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September 1990 A Monthly Publication of the Central Bank of the Philippines Vol. XLII, No.

I
FEATURES
Laying the Groundwork
1 fOr Long-Term Growth 13 Government Regulation of the Banking
System
1 Armida S. San Jose
Th4 government is implementing
policies that will sustain economic 18 Investment Trends: Towards Financing
growth and lay the foundation for Infrastructure Support for Economic
long-term growth. . . .
.- . , A ,
Growth
4 , . . . I '
, .-:
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.;;; ;:#,p:.,;t.-+;!. Ma. Belinda C. Carandang
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27 Q u a s i - m n g in tee Philippines =
Juan A. Tolentino . -

DEPARTMENTS

1 GOVERNOR'S PAGE

3 ECONOMIC INDICATORS
11 TRADE DEVELOPMENTS

32 PROFILE
I
I
RB Calauag Shifts to High Gear I

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MPLE ENGLISH
The Flow of Funds (Part 3)
I

38 NEWS , .

41 QUERIE

43 CENTRAL BANK REGULATIONS

44 CONGRESS UPDATE

45 MONTHLY
P&\,
STATISTICAL INDICATORS
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I . _ _ _
CB REVIEW @
I EDITORIAL BOARD

Chairman
Edgardo P. Zialcita

Members
Vivian M. Remigio
Roberto Y. Garcia
Ramon V. Tiaoqui
Ricardo P. Lirio

I
Eugcnio Ealdama, Jr.
Juan Antonio E. Muiioz
Purita F. Neri
Gaudencia k Santiago
Gregorio R Suarez
Amando Tetangco, Jr.

Editor
Mncedes B. Suleik

Associate Editor
Diwa C. Guinigundo

Assistant Editor
Angela L. Alzona

Staffers
Rudencio E. Magpayo
Rubuena B. Angcles

f i t
Antonio B. Talmcra

l).pese-
Serlina C Rufin
Beth D. Co

Circulation X b r C h q
Nonna B. Aspiras

Sector Coor&tom
Joel V.C Domingo
Herminip B. Paulino
Iluminada T. Scat

CB Re- is published monthly by the Central


Bank of the Philippines, A. Mabimi St. Manila,
Philippines
htiCl12Sd other 6- of chit p u b l i ~ r h
may be reproduced in whole or in part, provided
proper acltaowlcdgment of source is cited
The views expressed in the articles are those of
the authors and do not reflect those of the Ccnual
Bank mmagaacnt.
For further information, contrct CB R d m
Editorid Staff, Room 410, Fourth Floor. Five
Storey Buih%f~~ Centnl Bank of the Philippines,
A. Mabi St., Manila, PhElippines with Telcpbone
Nor 59-89-88 and 5Cb7051 t o 60,locats 2826,
2627 m d 2698.
Entered as second durs mPil st the M.nilr Post
Office on June 23, 1950 with addidon41 mailing
office at the CB Post Office.
La
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-2 - t for Long =TermGrowth
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THE PHILlPPJNE government is implementing policies that will
economic recovery and lay the foundation for longterm growth.
Toward this end, the economic and financial program from 1990 to
1992 is charactaized by the high priority given to implementing policy
initiatives which address the basic problems of poverty, unemployment,
underemployment, inequitable distribution of income, and economic
efficiency.
Governor Jose L. Cuisia emphasized these thrusts of the country's
financial and monetary policy framework when he spoke before the
region$ business conference of the Davao Chamber of Commerce in
Davao City.
The projected shortfall from the growth rate recorded the previous
years, the accelerated inflation rate, higher interest rates and the
downslide of the peso, which may have been exacerbated by the recent
earthquake and the Middle East crisis, might have conmbuted to the
impression that the economy has gone adrift The fact, however, is that
from the consumer-propelled upsweep of the economy in 1988, the
trend has shifted to invesanent-led grow& wer the long term. What is
needed now, he said, is to focus on specific strumral constraints which
may inhibit efforts in sustaining the gains already made.
Reporting on the 1989 GNP which grew in real terms by 5.6 percent,
Gov. Cuisia said that earlier projections for 1990 to 1992 GNP growth
of 6.5 percent, however, may be adversely affected by the drought, the
energy shortage and the killer earthquake.
At the same rime he stated that favorable developments in the
international markets and the government's continuous export
promotion stimulated world demand and the penetration of non-quota
markets, particularly for the country's top foreign exchange earners-
garments and electronics. The continued implementation of a flexible
exchange rate policy and increased production provided an
environment conducive to export growth.
The deficit in the balance of payments for the fist five months of
the year, however, was attributed by Gov. Cuisia to the increase in
imports which resulted in a widened current account deficit. On the
overall, however, the external fmancing gap through 1990 would be
alleviated by the important agreements forged with creditors-a cash
buybdck, restructuring of past due and maturing obligations with the
Paris Club, and a new aptement with creditor banks for a new
financing package-which lowered external debt by $1.5 billion as of
April 30,1990 from its comparative level in 1989.
The inflation rate, which has risen to 14 percent in 1989 from single
digit levels over the past three yeus, must be effectively contained Hc
explained the rise to the upward adjustments in legislated minimum
wages, higher interest payments,on domestic government debt,
subsidized domestic fuel prices and excess liqidity in the systcm
niggered by last December's destabilizing events
The high lending rate on secured loans for all maturibc~he said,
reflected the continued strong demand for private credit Rates on
Treasury Bills, however, have been on a downtrend, although rates for
secured and unsecured loans have not declined.
The Central Bank rediscount facilities continue to be extended in :.
increasing magnitude to help exporters. The rediscount rate was raised
by one percent effective February 19 to align it closer to market rates
In response to the clamor of commercial banks, the Cennal Bank has
decentralized its rediscounting operations through its three regional
offices. However, Gov. Cuisia reported that the commercial banks have
not been actively utilizing the CB rediscount facilities which offer
lower rates for exporters.
Access to foreign loans by exporters even for peso expenditures, the
simplification of export procedures and documentation, production
and distribution of export guides and brochure%and the holding of
periodic meetings with exporters are continuing concerns of the Central
Bank.
To provide the proper environment that would sustain the country
in its quest to reach the coveted newly-industrializing country (Nlc)
status, it is imperative that the gains made in the last three years be
consolidated and used as building blocks for long-term growth. What is
needed, Gov. Cuisia said, is a monetary position that would steer the
economy through a slower but more stable growth path in the
short-term and to a sustainable gtowth over the medium term. This was .
the general thrust in 1989, when monetary and credit policies adhered +

to the principles of market orientation, deregulation, competition and


institutional efficiency.
Specifically, the CB head emphasized the move toward completely
deregulated interest rates. Interest rate policy has been important for its
ability to respond to the problem of inflation and its effects on savings
and investments, and consequently on ou u t As proven in the history
'i!
of the Central Bank monetary policy, mar et-determined intercst rates
are less subject to arbitrary manipulation and can help policy-makers
achieve their objectives of stability and growth.
Gov. Cuisia reported that in response to the rapid expansion in
money supply and inflationary pressures during the latterhalf of last
year resulting from increased demand, supply bottlenecks and upward
price expectations, the Central Bank closely monitored developments in
the financial markets and took measures to control the growth of
monetary variables and relieve the pressure on the werall price level.
Policies on the external front also pursued a market-oriented thrust
as the Central Bank refrained from direct intervention in the foreign
exchange market and allowed the exchange rate to seek irs lewl.
Various promotional measures, like country and product-specific
campaigns and the simplification of procedurd requirements in the
processing of export documents, were implemented during the year to
maximize foreign exchange earn- The simplification of existing
procedural requirements governing foreign investments w2s likewise
stepped up.
In sum,.Gov. Cuisia said sound monetary management was pursued
in line with the overall national goals of promoting economic recovery
and setting the country on a higher growth plane. Meanwhile, economic
performance for tfie rest of the year and the next two years is viewed
with hopeful sobriety as the effects of the power crisis on productivity,
the impact of the killer quake, #he Middle East conflict and the
projected increase in the consolidated public sector deficit are expected
to influence economic growth.

CENTRAL BANK OF THE PHILIPPINES


ECONOMIC INDICATORS I
I
/ August Inflation Rate on the Downtrend
/ '

Prices: The August 1990 annual domestic in- ippines' bumper hamst of corn and rice. Non-food
flation rate tapered off at 11.1 percent, prices, meanwhile rose by 13.9 percent with Fuel,
lower than the comparable 12.6 per- Light and Water principally contributing the highest
cent last month add 11.7 percent in the price mark-up at 23.5 percent due to more expensive
same period last year. Price growths in fuel, followed by Services and Housing and Repairs
the National Capital Region WCR) and with price mark-ups at 17.6 percent and 13.7 per-
outlying areas posted 15.4 percent and 10.2 percent, cent, respectively.
respectively. On a monthly basis, the general price By region, the annuaI rate of price increases in the
index registered a fractional rise of 0.3 percent NCR and outlying areas at 15.4 percent and 10.2
throughout the country. percent, respcctivcly, could be traced mainly from
Prices of all food items went up by 8.8 percent higher-priced non-food items particularly Fuel,
during the month in review primarily due to the price Light and Water and housing and repairs. Compo-
increases of fruits and vegetables (15.6 percent), nent-wise, fuel shared the biggest price boost at 25.5
corn (14.7 percent), eggs (12.2 percent), cereal (9.8 percent due to oil price hike speculations brought
percent) and dairy products (9.7 percent). These about by the recent Gulf crisis.
developments occurred as earthquake damages dis- Compared to the preceding month, the cost of
rupted economic activity in the Northern part of the living index decelerated to 0.3 percent from 1.6 per-
country. Compared to the previous month's price in- cent last month stemming from lower pria growths
crements, the rates were nevertheless relatively low- of foodstuffs in the NCR and outlying areas.
er this time, partly attributable to the Southern Phil- -R.J. Veron

CONSUMER PRICE INDEX I N THE PHILIPPINES


(1978=1W)

All I1.m Food. Bm- md Tab.ero -Food


600

AugunlWlO JulylasO Aupurt1889 AwtlgsO July 1090 Ayun18Bb)


904
Clothing Housingand Repairs I lkfy=J
LiCt a d Water

Augun19W July 1- Au0un19119 AuguatlSBO July1900 AugunlgBB AupustlOQO July 1- August188U

CPI in tho Philippines CPI inAllka,OtmWth.NCR

CB REVIEW September 1980


ECONOMIC INDICATORS
/

hangeRate:Peaso~ cent against the Hongkong dollar; 4.7 percent against


in August the Indonesian rupiah; and 4.4 percent against the
New Taiwan dollar.
The official exchange rate of the peso The peso's average exchange rate against a total
to the US dollar was recorded at trade-weighted basket of major industrial countries'
P25.000 as of end-August, a substantial currencies, or its nominal effective exchange rate
depreciation of 4.8 percent over the July (NEERMIC), depreciated by 4.6 percent in August.
level. Compared to both the December On the other hand, the peso's NEER adjusted for
1989 and year-ago levels, the peso like- price differentials, or its real effective exchange rate
wise weakened by 11.4 percent and 14.3 percent, (REER-MIC), depreciated by 4.7 percent against the
respectively. During the month, the peso showed in- major industrial countries, improving the currency's
creased volatility which, calculated at P0.42, was the competitive position against its ASEAN competitors.
highest deviation around the monthly average level The REER against competing countries depreciated
since 1988. by 3.7 and 3.4 percent on the broad and narrow
The negative price differential between the official series, respectively.
rate and the comparable parallel market rate increased Bids for foreign exchange on the Bankers Associa-
substantially from P0.465 in July to P2.475 in Aug- tion of the Philippines (BAP) trading floor remained
ust. This differential was accounted for chiefly by unsatisfied as most banks continued to hold on to
the relatively sharper increase of the quoted parallel their dollars. More active Central Bank selling during
rate (12.9 percent) compared to that of the official the last two weeks, however, increased the aggregate
rate (which only grew by 4.8 percent). monthly volume of transactions for August to
The weak peso generally recorded greater deprecia- US$43.05 million, from US$3.45 million in July.
tions vis-a-vis selected currencies of major industrial The CB registered no purchases, effectively making
and competing countries. Specificdevelopments over it a net seller for the month.
certain periods are as follows: 10.2 percent against Notwithstanding the CB selling activity on the
the Swiss franc; 9.0 percent against the Pound ster- floor, the net availments on the country's trade
ling; 7.5 percent against the Deutsche mark and the facility lines and the receipt of new money increased
Singapore dollar; 7.4 percent against the Japanese the level of reserves by US$O. 146 billion to US$2.127
yen.and the French franc; 5.6 percent against the billion by end-August.
Thai baht; 5.3 percent against the Malaysian dollar; -M.M.C. de Guzman
4.9 percent against the South Korean won; 4.8 per-

CROSS EXCHANGE RATES OF THE PESO^


(Pesos Per Unit of Foreign Currency)
As of Dates Indicated; Endof-Period

August December August


Foreign Qrrency 1990 1989 1889

US dollar 22.4400 21.8800


Japanese yen 0.1562 0.1516
British pound 38.0049 34.5047
Deutsche mark 13.2889 11.1959
Swiss franc 14.5792 12.9923
French franc 3.8888 3.3235
Singapore dollar 11.8842 11.1412
Malaysian dollar 8.3295 8.1292
Thailand baht 0.8729 48467
Indonesian rupiah 0.0125 0.0123
Hongkong dollar 2.8745 2.8008
South Korean won 0.033480 0.033060
New Taiwan dollar 0.8587 0.8607

' ~ a s e dan the Bankers Auociation of the Phllippind reference rate.

