years in dialogue with the industry and with support of development partners, has oriented the private sector and the public authorities on its path to inclusion,” the report titled Regulatory Impact Assessment: Microinsurance Philippines launched on Dec. 9 read. “The policy path chosen back in 2010 allowed stakeholders to make the right moves.”
Insurer looking to fund more infrastructure projects Business Mirror 10th Dec 2015
Sun Life Financial Philippines is looking to invest in more infrastructure projects as part of its investment portfolio because these investments involve long-term investments, which insurance companies are more able than banks to undertake. Sun Life Financial Philippines President and CEO Riza Mantaring said at the sidelines of the Second annual Sinag Financial Literacy Journalism Awards on Thursday that Sun Life has around P170 billion in its general fund, a portion of which the company is keen on deploying in infrastructure projects. The Sinag Financial Literacy Journalism Awards is Sun Life Philippines’s annual awards to honor journalists whose body of work helps promote financial literacy among Filipinos. Mantaring said that, aside from its reported foray into the business of producing power, Sun Life Philippines is also looking at other infrastructure projects that it can either fund or have an equity in because infrastructure projects provide insurance companies with a steady cash flow over a long horizon.
Indonesia: Insurance mart growth forecast to be steady next year Asia Insurance Review 9th Dec 2015
Growth in the insurance sector in Indonesia is expected to stabilise in 2016 as economic growth is likely to recover, according to Fitch Ratings. The international rating agency estimates that Indonesian real GDP growth will improve to 5.3% in 2016 and 5.5% in 2017 from 4.8% in 2015. The forecast growth would follow the recent wave of reforms introduced by the government to improve business sentiment and strengthen the country's financial fundamentals. In a report entitled "2016 Outlook: Indonesia Insurance Sector", Fitch said the rating outlook for Indonesia's life and non-life insurance sectors in 2016 is 'Stable', underpinned by steady demand, manageable investment risks among insurers, and adequate buffers against catastrophe losses through reinsurance coverage. The sector outlook is 'Stable', reflecting Fitch's view that the low insurance penetration and growing awareness will continue to support life insurance growth. Generally conservative investment allocation is likely to mitigate the volatility in the insurers' operating results.
Singapore: Lloyd's starts open trading sessions Asia Insurance Review 9th Dec 2015
The world's specialist insurance market, Lloyd's, has started new open trading sessions in Singapore, allowing brokers to interact directly on site with Lloyd's underwriters. This is a new concept for the local market where brokers meet specialist property, power and onshore energy underwriters from 11 Lloyd’s syndicates twice a week on Tuesdays and Thursdays from 10.00am to 12.00pm. The format which is undergoing a trial until 31 December 2015 has been successful so far, said Lloyd's in a statement.
Market Regulation
Central bank to cut bank reserve requirement in January VietnamPlus 14th Dec 2015
The State Bank of Vietnam (SBV) will reduce the reserve requirement ratio for banks that take part in the restructuring of the banking system. Under Circular 23/2015/TT-NHNN, which will take effect on January 28 next year, the SBV Governor will consider reducing the ratio even to zero percent for ailing banks that are under the central bank's special supervision. As for banks, which are under restructuring or are selected by the central bank to take part in the restructuring of other ailing banks, the Governor will decide on decreasing the ratios depending on each case. Currently, the compulsory reserve ratio applicable to demand and below 12-month term deposits is three percent of the total deposits, while the rate for 12-month-plus term deposits is one percent. The ratios for foreign currency deposits are eight and six percent, respectively.
Expensive nonlife-insurance policies seen persisting as House abandons tax-rate cuts Business Mirror 12th Dec 2015
The Philippine Insurers and Reinsurers Association (Pira) is no longer hoping the proposed bill on the lowering of tax rate on nonlife-insurance products will ever be enacted under President Aquino. Pira Chairman Michael Rellosa said many of the country’s legislators are already in campaign mode, as indicated by the lack of quorum at the House of Representatives the past few months. The proposed bill that will lower the tax on nonlife-insurance products had been pending during the 16th Congress, no matter the strong support from Insurance Commissioner Emmanuel F. Dooc. The tax imposed on nonlife-insurance products in the Philippines is said to be the highest in the world, equal to 24.5 percent of the total premium paid for nonlife-insurance products, and 26.5 percent for fire insurance.
PHL remains among illicit money sources Business World 9th Dec 2015
The Philippines has remained among the biggest sources of illicit money in the world, the Global Financial Integrity (GFI) said in its latest report, even as it noted a slight decrease in illegally transacted amounts between 2011 and 2013. The Washington-based think tank said in its report titled “Illicit Financial Flows from Developing Countries: 2004-2013” that a total of $90.25 billion in illicit capital flowed from the Philippines in those 10 years -- or an average of $9.025 billion annually -- placing it the 19th out of 149 country sources.
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