CENTRAL BANK OF THE PHILIPPINES


INDICATOR
ECONOMIC

Interest Rates: Rates in August the first week to 7.556 percent in the third week
but rose sharply to 35.5 percent in the fourth week
Except for the yields on Treasury bills following stepped-up open market operations of the
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--
v
and interbank call loans, nominal inter-
est rates on all other borrowing and
lending instruments of banks exhibited
Central Bank towards the close of the month. ,
Treasury bills registered higher yields during the
review period reflecting the larger financing require
gradual declines during the month of ment of the government The average rate on T-bills
August 1990. The downtrend in market for all maturities rose steadily from 22.63 percent in
rates mainly reflected the improvement in banks' July to 23.082 percent in August. By maturity, the
liquidity position and the slowdown in the annual highest increase was registered by 364-day T-bills
inflation rate. Despite the decline in nominal market which rose by 0.643 percentage point to 24.673 p e r
rates, real interest rates continued to post positive cent, followed by 9 1-day issues, 0.5 19 percentage
levels as nominal rates remained above the 11.1p e r point t o 21.448 percent; and 182-day issues, 0.06
cent average inflation rate for the month. percentage point t o 23.157 percent. On an annual
Nominal interest rates on savings deposits, tradi- comparison, this month's average yield on T-bills for
tionally viewed as the least responsive to market all maturities was 2.959 percentage points higher
developments, slipped fractionally from the previous than the 20.123 percent average registered in August
month's average of 5.401 percent to 5.303 percent
in August Rates on time deposits with maturities
of 1 year and below and those of over 2 years simi-
1989.
-" Y. silsroza

larly dropped to 18.596 and 18.475 percent, respec-


tively and pulled the weighted average interest rate
for all maturities down by 0.6 percentage point t o
18.587 percent even as the average rate on place- SELECTED INTEREST RATES
For Periods Indicated
ments with over 2-year maturities rose by 0.9 per- (RramtPer Annum)
centage point to 13.3 97 percent
Likewise, the new Manila Reference Rates (MRRs), August July
which are based on banks' transactions on promis- 1990 1990
sory notes (PNs) and time deposits (TDs) for various
maturities covering placements of P 100,000 and
over, posted lower rates during the period Compared Interbank Call Loans
t o the 20.75 percent average in July, this month's Treasury Bills
MRR (dmaturities) at 19.25 percent was lower by 63 days
1.5 percentage points. 91 days
182 days
Following the general downtrend in traditional
364 days
bank borrowing rates, lending rates on secured loans All maturities
posted lower levels in August compared to the p r e Savings Deposits
vious month. Rates on secured loans with maturities Time Deposits
over 2 years and those with shorter maturities drop 1 year and below
ped by 1.663 percentage points and 0.838 percent- Over 1-2 years
age point, respectively which rolled back the weight- All maturities
ed average interest rate on secured loans across Secured Loans
maturities to 22.693 percent from 23.639 percent in 1 year and below 22530 23.368 19.857
July. Over 1-2 years 24.1 14 26.777 2a826
Compared with the rates registered in August All maturities 22.693 23,639 19.934
1989, banks' borrowing rates this year were general- Manila Reference Rate
60 days 19.313 21.000 15.625
ly higher specifically for new MRRs and time deposits 90 days 18.813 20.313 15.000
which went up by 3.75 and 3.26 percentage points, 180 days 10.063 2Q063 14.-
respectively. Similarlyl lending rates on secured loans All maturities 19.250 2Q750 15.500
moved up by 2.759 percentage points from the aver
age last year.
Meanwhile, the average interbank call loan (IBCL)
rate rose markedly to 16.94 percent, up by 6.8 13
percentage points from the July average and by 5.5 5 1
percentage points from the comparable period in
1989. On a weekly-average-basis, however, the m a
rate dropped gradually from 20.756 percent during

CB REVIEW September lssO


of Trade
: rade Gap
BALANCE OF TRADE
January-Augm 1989 and 1990
Philippine merchandise trade for the (In Thousand US Dollan)
period January-August 1990 recorded
a deficit of US$2,562 million marking
a 50.1 percent increase compared to 5,306,628
1
Exports
year-ago level of US$1,707 million. This
was a t t r i b u t e d to the 15.0 percent Ten Principal Exports 2,127,024
growth in imports which outpaced the 3.3 percent 1. Semi-conductor devices 535,965
increase in exports. 2. Consigned children's and
Merchandise exports grew slightly by 1.7 percent infants' wear 248,321
in August 1990 from the US$666 million registered 3. Coconut oil (crude and
in August last year. The cumulative level of exports refined) 231,592
from January to August 1990amounted to US$5,307 4. Copper metal 183,435
5. Fin. elect and electronic
million, up by USS172 million from the US$5,135 mach. and parts mftd.
million level recorded for the same period in 1989. from materials imptd. on
Manufactured exports contributed mainly to the in- consignment 169,266
crease (US$306 million). In contrast, commodities 6. Consigned women's wear 167,111
which showed downward trends were fruits and 7. Consigned men's wear 153,6 18
vegetables (USS9 million), agro -based products 8. Crocheted garments,
(US$52 million), forest products (USS71 million), knitted or crocheted, not
and mineral products ( U S 7 6 million). elastic 149,392
Semi-conductor devices continued to be the coun- 9. Electronic microcircuits 146,6 12
try's leading export for the first eight months. Other 10. Copper concentrates 141,712
leading items included consigned children's and
Others 3.1 79,604
infants' wear, coconut oil, copper metal, and con-
signed electrical and electronic machinery and parts, Imports 7,869,095
in their respective order.
Merchandise imports for August 1990 dropped by Ten Principal Imports 2,350,108
1.2 percent from the August 1989 level of USS999
million. Nevertheless, import arrivals for the period 1. Petroleum oils, cruds
January to August reached US$7,869 million, indica- 2. Dice of any material,
ting a US$1,028 million increase from the previous consigned
year's level. All commodity groups showed significant 3. Other parts, n.e.s, of
increases, led by capital goods which expanded by electronic components
4. Other materials and
US$497 million mainly on account of increased ar-
accessories, consigned
rivals of power generating and specialized machines, 5. Fabrics imported on
and telecommunication equipment and electrical consignment basis
machinery. Importations of raw materials and inter- 6. Wheat
mediate goods climbed by USS246 million as a result 7. Aircraft, mechanically
of higher purchases of materials and accessories for propelled exceeding
the manufacture of eletronic equipment, textile 15000 k g
yarns and fabrics, non-metallic mineral manufactures, 8. CKD for assembly of
and corn. Mineral fuels and lubricant imports also passenger cars
rose by US$89 million owing primarily t o hiked vol- 9. Blooms, slabs and billets
ume and unit price of petroleum crude. Finally, con- of iron and steel
sumer goods arrivals grew by US$161 million, fol- 10. Oilcake and other
residues of soya beans
lowing higher demand for rice, dairy products, and
passenger cars and motorized cycles.
-E. Alarilla
'rade Balance (2,562,467)

S b u m DER-International. Central Bank of the ph

CENTRAL BANK OF 1H E PHILIPPINES


ECONOMIC INDICATORS

&w= Liquidity: llptrend deposit substitutes continued their declining trend


, Continues in July since June. Currency in circulation fell by P1.S bil-
i lion which more than offset the P1.2 billion rise in
Domestic liquidity (M3), which has been demand deposits. Deposit substitutes dropped by
consistently on the uptrend since the PI8 million.
start of the year, registered a monthly On an annual basis, M3 grew by 23.8 percent fol-
expansion of P3.4 billion to settle at lowing the expansion in private sector credits and
P266.9 billion at end-July 1990. The the improvement in net foreign assets. Component
month's increase in M3 followed the wise, the annual expansion in M3 came from the in-
rise in liquidity multiplier from 2.938 in June to creases in quasi-money and money supply by P41.8
3.006, which more than offset the contractionary billion and P9.9 billion, respectively while deposit
impact of the drop in RM. substitutes contracted by PO.3 billion.
Viewed from the asset side of the balance sheet of -M.D. S d
the monetary system, the increase in M3 was largely
a result of the continued rise in credits to the private
sector. Public sector credits, on the other hand, de-
clined as the National Government increased its I DOMESTIC L I W I D I M
deposits with CB coming mainly from proceeds (In Million Pesos)
from sale of auctioned T-bills. Likewise, net foreign
assets (NFA) of the monetary system deteriorated by 1990 1989
P5.1 billion which exerted a contractionary impact JUI~P June July
on M3.
Viewed by component, the rise in M3 was traced 3omestic Liquidity 266,921 263,515 215,530
to the expansion in the levels of interestearning de- Money Supply 69,467 69,771 59,542
posits, in particular, quasi-money which rose by P3.7 Currency in Circulation 43,076 44,625 38,637
billion or 2.0 percent. Quasi-money which aggregated Peso Deinand Deposits 26,391 25,146 22,905
P194.7 billion accounted for 72.9 percent of M3, and
is composed of savings deposits (PI4 1.8 billion) and hasi-Money 194,653 190,925 152,889
time deposits (P52.8 billion). The move of a number Savings Deposits 141,808 138,807 102,431
of commercial banks to raise the interest on savings Time Deposits 52,8U5 52,118 50,458
deposits could have encouraged depositors to save
more in this form of deposit. Time deposits continued
I Deposit Substitutes 2,801 2,819 3,099
to yield positive returns to depositors, despite the
increase in inflation from 12.2 percent to 12.6.
Comprising 27.1 percent of M3, money supply and

P109.84 billion exceeding last quarter's flotations


Own instrument by 10.4 percent, while total redemption reached
P97.7 1 billion for net issuances of P12.13 billion
Operations versus P8.48 billion in the second quarter.
For September, gross issuances of P37.58 billion
Outstanding government securities ad- were shared by the National Government, account-
ministered by the Central Bank rose to ing for 6 1 percent, and the Central Bank for 39 per
P257.44 billion at end-September, cent.
marking a 5 percent increase from last Peso-denominated Treasury Bills decelerated to
month's P253.77 billion. The P3.67 bil- P197.99 billion as 26 percent or P7.67 billion out of
lion growth stemmed from securities P29.37 billion applications were rejected during the
transactions of P37.5 8 billion issuances and P3 3.91 four auctions (one full acceptance, two partial ac-
billion redemptions bringing outstanding levels for ceptances and one full rejection) conducted this
the three major issuers to: National Government - month due to precipitously high bid rates. Weighted
P237.56 billion; government corporations - P2,03 average interest rates for the three maturities rose
billion ;and the Central Bank - P17.85 billion Weight- from 26.193 to 28.386 percent for 91-days; 27.026
ed average interest rate for the outstanding issues to 29.152 percent for 182-days; and 27.143 to
stood at 22.529 percent, up by 63.1 basis points 29.132 percent for 364 days. Similarly, composite
from last month's 21.898 percent weighted average yield rate for all maturities trend-
Gross issuances for the third quarter amounted to ed upward from 26.876 to 28.858 percent at rnonth-

C 8 REVIEW September 1990


ECONOMIC INDICATORS

SELECTED OUTSTANDING GOVERNMENT SECURITIES


Asof svptrrnbw30,1990
(In Million Pesos)

This Last 3 Months 6 Months A Year


Month Month Ago Ago Ago
Lptembsr August Juna March Saptombar '89

1. Outstanding Government Securities


Issued by and Thnr the Central Bank*
a. National Government Issues
b. Government Corporate Issues
c. Central Bank Issues
2. Ddlar DenominatedT-Bills
3. Peso DenominatedT-Bills
a. Regular
R Special Series
4. Marketable T-Notes
a Negotiated (Special Series)
h Auctioned (Regular)
c. Negotiated (Rwlar)
5. PEA Bonds
6. Reconstruction Bonds
7. NPC Bonds
8. MWSS Angat Bonds
9. CB Bills, Regular
10. CB Bills, Special Series
11. CB Notes

end. Bonds worth P5.8 million, while no fresh issues were


Marketable Treasury Notes accelerated to P20.26 authorized for NPC and Mwss Angat Bonds. -
billion, up P0.95 billion or 5 percent from P19.3 1 CB BilIs, Special Series, slipped to P2.69 billion,
billion with the initial issuance of restructured Notes while CB Notes stood steady at its level last month.
of 3-5 years' maturity geared to absorb proceeds of During the month, CB Bills, Regular Series, were
matured T-Bill holdings of the SSs and the GSK in reintroduced in the market, as monetary authorities
accordance with the term transformation agreement approved the shift from Treasury issues of the in-
with said institutions. strument for liquidity management. As end of Sep-
Sales of dollar-denominated Treasury Bills and tember, some PI3 billion bills were issued in two
Reconstruction Bonds perked up by 5 1 percent and maturities (30 and 60 days) with rates related to
16 percent, respectively. Treasury Bills.
For guaranted corporate issues, change was ef- -H. B. Paulino
fected only 9 t h the mandatory redemption of PEA

declined bv P1.6 billion.


~iewed'fromthe asset side, the increase in RMwas
traced to the P6.0 billion increment in the net do-
Reserve money for the month of August mestic assets WA)of the monetary authorities, the
1990 stood at P89.0 billion, P0.2 billion expansionary impact of which was partly dampened
(0.3 percent ) higher than the previous by the P5.8 billion deterioration in net foreign assets
month's level. The expansion was due of the monetary authorities (NFA-MA).
to the increase in currency issue (P1.8 In particular, the rise in NDA was due primarily to
billion). The other component of reserve the drawdown in NG deposits with CB amounting
money, deposit money banks (DMBS) reserve balances, to P1.O billion and the unwinding of W.3 billion in

CENTRAL BANK OF THE PHILIPPINES


ECONOMIC INDICATORS

SOURCES OF RESERVE MONEY MOVEMENTS*


As of Dates Indicated
(In Million Pews)

I
Levels Fkws
A U ~ U S ~July
~ August Aug 90 Aug. 90
1990 1990 1989 hl.90 Aug, 89

I. Reserve Money
1.0 Currency lsdel
2.0 DMB* Reserve Balances

-
II. Net Foreign Assets Monetary Authorities (MA) -122,426 -116,658 -124,394 -5,768 1,988
1.0 Net International Reserves 2,284 -1,186 -13,511 1,098 -11,227
1.1 Gross International Reserves 54,634 48,422 33,332 6,212 21,302
1.2 Short-Term Foreign Liabilities -52,350 -49,608 --46,844 -2,742 -5,506
2.0 Medium- and LongTerm Foreign Liabilities -124,710 -115,473 -110,883 -9,237 - 13,827
III. Net Domestic Assets MA -
of which:
1.0 Net Credits to the National Government (MA)
of which:
National Government Deposits
2 0 Assistance to Financial Institutions
of which:
Overdrafts
3.0 Regular Rediscounting
4.0 CB Bills
5.0 Reverse Repurchase
6.0 Forward Cover Differential

*Data reflect the expansion in coverage of DMBs.


Net of cash in Treasury Vault
Preliminary

CB bills. These transactions, however, were offset by the peso-dollar exchange rates, nomithstmding the
the P0.8 billion additional CB borrowings under the improvement in gross international reserves.
reverse repurchase facility and, to a lesser extent, On an annual basis, RM expanded by P20.9 bil-
by the drop in rediscount credits and assistance to lion or 30.6 percent brought about by the improve-
fmancial institutions. ments in both the domestic and foreign accounts of
On the other hand, the deterioration in NFA-MA the monetary authorities.
stemmed from the increase in medium- and long- -E. P.Martinez
term foreign liabilities, due to the depreciation in

awash with excess money. Transactionswere effected


~
W Ma
rkt# h i;CB Bills Reissued
e within the wide range of 4 1/32 percent - 80 percent
while the average cost of onite borrowing settled at
The onite funds market for the ,month 15 118 percent, down by about 213 basis points from
of September 1990 showed a mixed the past month's average rate of 17 114percent. Trans-
condition. Tightness was exceptionally acted volume registered P66.49 billion. On the aver-
felt by banks during the fast week and age, there were 14 borrowers and 20 lenders that
toward the last week of the month. In- participated in the IBCL market.
terbank rates, however, sharply dropped As banks scampered for funds coupled with the
1 between the second.and third weeks as banks became CB's continuous borrowing stance during the first

CB REVIEW September 1990


ECONOMIC INDICATORS

week, rates shot up to 80 percent (September 04),


a new record high for 1990. The Central Bank had
to contract the system in order to achieve its reserve
money rargets.
The succeeding two weeks of the month under re-
view saw interfund rates dip. The weekly average
IBCL rates registered I1 percent and 6 5/16percent,
respectively. The gathered lowest rate, i.e., at 4 1/32
percent, was transacted on September 24.
The last week mirrored a moderately tight market
with the weekly average rate settling at 12 1/4per-
cent. It being a quartcrend month, banks borrowed
to attain their quarterly and end of month reserve
requirements. Market's tightness during the week was
also partidy due to CB9ssiphoning off a hefty
P8.781 billion through the CB Bills. The Central Bank
re-issued CB Bills last 19 September 1990 with the
intention of augmenting CB's open market operations.
-E. C. Jimenez

CENTRAL BANK OF THE PHILIPPINES


TRADE DEVELOPMENTS

/ Commercial Policy Developments


in Selected Countries

TRADE REGULATIONS/POLICIES 3. United Kingdom - Import licensing

LIBERALIZATION A new Open General Transhipment License has been


introduced for stricter monitoring of sensitive goods

textile products
-
1. United States Documentation requirement% (mostly military equipment and high technology
goods) transhipped through the United Kingdom.
Prior to importation to tranship such goods, an ex-
Effective 14 March 1990, shipments of bolducs (or port license must be applied for.
fabrics consisting of warp without weft assembled
by means of an adhesive) under Harmonized Tariff OTHERS
Schedule No. 5806.40.0000, Category 229, export-
-
ed from all countries on or after 14 March 1990 1.Australia Health requirements: food and bever-
have been exempted from existing visa and quota re- ages
quirements established under the terms of current
visa arrangements and bilateral trade agreements. The Australian Quarantine and Inspection Service
(AQIS) has announced that from April 1990, new
RESTRICTIONS inspection procedures for imported foods will be
progressively introduced.
-
1.Australia Packaging requirements: pre-packed
articles -
2. India Foreign exchange

The provisions of the Trade Measurement Act and Effective 1 January 1990, the exchange rate to be
Trade Measurement (Pre-packed Articles) Regula- used for the conversion of U.S. Dollars to Indian
tions which will soon be introduced in Australia will Rupees for Customs purposes has been set at US
cover all pre-packed articles whether for sale by $5.875 per Rs. 100.
wholesale or retail, unless specifically exempted.
-
The legislation will include the following require- 3. New Zealand Foreign exchange
ments:
a all packages containing pre-packed articles, un- The following exchange rates to the New Zealand
less specifically exempted, must be marked with the Dollar relate to imported goods for which a New
name and address of the packer or the person on Zealand Customs Entry has been lodged on or after
whose behalf the article was packed. The marking the Date indicated:
must be readily visible and legible such as to enable
the person named to be identified and located; Entry lodged on Entry lodged on
all packages containing pre-packed articles, un- or after or afier
less specifically exempted, must be marked with a 23.04.90 0 7.05.90
statement of the measurement of the article. The
statement must be clear, readily seen and easily read Philippine Peso
when the article is displayed for sale. US Dollar
-
2. New Zealand Health requirements CUSTOMS TARIFFS

Effective 2 April 1990, an updated list of goods RESTRICTIONS


which will require a permit from the Department of
Health prior to release from Customs control will -
1. Australia Tsriff preferences: handicrafts
now include certain items ranging from ceramic
ware to soups and broths. The following definition will apply with respect to

CB REVIEW September 1990


TRADE DEVELOPMENTS

traditional handicrafts, inJuding furniture, to be all graded pearls temporarily strung for the con-
considered e b b l e for concessional rates of import venience of transport are to be classified under tariff
duty (handicrafts concession): heading 71.01. This means that it is the Govern-
ment's intention to render duty free all graded and
"For handicrafts to be accepted as having attained ungraded pearls that have been temporarily strung
an artistic or decorative character comparable with for the convenience of transport.
traditional handmade products of the country in Pearls that have been temporarily strung for the
which the goods were made, the following condi- convenience of transport can be easily identified by
tions must be met: a knot tied very tightly against each pearl at each
the handicrafts must be traditional of their end of the string, and that there is no clasp attached.
country of origin; and Pearls that are strung and do not have a clasp are
that tradition must have both its origin in that to be classified under heading 71.16 and will have
same country and have had an active history dating the following duty rates:
back a number of centuries. from 1 July 1989, 21 percent (developing coun-
Traditional hand-made furniture is required also ay, 16 percent);
to have an artistic or decorative character which is from 1 July 1990, 19 percent (d.c., 14 percent);
to be achieved by inlaid work or by carved designs from 1 July 1991, 17 percent (d.c., 12 percent);
carried out by hand. The amount of carving or in- from 1 July 1992, 15 percent (d.c., 10 percent).
laying done must be substantial.

OTHERS

-
1. Australia T d f f chmifica&n: pearls S o w c ~ rTISNET-Tradeand Infomation Sheet 1 5 March 1990

Pending an overall review of the Harmonized System


(HS) by the Customs Cooperation Council in January
1991, the Australian Government has decided that

C E ~ T R A LBANK OF THE PHILIPPINES

1
L - - - - -- - - -- ---
FEATURES I

of the F.......
m -
C

Armida S. San Jose

Introduction it necessary to regulate the bank- tion. They offer transaction yrvi-
ing system. ces by clearing and facilitating
The financial intermediation proc- The next section discusses the payments of goods, services and
ess facilitates the development of role played by banks in the finan- financial investments for other
the country through its functions cial intermediation process and participants in the economy. They
of mobilizing resources and effi- the various types of risks faced by also intermediate funds by selling
ciently directing these into more them in the process. The third claims on themselves, i.e., deposits
productive uses. Because of this part touches on the reasons/argu- to savers and investingthe proceeds
major function, a higher degree of ments for government regulation by buying claims on borrowers, i.e.,
financial intermediation would of banks. The fourth section details loans. Hence, banks bring savers
serve to favor a higher level of out- the existing regulations imposed and ultimate borrowers together.
put of the economy as more funds on banks in the Philippines while The functions performed by
are translated into investments the fifth section discusses recent banks provide great benefit to the
vital for growth. Banks play an moves toward deregulation of the economy. By collecting funds of
important role in the financial in- banking system The paper is sum- various small depositors and lend-
termediatibn process. In their p e ~marized with some concluding re- ing these to businesses, borrowers
formance of financial intermedia- marks in the last section. and lenders of funds economize
tion function, they face various on information and transaction
risks which if not regulated could The Role of Banks costs By pooling funds of savers,
give rise to losses nor only to in the Economy they also reduce the riskiness of
depositors and to the holders of lending for the depositors. They
equity claims on banks but to the Banks do not produce goods as make possible the intermediation
economy as a whole It is for this manufacturing h s do nor' do of long term funds (which is im-
reason that the government finds they transport and distributegoods portant in economic development)
but they are an important segment since banks can lend long tenn
Mrr Son Jose m IheActingAsrockteDinc of the economy. They perform the loans to borrowers even though
tor of dre Dcpanancnt of Economic Research- functions of providin transaction the ultimate lenders of the funds
Domestic. services and fmancia! intermedia- are only making short term loans.

CB REVIEW Sspternber 1-
2 FEATURES

Since depositors can withdraw Rationale for Government Bank Regulations


their money from banks virtually Regulation of Banks in the Philippines
at any time they need them, banks
also ensure liquidity to savers. While it is generally accepted that The supervisory and regulatory
Thus, banks' performance of their regulations create inefficiencies, powers over the Philippine bank-
functions reduces the degree of the government has increasingly ing system are vested in the Central
risks and uncertainty in an econo- been involved in bank regulations Bank of the Philippines (cB~).In
mic system. since an unregulated system takes the pursuit of this responsibility,
In the process of performing too many risks. The difficulty and the CBP formulates, issues and im-
their functions, however, banks inability of depositors t o distin- plements rules and regulations
face and accept different types guish stronghafe banks from weak- affecting various aspects of banks'
of risks such as default or credit er ones by just looking at the bal- operations, the major ones are pre-
risk, interest rate risk and liquidi- ance sheet, brochures and financial sented below. Books of every
ty risks. Default risk arises when statements as well as banks' adver- bank are examined t o ensure com-
borrowers simply do not repay the tisements are major factors behind pliance with these regulations.
loan due either to dishonesty or the need for government regula-
inability to do so. A bank suffers tions Regulations are also used to a. Minimum Capital Require-
interest rate risk when the average avoid great concentration of power ment.
maturity of its liabilities is less in the banking system. More im- Different minimum capital re-
than the average maturity of its portantly, the government wants quirements as shown below are
assets and a sharp rise in interest to avoid bank failures through re- imposed on different bank catego-
rates occur that would reduce the gulations since a loss of confidence ries depending on the possible risks
market value of its assets more in one bank can trigger a domino- that these banks face in perform-
than its liabilities. Moreover, a type effect on deposit withdrawals ing the functions which they are
bank incurs liquidity risk when its or bank-run in the general banking authorized to undertake. Universal
liabilities or deposits are withdrawn system which is disruptive to the banks or expanded commercial
more rapidly than it can convert payments mechanism and in the banks (EKBs) which enjoy a wide
assets into cash t o meet the with- flow of trade and commerce. Since range of functions are required to
drawal of deposits banks are important transmission have bigger capitalization than
There are however a number of mechanisms of monetary policies, other bank types.
safeguards that can cushion bank bank failures also weakeddilute
MINIMUM CAPITALIZATION
depositors from possible losses these policies which in turn could c,Mmn
that may arise from all of the adversely affect the attainment of
abovementioned risks faced by the macroeconomic goals of the U n k d B d s (EKBs)
banks. These are the banks' equity country. In certain cases, regula- Commercid Banks (KBs)
'Ibrift Bsnks (TBs)
capital and their specialized skill tions are utilized by the govern- within MM
or ability to diversify credit port- ment to promote or redirect cred- oud&m
hd Banks (RBs)
folio to minimize if not avoid risks. it t o- . particular sectors or geo- w i h b ~ ~
In some countries including the graphic areas of the country. outside MM
Philippines, the existence of a F i t claw "A" cities
other municipalities
deposit insurance scheme provides
an explicit added protection to
depositors. The Central Bank's
role as a lender of last resort to
banks may also be viewed as an
implicit form of deposit insurance
to savers.
In spite of these safety factors, Single copration . 30% 30% 3094
the government has considered it Aggregate Corporate Hddiigs no limit no limit no limit
Corp. owned by persons related
necessary t o become involved in within the 3rd degree of
the regulation and supervision of consanguinity or affinity 2096 20% , 2096
banks. To the extent that the cost IndividuJ person/fmly group 2W 20% 2096
of providing implicit and explicit Forrign (with the President's
deposit insurance would ultimate- approval) 30% (40%) 30%(40%)
ly be absorbed by the government,
it finds it necessary to regulate 'lncludet two specialized government banks.
banks.
FEATURES

c. Net Worth to Risk Assets ancelpayment or not paid on ma- All types of banks are allowed
Ratio turity date, whichever comes ear- to invest in allied undertakings but
The net worth (or combined lier; only universal banks are allowed
capital accounts) shall not be less out-of-town checks and f o r t o invest in non-allied under
than an amount equal to 10 p e r eign checks outstanding for thirty takings. Allied2 undertakings are
cent of its risk assets. If a bank has days and forty-five days, respec- activities related to banking while
a capital of at least P500 million, tively, unless earlier dishonored; non-allied undertakings3 are those
it may (with Monetary Board's or loanslreceivables payable in not related to banking.
MB's approval) maintain a net installments which have exceeded The ceilings on equity invest-
worth to risk assets ratio of 8 p e r the prescribed minimum number ments of banks in allied under-
cent. If its net worth averages at of installments in arrears; takings as percent of the capital
least P700 million, it may maintain loans for which 20 percent of and surpluses of the bank are as
at least a networth to risk assets the total outstanding balance in follows:
ratio of 6 percent. This regulation arrears; and, Total Investments Single Investment
is imposed uniformly on all types all items in litigation.
of banks. g. Reseme Requirements 2 5% 15%
d. Single Borrower's Limit (SBL) Banks are required to set aside a 50%(for EKBs) 15%(EKBs, for died
Except as the MB may other certain portion of their deposit and non-allied
wise prescribe, the total liabilities liabilities as reserves in the form of
of any person, company, corpora- cash in vault, deposits with CBP For the purpose of determining
tion or firm to a banking corpora- and government securities. compliance with the limitations
tion for money borrowed should
not exceed 15 percent of the un-

I
LEGAL RESERVE REQUIREMENT AGAINST DJlPOSITS
impaired capital and surpluses of AND DEPOSIT SUBSTITUTES OF BANKS
such bank.
e. Limits on Loans to Directors,
Officers, Stockholders, and Re-
(10 Percent pr)
I
lated Interests (oosR~)
Loans t o individual DOSRI are h a n d 21 2 1' 20
limited to the amount of deposits Savings 21 . 17 14 14 -
held plus the book value of their NOW Account 21 21 18 *

shares in the bank, and musr be 70 Time Deposit


33 0 21 17 14 14
percent secured, provided that un- 730 21 21 20 21
secured credit accommodations to Dcposit Substitutes
each of the bank's DOsRI shall not 7 30 21 21 21
exceed 30 percent of his total 73 0 21 21 - 21
credit accommodations TotaI
DOSRI loans are limited to 15 p e r
cent of a bank's loan portfolio or
100 percent of its c a p i d accounts,
whichever is lower. h. Liquidity Floor on Gooem--on equity holdings by a bank in
f: Treatment of Past Due Loans ment Deposits an allied and non-allied under-
Banks are allowed to write off Authorized depository banks of taking, the equity holdings of the
bad loans up to P100,OOO.CBP a p government funds are required to bank in the undertaking, when
proval must be sought before maintain a 75 percent liquidity
wri ting-off loans in excess of floor with respect to deposits of,
P 100,000.00. borrowings from, and all other u n ~ &aresof rwoF/pes, rim
The following shall be consider- liabilities to the Government and cid and non-fmaneirl. AUied financial under
ed past due loans: f ~include
government entities. This liquidity vestment h [ e~h g cmpmie%b a k s
~ O U M % financing companies, credit
*
bills discounted and time floor requirement is inclusive of ete. Allied nowfi-cipl. un*
loans, whether or not representing the existing legal reserves against der&ng include w~rcbousingcompanies,
availments against a credit line - if deposits, &d could be coGplied grgtdsafe d e ~ d box
t comp-ie% compmi-
in the provision of computer services,
not paid on respective maturity with -in. the form of government cmpmies cngrged in pctiviwsimilu to the
dates of the promissory notes; securities mmngunat of mumd funds, etc.
bills and other negotiable in- 3~oa-alliedundcrtrkiags include eorcrpriscs
struments purchased - if dishonor- Ceilings on Equity Investment
j. engaged in &culture, manufacturing; energy,
of Banks ~ s p o r t a t i o n ,power, deeaification, w h d e
ed upon presentment for accept- sale wade, etc

CB REVIEW September 1990


combined with those of its direc- At least 75 percent of total banks with the granting of addi-
tors, officers and substantial stock- deposits, net of required reserves tional powers for thrift banks, to
holders, and its wholly-or majori- ~ a i n s deposit
t liabilities and pro- mention a few. --
ty-owned subsidiaries.should not vision for "till money," in a par- It is worthy to note that when
exceed 35 percent of the equity of ticular regional grouping outside Circular No. 1200 was issued in
that undertaking. the National Capital Region, must May 1989 up to end-1989, 23
j. EstabZisbment of Bunks and be invested in the same regional commercial banks, 18 thrift banks
Bank Branches grouping. This requirement is com- and 13 rural bank branches weFe
The existing policy of the MB plied with if in a particular region, allowed to be established. This
regarding the licensing of new the bank's lendings for the fi- compares with only one thrift and
banks is embodied in CB Circular nancing of agricultural and export one rural bank branches opened
No. 1200 dated May 16, 1989. industries aggregated 60 percent during the comparable period in
The said circular provides that the of its deposits. 1988 and absolutely no branches
establishment of new banks shall It may be noted that above re- in 1987. The conversion of a
be allowed, with the Central Bank gulationdrequirements from (a) to savings bank into a commercial
determining the qualifications, (j)were intended to minimize risks bank was also approved in Februa-
both qualitative and quantitative, faced by banks and promote sound ry 1990 which in effect lifted the
such as but not limited to com- banking operations for the protec- moratorium on the establishment
pliance with all requirements of tion of the interest of the deposit- of new banks. The pre-requisite
existing laws, capitalization, direc ing public, as well as avoid undue investment in government securi-
tion and administration as well as concentration of economic power ties for bank branching was also
the integrity and the responsibility in the banking system. Meanwhile, removed towards the close of
of the organizers and administra- the last two requirements (k and 1) 1988. The definition of branch
tors to reasonably assure the safe partake the nature of allocative service areas and the criteria for
ty of the interest which the public mechanisms to channel resources branching are currently further
may entrust them, A new bank to certain preferred sectors and being reviewed with the end in
may also be established as a result geographic areas of the country. view of further liberalizing branch-
of merger or consolidation of weak ing policy.
and marginal banks. The Thrust Towards On April 27, 1990, the allow-
With respect to bank branching, Deregulation able areas of equity investments in
there are no restrictions on the non-allied undertakings of univer-
opening of new branches in priori- It is an admitted fact that too sal banks w,ere expanded to include
ty rural areas. However, in urban much regulations inhibit competi- investments in enterprises engaged
and particularly metropolitan tion and lead to inefficiencies in in mining and quarrying, construe
areas, the CBP shall retain its dis- the banking system. Regulations tion, wholesale trade and commu-
cretionary policy on branching, are also not guarantees against nity and social services in addition
but allow a bank to open a new bank failures as shown by the ex- to previously allowed areas such as
branch so long as the bank's mar perience during 1984 t o 1987 agriculture, manufacturing and
ket share in that area would not when a number of banks were utilities. In the following month,
create any market concentration closed. It is in view of these con- additional equity investments in
problems. Branches of closed banks siderations that the CBP has moved allied financial undertakings of
are available for purchase by eligi- ahead with the thrust towards commercial and universal banks,
ble banks desirous to expand greater deregulation and liberaliza- were also dowed to include com-
k. Repwed AUocationforAgra- tion only to be complimented by panies engaged in stock brokerage/
rian Refornf and Agricultural a more careful supervision of the securities deaIers1brokers. Also in
Credit (Agngn-ugraCredit Require- banking system. Important steps May 1990, thrift banks were allow-
mntY have been taken such as the con- ed to accept foreign currency
Each bank is required to set tinued pursuit of a deregulated in- deposits (for those with mini-
aside at least 25 percent of its loan- terest rate policy which was ini- mum paid-in capital of P500 mil-
able funds for agricultural credit tiated in the early 80%the easing lion) or to act as forex-agents(for
of which at least 10 percent of the of rules regarding the opening of those with minimum capitalization
loanable funds should be made banks and establishmentof branch- below P50 million) and to issue
available for agrarian reform credit. es including automated teller negotiable order 'of withdrawal
1. Required Loansto-Deposit machines (AT&), the expansion of (NOW). Before the end of June
Ratio: allowable areas for equity invest- 1990, authorized banks including
ments of banks and the relaxation wholly foreign-owned banks were
of functional distinctions among authorized (subject to prior CBP
4& requiredunder P.D. 717

CENTRAL BANK OF THE PHILIPPINES


approval) to install ATMs outside These measures include the im- that government regulation suffers
banks' premises which heretofore provement of: (1) reporting re- from some inefficiencies however,
was prohaited. During the same quirements for banks, (2) guide- may not be a sufficient case to r e
month, the single borrower's limit lines for asset valuation and loan place it since the alternative might
(SBL) was also relaxed by exempt- gross provision to tighten and be worse. It is therefore said that I

ing portions of the peso loans co- standardize criteria uniformly to it is much easier to make a case
vered by guarantees of internation- all. banks, (3) guidelines for aeat- for some government regulation of
aVrcgional institutions where the ment of trust accounts to prevent banks than to decide just how
Philippines is a memberlsharehold- abuses, and (4) accounting princi- much regulation is needed and
er from the computation of the ples governing preparation of what form it should take.
SBL. banks' financial condition and In the Philippines, the CBP has
With regard to the rules alloca- operating results. The cBP has like- since the early 80s initiated moves
ting €unds/resources to specific wise initiated legislative measures towards deregulation in the bank-
areas, it may be pointed out that to improve the overall regulatory ing system. The implementation
the existing loan to deposit ratio and supervisory framework within of deregulation policies were inter-
requirement has also undergone which the CBP will operate. rupted by various crises, i.e., crisis
some relaxation in January 1990 of confidence in the financial sy*
with the expansion of the geo- Summary and Conclusion tern in 1980, balance of payments
graphic area wherein the required problems in 1983-1984 and bank
loans are to be channelled. This The foregoing has touched on the failures in 1984-87.
was done to provide banks with vital role played by banks in fund The csp nevertheless endeavor
greater flexibility to diversify loan intermediation, the benefits that ed to push through with the dere-
portfolios. The CBP also supported they accrue to the economy and guIation. Such deregulation has
moves in Congress to repeal the the various risks that they take. been and will continue to be com-
agri-agra credit requirement. The government through the CBP plemented by the strengthening of
Meanwhile, to strengthen the has taken an active role in the re- the legal and institutional frame-
foundation for greater competi- gulation of the banking system to work for supervision and regula-
tion in the banking industry, mini- protect depositors, prevent bank tion. The Philippines has followed
mum capital requirements were failures, avoid concentration of a gradual and rather cautious ap-
raised in November 1989, ie., uni- economic power and to redirect proach towards deregulation in
banks from P500 million to P1 bil- funds to certain sectors and areas the last decade but recent policy
lion and commercial banks from of the country. Government re actions and pronouncements par-
P300 million to P500 million. Var-
ious measures to strengthen bank
Q
lation is not all together desira le
since it has also its own disadvan-
ticularly in the first half of 1990
indicate that the deregulation has
supervision and regulation were tages of limiting competition and gained momentum.
also formulated and implemented promoting inefficiencies. The fact

CB REVIEW Smtmnber lssO


UFEATURES

Inyeistment Trends :Towards Financing


Irifrastructure Support
for Economic Growth
Ma. Belinda C. Carandang

Induction in particular, stresses that the rate their maintenance or full replace-
of fixed investment is a key detcr- ment.
Capital accumulation is regarded rninant of the short-run or cyclical Efficient and maximum utiliza-
as h e core of the growth process, fluctuationsin real national income tion of public investment resources
and it is viewed as a primary factor because it affects the amount of for economic development require
which facilitates a more rapid rate productive capital available per - judicious &cation decisions de-
of economic development. The person employed, and thus, aggre- pending on, among other consider-
amount of productive capital gate productive potential. ations, the following criteria: incre-
accumulated is also a major gauge The very nature of the economic mental capital-output ratio (rco~),
of the standard of Living of a na- function of investment is the sac- national produce test, social mar-
tion. The striking disparity in in- rifice of current consumption with ginal productivity (SMP) and the
come and available savingsberwecn the purpose of increasing the stock balance of payments effect.
developed and underdeveloped of capital goods to realize an ex- The incremental capital-output
countries has, in fact, been at- pansion in consurnmable output ratio (IcOR) or capital coefficient
I tributed to, among other factors, in the future. From the viewpoint is defined as the amount of ad-
the scarcity of capital. of the suppliers of capital, invest- ditional investment required to
Though investment constitutes a ment serves the economic function produce an additional unit of
I
smaller part of aggregate demand of providing an outlet through output. The criterion asserts that
than consumption spending, it which stored wealth may be put idedy only projects with a low
plays an important role in the to productive use and made to re- incremental capital-output ratio
fluctuations of G N Pover the course turn an income. The payment of a should be selected. However, it is
of the business cycle because it fair return under the free enter- restrictive in the sense that it fails
varies more than consumption rise system is the essential factor to consider the time element and
spending. Keynesian economics, that induces potential investors the supplementary benefits to
to withhold currznt consumption. other economic activities. Table I
Ms. Curndang ia Senior Economic D w l -
Moreover, if effectively employed, shows that the annual ICORS of
opmyt Specirlirt at the Dcpuemcnt of Rco- capital goods can increase pro- the Philippines compared to the
mmr Racuch.Intetnatid ductivity to provide profits for other ASW countries during the

CENTRAL BANK OF THE PHILIPPINES


FEATURES
I

foIIowing sections seek to discuss


r* I. MCREMENTAGCAPITALOUTPUT RATIO OF investments of both s e w par-
z*
SELECTED ASEAN COUNTRIES
(At Constant 1972 Ricer)
ticuhrly with
PO-t trends 'ch have beenlm-
Year Philippines Malaysia Sinp- Indonesia observed sine the seventies.
The Philippinesagross d o m d c
.1.85 capital formadon (GDCFI in real
2.87 terms generally cxhi'bited uptrends
1.65 during the '~OS, from P9,929 mil-
1.98 lion in 1970 to P25,493 million in
3.26 1979 (Table 2). The highest growth
2.27 rate of 23.5 percent was registered
4.07
6.91 in 1975 while the lwm (0.1 p w
2.91 ' cent) was recorded in 1977. While
2.27 the private sector has contributed
N.A. a larger share to total investments
than its public sector counterpart
Sourre of Saric Data: The Iaterootiod Fi0aoci.l Stntisties 1989,lnteruatiood Moo-
Fun?
in both construction and durable
equipment, public invcs tment s
have risen quite sigdicantly parti-
cularly in the mid-ties until
seventies and up ao the mideigbtics productivity of capital is cqud the early eighties, m meet the high
were relatively higher, (than those in all its different uses. Galenson infrastructmal needs of a rapidly
of the other A ~ E A N countries) and Leibenstein, on the other hand, growing economy. The accelera-
reaching a peak in 1983 due to fhe state that investment must be A- tion of public investments after
slowdown in outgut which was located to maxirnize the rate of 1979 could also be attributed
precipitated by the external pay- savings and thus of reinvestment. p d y to the up-g and expan-
marts &is. However, it started They assume that profits are largely sion of faciIitios of the energy see
to de&e after 1986, signalling saved for reinvestment and that tor, particuhrly in gcothennd,
that the Govemmcnt has been suc- wages arc l q d y spent. Hence, coal and hydropower plants to mi-
cessful in strengthening its invest- available capital should be distrib- nimize the heavy dependence in
ment programming and evaluation uted among the various alternative imported petroleum. A major pro-
mechanisms to come up with uses in such a way that the margi- gram of industrial investments was
more efficient projects. nal per capita investment quotient also launched in the early eighties
The national produce (or con- of capital is approximately equal to save foreign exchange through
sumption) test, d- by J. in the different uses. However, this import substitution. Howcvet, as
Tinbergen, is based on the asses- criterion is not well-suited to the the i n m m t p r o m expanded,
ment of the projw's direct, in- case of underdcvtlopd economies many of the investments turned
direct and secondary consequences which are generally characterized out to bc less productive than ex-
valued at accounting prices. While by massive underemployment and pected partly as a result of the
the ICOR test can be used to esti- scarce capital, since these areas ge- Government's weak mechanism
mate the efficiency of investmeats nerally requirc investment projects for evaluating and supervising pro-
for #the whole economy, the na- thw are labor-intensive to mobilize jects and tbe concentration in
tional produce test can only be the maximum amount of labor per infrastructure projects with long
applied on a per project basis, unit of investment. gestation periods. Many of the in-
The social maxginalproductivity Lastly, the balance of payments vestments also had limited impact
(SMP) criterion, proposcd by A.E. criterion advocates that priority on foreign exchange savings and
Kahn, states that the allocation of should be given to projects which this further aggravatedthe external
investment resources should con- maximize the balance of payments debt burden. These, in conjunction
sider the total net contribution of gains. with other fadtors, led to the eco-
the marginal unit of investment to nomic crisis which started in 1983.
national product and not only that ~ n v e a r a n Trends
k in the During the 1982-1986 period,
portion of the contribution which Phgippma CDCP declined steadily, with gov-
may a c m e to the priwte sector. emmat o$nsa;uction activities
Based on this criterion, the optimal The accumulation of capital is un- dropping by 32 percent in 1984
alloation of investment resources dertaken by both the private and as the public infrastructure pro-
occurs when the social marginal government (public) sectors. The . gram was restricted to majar re-
deficit of the country. Decreases
in stocks were.likewise noted dur-
ing the same period in marked
contrast to the substantial increases
registered in the years preceding
the crisis.
The economic turnaround in
1986, however, was manifested on
the demand side by larger domestic
invest men t s which registered a
record high 34.2 percent growth
in 1987 and which continued to
increase although at a slower
pace until 1989. The expansion in
GDCF was traced primarily to
increased investments in durable
equipment in the private and pub-
lic sectors precipitated by the
improving business dimate coupled
with brisk construction activity.
' ~ o u s r sRDlP Projects and PrOjRcIsthat will be identified later on from a Shoppinu List of Projects.
Build-ups in stock were also ex-
includinpContingamy a l ~ ~ n n cfors physkal and finmcial variationr The incremed h u e of Others took inm
m o u n t now wo~ectathat w l l be identifiud during the Plan period
perienced in 1986, with 1987
Sam: Medium Term Philippine Deuelqment Plan, 1987-92, NEDA. reaching a particularly hefty in-
crease as bullish production activi-
pair and maintenance of existing struction suffered declines from ty was translated into an accumula-
projects as well as the completion 1984 to 1986. tion of inventories for future sales.
of ongoing projects. Reductions In about the same period (i.e., Cognizant of the need for a
were particularly severe in trans- 1982 to 1986), the accumulation sound infrastructure program to
portation/communications (80 per- of durable equipment was also on provide firm physical foundation
cent), industry (83 percent) and a downtrend, both in the private for economic growth, new. mea-
energy (54 percent). Considerable and public sector, reflecting the sures have been and continue to
delays were likewise experienced general recessionary situation and be implemented to effect efficient
in the completion of ongoing pro- the austerity measures adopted to implementation and management
jects. In fact, even private con- contain the balance of payments of government infrastructure pro-

CENTRAL BANK OF THE PHILIPPINES


FEATURES I
jects. In 1987, the Project Facili- ficiency in food. Irrigation shall Comparative Analysis of the
tation Committee was created and be extended to crops other than Capital Formation Experiences of
the implementation of projects at rice and the flood program shall ASEAN Member Countries,
sub-national levels was strength- be improved to mitigate damage
ened. In 1988, infrastructure pro- to crops especially during calam- Figures 2-6 show the growth rates
jects were identified as one of the ities. of Gross Fixed Capita1 Formation
economic activiees entitled to in-
vestment incentives under the 1988 Figure 2. GROWTH RATES OF REAL GFCF*
Investment Priorities Plan. Further- Philippines, 1970-88
more, the Medium Term Philippine
Development Plan for 1987-92 is
envisioned to eradicate impedi-
ments to increased industrial and
agricultural production and to pro-
vide greater access to basic social
and economic services (i.e., water,
energy, transport, communications
and social infrastructure). In this
regard, priority will be given to
ongoing and existing social over-
head facilities as against new in-
frastructure projects. Extensive
engineering surveys and designs,
close supervision and quality con-
trol and transparency in operation
will also be pursued to ensure ef-
ficient project implementation.
Moreover, discriminate selection
of projects will be undertaken so
that only projects which will help -
* G r a Fixad Qpiml Formation in US$ Million
GDP M a t o r lgB6
S a r m of @.aDam:
* Tho Inwrnmional Flmmbl Stmlnkv 1OBg
in the attainment of the Govern- lnnrnatlonrl Man- Fund
ment's goals of employment gene-
ration, poverty alleviation and im- Figure 3. GROWTH RATES OF REAL GFCF*
proved delivery of support services Thailand, 197047
ivill be encouraged.
Sector-wise, the energy, trans-
port and water resources industries
have the highest investment re-
quirements for the medium-term
(Table 3 and Figure 6). The coun-
try's energy program shall continue
to pursue fuel diversification, and
the exploration and development
of potential, indigenous and renew-
able energy sources. Efficient aa-
bilization of energy and water
resources along with effective
conservation efforts shall be en-
couraged. Transport infrastructure,
on the other hand, will be oriented
I
toward rural areas by strengthening is90 I ish I 1994 I i$e I ~ & aI ihI l a b I ih I ih
inter-regional linkages to effect Year 1971 1973 1975 1877 1979 1Wl 1983 1986
more effiaent movements of mods
and services from excess p&luc- 'Gross F i x d fapita1 Fornution In US8 Mllllon
GDP Deflator a tW
tion areas to deficit areas. The
water resources program shall be Sourn of&& LR.a: Tho l n t e r ~ t i o nFlnmkl
l
lntwnarorul Montmry Fund
SWnla 1gBB.

geared toward attaining self-suf-

CB REVIEW Septembew 1890

4
--
A FEATURES
(in red terms) for the ASEAN Figure A GROWTH RATES OF REAL GFCF*
member countries. It can be Singapore, 197087
observed that the said countries
experienced drops in GDCF in the
early eighties as a result of the
worldwide international recession
which was precipitated to some
extent by the debt crisis. How-
ever, the decline in the GDCF of
the Philippines was particularly
significant because it was magni-
fied by a crisis in the political
front. Nevertheless, it showed a
relatively better performance than
Indonesia in the sense that the
Philippines was able to show a
positive growth in 1986 while
Indonesia still reflected a negative
growth. Elements of strength in
the investment picture in the
Philippines appears, therefore, to
be evident in the late eighties. In
fact, in 1989 economic growth in
*&
-
F l r d CmplOl Farmnth In US6 Mllion
GDP m a 1-

the country was investment-led. Swtw of&& L*a:Thr InmmtlonJ P I n d l l SmbUcs 1PBB.
Intwn6tio~lMnnr~nFund

Financing of the Government


Infrastructure Development
Prog;lram nical personnel, technological stimulus to additional domestic
knowledge, administrative organ- investments in the recipient coun-
The medium-term public infra- ization and capital-are usually PY.
structure investment require- scarce. Cognizant of this problem, However, the inflow of foreign
ments totalling P257.6 billion the LDCS recognik the important capital may also imply that ad-
for 1987-92 are expected to be contribution of foreign invest- ditional costs have to be borne
financed by domestic (73.5 per- ments in augmenting domestic in- by the host country. These may
cent) and foreign sources (26.5 vestible resources. In this regard, arise from special concession of-
percent) (Table 4). Of the total capital importing countries have fered by the host country - such
domestic component, more than provided a wide array of incentives as the provision of special facilities,
half will be sourced from general/ to attract foreign capital, e.g., tax additional public services, financial
continuing appropriations while incentives, investment guarantees assistance and subsidies for inputs.
the rest will come from equity and financial assistance to private Another serious concern is the
contribution to corporations, net investors. balance of payments which may
lending, internal cash generation The most significant conmbu- weaken with the repatriation of
and corporate domestic borrow- tion of foreign investment coma profits, royalties and dividends.
ings. On the other hand, about
60.0 percent of the foreign cost
from external economies the in- - In addition, there is some appre-
hension concerning nonnsident
flow not only of capital and foreign
component will be fmanced from exchange but also of managerial ownership and control of the
National Government borrowings. ability, technical knowledge, ad- country's resources which may
ministrative organization and in- engender a sense of lack of con-
Foreign Investment novations in products and produc- trol wer the domestic economic
in the Philippines tion techniques - all of which are activity such that there is s feel-
in short supply in the recipient ing of national loss of capability
Many less developing countries countries. Foreign investment thus for independent action.
(LDCS) possess valuable natural provides access to foreign techno- Given the various pros and
wealth. However,the basic instru- logy that helps to fill the manager- cons surrounding foreign invest-
ments for the efficient and maxi- ial and technological gaps in these ments, controversy, therefore,
mum utilization of these re- countries. The entry of foreign arises as to whether or not for-
sources-managerial ability, tech- investments may also serve as a eign capital should be actively
FEATURES -

encouraged. The controversy par- stitute a transfer not only of capi- available at higher costs, (c) ability
titularly centers on the: (a) degree tal but also of a package of aux- of the host country to effectively .
of non-resident ownership and iliary factors- technology, man- capture a substantial share of earn-
control that will be permitted in agement and foreign market access ings of the foreign capital and the
domestic industries, (b) extent to that would not be readily available rents earned on the packages of
which foreign investments con- to the host country or would be these auxiliary factors, (d) ex-

CB REVIEW September 1BsO


Figure 5. GROWTH RATES OF REAL GFCF* port of jobs from rich countries,
Malaysia, 1970-88 and (e) possibility of currency '
speculation and tax evasion.
From the economic mint of
view,foreign capitaIinfl04s should
be encouraged if the value added
to output by the foreign capital
is greater than the amount ap-
propriated by the investor so that
social returns exceed private re-
turns. As long as foreign invat-
ments raise productivity, direct
bmefits accrue to other income
groups, namely: domestic labor
in the form of high r e d wages,
consumers bv wav of lower
prices, g o ~ 6 e n &ugh
t higher
tax revenues and indirect gains
through realization of e&md
economics. The recipient nation
shodd, therefore, encourage for-
-
'Gross Flxcd Capla1 Fornmtlonin USS Million
COP Oeflrtor 1985
eign capital inflow if it can derive
maximum nationaI economic gains
&urn of- Ika: The Inanutlatd HnrreW Ststkrics 1988.
lnarrutlolul Monnvy Fund from these resources. Effective

CENTRAL BANK OF THE PHILIPPINES


FEATURES

utilization of foreign investmenf


therefore, calls for appropriate NET DIRECT INVBSKBNTSIN THE knaLIPklr*ES
policies that would attract the: (In Million US$)
inflows as well as the retention of 1970-1969 *

capital to the sectors where them


are most needed (i.e.. in area^
where domestic investments are
wanting) and that would minimize
thtir deleterious impact if any on
the economic, political and social
structures of the country.
Trends of Fareign Investments
Flows in the Philippines,
1970-1989

From Table 5, it can be gleaned


that net foreign investments in the
coway were on an uptrend until
1977,after which the trend became
unsteady, as a result of the unset-
tling effects of the second oil price
hike and the internationalrecession
which started in the early eighties.
The foreign exchange cnsis as well Souw: DER-intcrrtioaJ, C e n d Bank of the P h l i p p h
as problems in the political front
in 1983-85contributed further to

-
the fluctuations in foreign invest-
ment flows. However, foreign Figure 6. GROWTH RATES OF REAL GFCF*
investments started to surge in Indonesia, 1Q70P7
1986 reaching a record high of 0.6 I ...
USS986 million in 1988 as confi-
dence in the Philippine economy
was restored with the installation
of a new government and the re-
turn of democratic institutions as
well as the introduction of the
debt-to-equity conversion schemes
in August 1986 which sought to
transform part of the country's
external debt into investments and
help ease the debt burden. In 1989,
however, the political disturbance
toward the latter part of the year
as well as the temporary closure of
the debt conversion of CB debt
papa had a depressing effect on
thc growth of foragn capital in- Year
flows to the country.
The economic and fiuancial
program of the Philippines for
-
'Oron F i x d Qptml Forrnsbn in USf Million
GOP M a t o r lsB6

1990-92envisages an increase in
foreign investment inflows in-
cluding the reflows of flight capital,
as the Government will continue work and the accompanying admi- nection, the Philip pine Fund,
to attract foreign idvestments by nistrarive machinery governing which was lamched in November
s~cCan3,bing the regulatory frame- foreign investments. In this con- 1989,is expected to mobilize sav-

CB REVIEW September 1990


ings from overseas Filipinos and country manages its investment Lund, Philip. trrrrenmmt: Tbe Study of an
resources. However, the efficient Economic Aggrqat6. 55*a Francisco: North
other investors so that the funds Holland Publishing Company, 1971.
will be invested in Philippine com- utilization of scarce investment
panies and thus provide a boost t o resources hinges on the develop- Meier. Gerald Leading lssvss in Economic
ment of a sound public invest- Development, 3rd ed, 1976.
the local stock market. Further-
more, a joint Congressional Hear- ment program and the establish- Medium-Tern Philippine Development
ing Committee on Investments of an appropriate macroeconomic Plan 1987-92. NEDA.
Review is currently studying the policy framework. On the other National Income Accounts of the Phiiip
present investment climate of the hand, a sound public investment pines. NEDA.
country with the view of reorient- program is expected to provide
the basic social overhead facilities Nurkse. Rlgnar. h b l m s of Capital For
ing investments toward medium- mation in W d d m l o p e d Counttics. 3rd ed.
sized industries for both domestic that would enable the smooth and Great Britain: A.T. Broome and Son, St. a e -
and export markets. In addition, efficient flow of resources among molt's Oxford, 1955.
the Government is studying rhe productive entities. An appropriate Rcubcr, Grant. m e FommgnImmtmmt
prospects of raising beyond 40 per- macroeconomic policy framework, h Dwalopmant. Great Britain: Oxford Univer-
cent the equity participation of on the other hand, consisting of sity Ress, 1973.
foreigners in non-pioneer areas interlocking policies-fiscal, mo- The International P i c i d StaWcs 1989.
under the Investment Priorities netary, foreign exchange, trade International Monetary Fund. Wdington,
Plan to allow greater ownership and wages that are supportive of D.C.
The Philippines: A Framework for
and control of certain business investment decisions is also neces- Economic Recovery, Nwanber 5. 1986, Re-
and assets. Thie measure aims to sary since this would provide the port No. 6350-PH.
address the insufficiency of local environment against which invest-
ment decisions could-bemade. Zolotss, Xcnophon. Intemarional Mone-
risk capital. taty Issues and Dswlopmmt Policies. Athens:
Banks of Greece Riting Worb, 1977.
Conclusion
The direction and pace of econo- wc, hct I-t-
mic development are determined m m t in A& a d the *PC. ~~oab- Aue
to a significant extent by how a d i m National U n i ~ t n i the^,
~ 1972.

CENTRAL BANK OF THE PHILIPPINES

L- - - - - - - - --
6i-~anking in the r.....,,...
1 111

-s
Juan A. Tolentino

EvolutiodRPtio~leof . similar instruments with recourse, understood under the Central


Quasi-Banking or of repurchase agreements, from Banking Act in the sense that the
twenty or more lenders at any one former refers to financial inter-
The beginnings of quasi-banking in time, for purposes of relending or mediation of funds by non-bank .
the Philippines may be traced to purchasing receivables and other financial intermediaries. While I
the Joint IMF-CBP Banking Survey obligations. "l seemingly similar in deposit-taking
Commission in 1972 which recom- Likewise, by defining public activities, the latter as undertaken
mended, among others, the inclu- borrowing as consisting of at least by the non-banks is unique iri the
sion of non-bank financial inter 20 lenders, the Commission dis- sense that funds are gathered in
mediaries excepa insurance tinguished such borrowing from exchange for hlgh-yielding deposit
companies within th scope of the ordinary borrowing. The former is substitute instruments with colla-
Central Bank's authority. Such in- allowed by means of a Central teral securities (ie., prime stocks,
clusion sought to bring about a Bank-issued certificate of authori- or postdated checks, or govern-
more effective monetary and cred- ty to engage in quasi-banking. This ment security bas, etc.) which are
it management and to protect the license exempts a holder from the payable on maturity dates or pre-
public as a result of fun& lent to creditor number limit by dowing terminated anytime, although in
the non-bank institutions access to sizeable borrowings sub- the case of a promissory note,
As defined by the Commission, ject to certain Central Bank rules there is no accompanying security
the function of quasi-banking is and regulations, and permits said when issued This difference not-
the "borrowing of funds, for the licensee to turn around by relend- withstanding, most of the legal
borrower's own account, through ing the borrowed money resources, parameters of quasi-banking are
the issuance, endorsement or an undertaking that is no different common and at par with commer-
acceptance of debt instruments of from banking. cial banking although the latter
any kind other than deposits, or Quasi-banking is however deli- enjoys a broader scope.
through the issuance of participa- neated from banking practice as Although officially recognized
tions, ~ e r ~ c a t of
e sassignment or only since 1974, quasi-banking has
in fact touched the lives of vast
' l b a Rrcmmnmddon of tba joint IMECBP
number of the populace. The ex-
Mr. Tolenth is r Supervision and Exnu+ Ban&& afwsy Cornrnirrim ocr &beP b O ~tent of its influence ranges from
~oioS n p e w IV at fbe Supmisory Repam ~inoncials y s ~ r r n(~marlB I ~ ~ofLthe =nip the average income worker in need
.ad Corporate Aaalydr Department (SRCAD). piam September 1972), p. 139. of a refrigerator or a washing

CB REVIEW Sqmmber 1980


1 FEATURES
machine who has insufficient cash forces in the financial market. by underlying shares of blue-chip
savings to purchase them, to the Placement yield varies among the stocks, or government security
industrial tycoon-millionaire seek- 15 quasi-banks from a low 4 per- certificate, or postdated check. In
ing an investment outlet at opti- cent to a high over 17 percent as exchange, the investor issues cash
mum yield for his excess funds. of December 31, 1989 as shown or a check value dated upon issue.
The occa,sions a l l concern financial below. In the case of a custodianship
dealings with, either as debtor or Table 1 shows the relationship agreement, there is no physical
as creditor to, non-bank entities between placement yield rate and delivery of deposit substitute in-
'with quasi-banking fbnctions. level of borrowings. Except in strument. Instead, the quasi-bank
three instances (ie., rate level of keeps the instrument in behdf of
The Q u a s i - W i g Cycle over 4 percent to 6 percent; over 6 the lender.
percent to 8 percent; and aver 14 The second or turn-around phase
Financial intermediation consists percent to 17 percent), the amount is termed "relending," and must
of three aspects: borrowing, re- of borrowings markedly increase follow for the simple reason that
lending, and repayment. with the increase in the yield rate. borrowed money resources must
The first, fund solicitation or. This trend indicates that rate qua- be made to earn to pay off the in-
borrowing phase, seeks the excess lity is the selling point in obtain- vestor's yield rate cost; contribute
or idle funds. A meeting between ing placements. As to the exeptions a share in defraying the operation-
the quasi-bank's trader and the noted in certain rate level, this aI, administrative and other ex-
identified prospective investor could be attributed to factors such penditures of the quasi-bank; b e
progresses into bargaining over as placement volume, p-ing sides providing an equitable spread
specific yield rate cost, maturity market cost of fund for a particu- to compensate for the financial in-
period of the prospective place lar borrowing such as GLF and termediation services of the entity.
ment, type of debt instrument to other government loan programs, A run-down of the financial en-
be issued as loan guarantee and and bargaining skill of the fund vironment prcpares the ground-
underlying collateral security. AU placer. work for relending. Projects lagging
terms of the negotiation must fall Acceptance of the trader's offer on percentage completion from
within the quasi-bank's policy by the investor closes the deal. targetted due rates, temporary
guidelines. Immediately, the quasi-bank phy- work stoppage resulting from
The key to fund gathering is the sically delivers to the investor the overspill of production budget,
placement yield or borrowing cost. deposit substitute instrument as unstarted business proposals owing
It features a range otdering on a agreed upon (ie. ,-promissorynote, to inadequate capital, etc. identify
floor and a ceiling, indicating a or repurchase agreement, or certi- money needs of the corporate
latitude of flexibility for the free ficate of assignment/participation owners.
interplay of supply and demand with recourse) and duly supported

(EST RATE
LRIFS WIT1

rlacernent I relw mrmt


Earrowing Cost to Total

1. Upto4%
2 Over 4% to 6%
3. Over 6% to 8%
4. Over896 to 10%
5. Over 10% to 12%
6. Over 12% to 14%
7. Over 14% to 17%
8. Over 17%

Total

CENTRAL BANK OF THE PHILIPPfNES


FEATlJRES
-
In quasi-banking, relending ac
tivities do not simply wait for
walk-in clientele, but actively seek
out users of the funds gathered.
Account officers of quasi-banks
make social contacts and sell p m b
uct lines to corporate businesses
and individds in need of financing
or equity capital. These prospects
however undergo immediate,
speedy and thorough credit in-
vestigation.
The free interplay of supply
and demand for funds prevail in
every transaction. Income yield
rates are presently deregulated,
hence, the parties can openly
negotiate. Fund lending rates are
much higher than fund borrowing
rates for obvious reasons In most
companies, the account officers
try to mat& maturities of money
inflows with maturities of money
outflows thereby insuring contin-
uing liquidity.
The third or repayment phase
covers the liquidation of maturing
obligations of the clientele on one
hand and the quasi-bank on the
other. Accordingly,- all pertinent
documents are returned to the re-
spective ownerslissuers. Funds sioa out of borrowed funds While Historical Development
paid by the clientele to the quasi- there are 16 investment houses
bank are in mm issued to the lend- and 141 financing companies In 1975 there were 5 1quasbbanks
er in satisfaction of the placement. only eight head offices of the fram four institutional groups of
A rollwm of placement signals former and seven head offtces of the non-bank financial intcrmedi-
the start of a new cycle. The fol- the Iatter for a total of 15 entities aries indusqy, namely: investment
lowing is a diagram of the three- hold Central Bank-issued certifi- houses, financing companies, secu-
phase quasi-banking cycle. cates of authority to engage in rities dealers/brokers and invest-
quasi-bank* Of these 15, 93 ment companies. By 1978, the
percent or 14 entities are based in size shrunk to 27 entities To date
the Nationd Capital Region. The there now remain 15 quasi-banks
While there are banks which have lone institution outside Metro and these are confined to the in-
been aurhorized to perform quasi- Manila is situated in Cebu vestment houses and financing
banking functions, the bulk of Branches of these quasi-bank companies institutional groups.
their transactions are on tradition- institutions in the National Capital Compared with the 1989yearend
al banking lines. Non-b& f i n e Region account for only 13 per aggregate of 2,861 head offices of
cid intermediaries on rhe other cent, or seven units, of the total the non-bank financial intermedi-
hand identify quasi-banking as 53 branches in the entire archipe- aries industry among which the
their primary endeavor (this analy- lago following regulations that quasi-banks are classified, the elite
sis therefore excludes this peri- only one branch outside of the 15 constitute a mere 0.52 percent
pheral activity of banks). head office may be established in Such size is attributed primarily to
The present participants in Metro Manila Notwithstanding, two factors, namely: 1) the closure
quasi-banking activities are specific the head offices synchronize the of the applications window for
entities of the investment houses operations of all the branches such quasi-banking functions since the
and the fiancing companieswhich that funds held are maximized late seventies and 2) the mote
extensively deal with credit exren- through transfers tion or surrender of privileges of
FEATURES

12 licensees for varied causes which preceding year's figure to residue borrowlags and Iaan port'hio ex-
included reneging on capital build- at an outstanding P8.0 billion as hibited a 1.02: 1.0 relationship, or
up program, dismal performance, of December 31, 1989. The an optimized fund utilization ratio.
merger with a bank/another quasi- amount equalled 72 percent of Paid-up capital of P1.O biIlion
bank to satisfy the minimum paid- total assets, disclosing quasi-banks' provided the creditors' cushion
up capital required of P50 million heavy dependence on debts t o Retained earnings, which balloon-
and insolvency. The quasi-banking actively mobilize earning assets. ed at high 220.7 percent from the
license is a privilege which when On the other hand, the loan preceding year's level to reach
abused is subject to withdrawal portfolio posted an outstanding P0.6 billion, indicated a growing
anytime by the issuer. balance of P7.8 billion Compared profitable operating results.
The banking reforms at the turn with the total assets of P11.2 bil- Table 4 shows that the year
of the eighties made quasi-banking lion, the loan portfolio together 1989 dispIayed increases in all
a very competitive business. Keen- with investments which constitute major asset accounts, the most sig-
est rivals for credit power are the the earning assets represented 78.9 nificant on investments and other
well-entrenched traditional institu- percent thereof. assets at 54.2 percent and 54.0
tions, such as commercial banks. A matching of levels between percent, respectively. Likewise,
Thus the staying power of the first
in the financial scenario revolves
on strategies of narrowing the gap
between yield rates of borrowing
and relending through a fair and
reasonable sharing of earnings
with the investor or placer of the
fund
These changes are reflected in
the following comparative table.

Quaai-Banks' Financial
Transactions in 1989
Borrowings of quasi-banks, obtain-
ed through the issuance of mainly
promissory notes and interbank
call slips/instruments, registered
an 8.6 percent increase from the

CENTRAL BANK OF THE PHILIPPINES


FEATURES A

liquid resources marsedly rose by


20 percent or P0.2 billion. Their
overall effect expanded total assets
by a moderate P 1.1 billion or 10.6
percent
On the liabilities and networth
side, the increases in borrowings,
other liabilities and retained earn-
ings pointed to the sources of as-
sets growth. Capital stock, howev-
er, shrunk by a hefty 6.8 percent
or P7 3 million.
For their borrowings, quasi-
banks have to maintain reserves.
Yearend aggregates recorded P964
million of actual reserves as against
P994 million of required reserves.
Reserves, however, is considered
in terms of their average during
the week. An average excess frees
a quasi-bank from the daily defi-
ciencies. Inversely, an average defi-
ciency subjects an entity to a closed that all 15 quasi-banks ex- mark. On the other hand, the total
penalty charge. ceeded the 10 percent risk assets cash outflow to pay-off the cost
As to the loan portfolio, a mini- ratio, The average ratio was 28.3 of borrowed funds stood at P1.1
mum 10 percent risk assets ratio is percent. billion level. The net inflow or
prescribed for which sanctions are Total cash inflow during the
prescribed when this is not met. year solely from financial inter-
The same year-end aggregates dis- mediation reached the P1.4 bilIion (Continued to page 36)

CB REVIEW September l9QO


I
PROFILE

?
.- dalauag Shifts to High Gear

A scrappy businessman from Rizal got this bank


running like a computer machine.

"JUST TOSS a seed and this will All-out Support technologies with emphasis on
grow luxuriantly without further vegetable farming. Yearly, it sends
care. That's how rich our soil is." So rich is the soil in Calauag and three scholars to the Central Luzon
So says Joseph Espiritu as we roam the whole proGnce of Quezon that State University in Muiioz, Nueva
around his hilly sevenhectare crop- the Rural Bank of Calauag is giving Ecija or to Don Sverino Agricul-
land bordering his Spanish colonial all-out support to the residents so tural College in Indang, CsYite. As
house and overlooking his bank. they can exploit this advantage. a pre-condition to the grant, the
the Rural Bank of Calauag. Joseph's This support comes in the form of grantees are required to help admi-
farm is teeming with coconut, lan- production loans and scholarship nister and supervise the bank's agri-
zones, rambutan, banana, papaya, grants for high school graduates cultural financing projects during
black pepper and the like. Further with interest and experience in their vacations, and serve the mu-
at the end side are a citrus orchard farming. nicipality as rural bank technicians
and a small fishpond seeded with In 1989 alone, PI1 million or for two years, after their gradua- .
bangus (miMsh) juveniles. The more than half of the total loan tion.
Quczonians, according to him, have portfolio of P22 million was lent
reduced their dependence on co- to agriculture. "Remote Control"
conuts, the provine's major earn- RB Cdauag's agri-scholarship
ing product. They are now raising program offers free tuition, books, RB Calauag has been helping the
buffer crops like citrus and black board and lodging as well as uni- residents tap their agricultural
pepper including aquacultureprod- forms and expenses for transporta- bounties since Joseph took over
ucts not only to augment their tion and graduation. Started in the management of RB Calauag in
incomes but also to ensure against 1986, the program aims to produce 1979. Joseph's father, Enrique,
their vulnerability to the volatile professional agriculturists who will together with his three brothers,
international markets. teach the farmers modem farming organized the rural bank in 1961.

CENTRAL BANK OF THE PHILIPPINES


PROFILE

"My father was encouraged to


invest his excess money in rural
banking because of the govern-
ment counterpart equities and
subsidies," says Joseph. At that
time, Calauag and other south:
ern municipalities of Quewn
were accessibleonly by rail. Today,
the 92-barangay Calauag is flour-
ishing. Several bus companies ply
the Manila-Calauag route and the
town boasts a P3.9 million revenue.
The Espiritus are natives of
Montalban, Rizal. They just hap-
pened to put up a rural bank in
Calauag because Mandaluyong, . -
Rizal, their original choice, was
already closed to new applicants.
When RB Calauag was initiated,
Joseph was appointed as a mem-
ber of the board bv his father who
was the chairman: He was then in
his sophomore year in Commerce
at the University of the East.
"Father ran the bank by remote
control," says Joseph.
In 1969,Joseph involved himself
in the lending activity of RB Cala-
uag and introduced an innovative
credit program that provided fi-
nancing for market stallholders
payable on a daily a m o m d o n
basis.
Pleasant Ambience (Above) A typical bully day in the hnL. (Bdow) Rodolfo Cadlo lad Elvim
PIorido-board chairman and ,-nr rrrpcedvely, of thc RB of CJlurg,
In 1979, after a nine-year respite
during which time he ventured new office machines and equip- them feel at home regardless of
into sewed other projects, Joseph ment such as calculators, type- whether they are in sandos (shirts
returned to the bank as president writers and posting machines. sans collar and sleeves) or sandals.
and chief operating officer. At Following this move, Joseph Joseph also provided piped-in
that time, RB Cslauag's total initiated innovative "comesns" stereophonic music and fded the
resources amounted to only P6 to generate deposits. Among these lobby's center table with news-
million and the bank needed d e c was the Gintong Pamana (golden papers and other reading materials.
tion and momentum. Joseph hired legacy). Under the scheme, if one He also considered installingan air-
Elvisa FIorido, a young and ener- makes a time deposit of P1,000 conditioner in the lobby, but
getic d f i e d public accountant, with the bank, that amount after discarded the idea after realizing
as its manager, and the services of the 20-year maturity period, goes that this could scare them away
an auditing h. The Central Bank back to the depositor, 20 fold the instead of luring them in.
people, Joseph said, helped to original investment. As of August Joseph, connnuingto blow fresh
streamline the bank operations. this year, the total redeemable wind into RB Calauag, diversified
He made special mention of Mr. deposits under the program the bank's loan portfolio in favor
Alfonso Cruz, associate director amounted to P4 million. of agridture. In the past, the bulk
of CB's SES W , who assisted in To encourage the timid barrio of tbe loans went to the salary
correcting their unbalanced ac- folk to use the facilities of the loans of employees of the Philip-
count, subsidiaries and general bank, Joseph admonished his staff pine National Railways (PNR).
ledger. Joseph also ordered brand to be cordial with them, make However, a number of employees

CB REVIEW September IS90


abustd this privelege by borrowing Today, with total resources of Success Scoria
beyond the ceiling agreed upon by P38 million and managed by the
the PNR management and the troika of Joseph, manager Elvira Now on his tenth year as president,
bank, on top of which, the em- Florido and board chairman Joseph takes pride of the bank's
ployees were frequently absent. Rodolfo Carillo, RB Calauag ranks accomplishments in Calauag. Ac-
The PNR management threatened second in financial performance cording to him, almost all of its
to stop remitting the monthly loan among the province's 32 operating residents have, at one time or an-
amortization payments of its em- rural banks. Its average daily vol- other, availed themselves of loans
ployees, which however Joseph ume of transakions amounts to from the bank to fmance a small
was able to deflect, in tactful and P3 million. Supported by a com- business, an agricultural project or
diplomatic discussions with the puter-literate and highly-paid 38- any incomegenerating enterprise.
PNR management, thus avoiding man staff, the bank is now raring Success stories flow from the
the harm that might have been to go province-wide. long list of the bank borrowers,
inflicted to the bank.
For borrowers who pay their
loans on time, Joseph give incen-
tives in the form of automatic re-
lease of their loans if they apply
anew and sanctions in the form of
suspension of their privilege, if they
default. Good borrowers should
be rewarded because they promote
good will for the bank, Joseph
said; on the other hand, bad bor-
rowers must be penalized, and
should learn from their mistakes.

The net effect of Joseph's energiz-


ing measures are visible in RB
Calauag's improved balance sheets.
From P6 million in 1980, the
bank's total assets soared to PI4
million in 1985. The trend con-
tinued, unhampered by the
drought, speculative! runs, political
uncertainties and business slow-
down that alternately took their
toll on the nation's economy dur-
ing the year (1985) and the suc-
ceeding two years. While other
banks were reeling from the effects
of the crisis, RB Calauag even had
its building renovated and its oper-
ations fully computerized. This
indirect show of liquidity in times
of financial difficulties provided
a positive psychological impact
that fortified the people's trust
and confidence in the bank, thus
boosting its robust financial posi-
tion. By 1987, its resources reached
P22.8 million; loan portfolio, P 126
million; deposits, P18.5 million; (Above) Roiaudo Bctita now operatesa 25-hectarebangus fishpond &om a
net income, P0.24 million; and P74000 seed capital borrowed&om the RB ofCaiauag. (Bottom)A Pl,000
networth, P1.9 million. loan from the rural bank started the thriving smoke fish businem of Elvim
and Amado Antonio.

CENTRAL BANK OF THE PHILIPPINES


capital of P70,000 supported by
a P20,000 clean loan from the
bank. Betita's fishpond produces
8-10 tons of marketable bangus
per year, netting him around
P80,OOO.

I This year, for the convenience


of its patrons and staff, the bank
building, which is located alone:
J.P. ~ i l Street,
d will be expanded:
Joseph disclosed. On the bank's
1,000 square meter lot, Joseph
plans to construct town houses for
kmployees and/or a commercial
office building whose income will
be shared with emulovees through
.-.- I dividends. The baAk kill also fgl-
. low up its long-time application
.-
.n-+. '. ..
.' . . for branching in the nearby mu-
CJnuag townfolk now raise buffer crops, like ciaus, to reduce their nicipality of Eopez, which h& been
dependenceoncoconutc deprived of the services of a rural
bank since the closure of the
and among those worth menrion- loan of P5,000. There is also the Rural Bank of Lopez. Joseph is
ing is that of Elvira Antonio, a husband-and-wife team of Isidro hopeful that with the liberdization
tinapa (smoke fish) vendor, who and Regina Caponpon from Sto. of the Central Bank policy on
parlayed her P1,000 loan into a Tomas, Batangas, who now tills branching, their application will
thriving business. Now she is mak- more than 20 hectares of fruit now be given due course.
ing 50 banyeras a day and has 20 bearing citrus trees in barangay
vendors in her payroll, There is Tabogon. Another migrant, At a Cost
also Silvino Escobar, a former Rolando Betita, is now success-
jeepney driver, who now owns a fully operating a 25-hectare Meanwhile, Joseph would like to
fleet of mini-buses out of a starter leased bangus fishpond on a seed share with his fellow rural bank-

CB REVIEW September 1990


as the fully integrated software monthly run-up, service charge banking system computerize," he
products/pmgrams designed and computation and interest compu- Says.
developed for RB Calauag by his tation. For all that Joseph has done for
mmputer technician, but which -
*Time Deposit produces daily RB Calauag, no other person could
are also suitable for 'the needs of and monthly schedules. be happier than his father Enrique.
the rural banking system. These -
*Payroll automatic printing of Joseph has not only succeeded in
sofNirare programs, which Joseph payslips and payroll summary. reviving the bank but also has
calls 'The Rural Banking System," Each program, Joseph explained, conditioned it to run with the high
consist of the following: requires 640 KB PCIXT or AT, speed, clockwork-precision effi-
*General Ledger - produces IBM compatible with hard disk ciency of a computer. For this,
financia statement, trial balance of at least 20 MB capacity. The Joseph deserves a pat on the back
as well as prints ledger of specified Savings Account, he added, has not only from his father but also
date. been designed and programmed to from the residents of Calauag,
*Loans Ledger - produces sum- use EPSON Lx-800,a low priced whom his bank has heIped a lot.
mary and schedules of all types 80 column printer for passbook
and stacus of loans for monthly printing.
run-up and general examination. Joseph is offering his product
*Savings Account - produces at cost to the rural bankers. "It
daily summary of transaction, is my wish to see the whole rural

-I-Bmkiag ...From page 31 in the 1981 financial crisis. Its


finances again ebbed in the 1983
spread was at P307 million repre- upheaval when the economy reel-
senting a gain of 21.6 percent ed from the impact of inflation
and overly-cautious business cli-
mate. Having withstood all these
ordeals, howcver, is proof that
*Quasi-banking, like any ordinary quasi-banking remains as one of
institutional practice, is vulnerable the mainstays of the Philippine
'ksevere financial stonns. It suffer- financial system,
ed a setback in financial position

CENTRAL BANK OF THE PHILIPPINES


ECONOMICS IN SIMPLE ENGLISH

Flowaf Funds (Parts)

( The Flow of FuaS of the Philippines Funds is as follows:


I. Financial Sector
THE PHILIPPINE flow of funds tables are presently A. Private
being prepared by the Central Bank of the Philip- 1. Deposit Money Banks
pines; preparation of flow of funds from 1974 to a Commercial Banks (induding expanded
1979 was a joint effort of the National Economic commercial banks)
and Development Authority and the Central Bank. b. Rural Banks accepting demand deposits
The study of the Flow of Funds of the Philippines 2. Other Banks
was, however, first undertaken by Dr, Richard W. a. Rural Banks not accepting demand deposits
Hooley and Mrs. Honorata A. Moreno of the U.P. b. Thrift Banks
School of Economics, which study covered the years Savings and Mortgag .3anks
1948 to 1965. Private Development Banks
In a paper submitted to the 4th National Conven- Stock Savings and Loan Associations
tion on Statistics in June, 1987, Feliciano M, Ocol 3. Insurance Companies
and Ma. Elorna C. Film of the Department of Eco- 4. Other Non-Bank Financial Intermediaries
nomic Research-Domestic of the Central Bank, de- a. Investment Houses
scribed the Highlights of the Philippine Flow of b. Financing Companies
Funds Accounts: 1980-1985. This paper describes c. Investment Companies
the methodology, sources of data, and the move- d. Leading Investo;s
ment of funds during the years when the FOF tables e. Securities Dealers/Brokers
were prepared by the Central Bank. f. Fund Managers
By virtue of Lo1 No. 1082 issued in November g. Pawnshops
1980, the Central Bank was given the sole responsi- h. Non+tock Savings and Loan Associations
bility of constructing the Philippine FOF tables, i. ~ h aBuilding
l and Loan Associations
starting with the 1980 matrix, with the proviso B. Government
that coordination with the National Accounts Staff, 1. Monetary Authorities
NEDA, be done to prevent the publication of con- 2. Specialized Government Banks
flicting statistics. a. Development Bank of the Philippines
The basic sources of data are the financial state- b. Land Bank of the Philippines
ments of the business sector and government. They c. Philippine Amanah Bank
are gathered from the Securities and Exchange Com- 3. Social Security Agencies
mission, Commission on Audit, Insurance Commis- a. Social Security System
sion, Social Security System, Government Service b. Government Service Insurance System
Insurance System, and the Central Bank's Depart- 4. Other Non-Bank Financial Intermediaries
ment of Economic Research. The aggregate non- 11. Non-Financial Sector
financial accounts are obtained from the NAS ,NEDA . A. Private
Data from a sample of 2,000 corporations whose 1. Households and Non-Corporate Business
total assets comprise the bulk of the assets of some 2. Corporations
30,000 private corporations in the counny are used B. Government
I to estimate the private sector's flows. Government
and financial sector data are summarized and consol-
dated. Flows of the household and non-corporate
1.National
2. Local
3. Corporations
1 business sector are computed as a residual item, while 111. Rest of the World
data for the Rest of the World sector correspond to In conclusion, an important use of the Philippine
I
the net borrowing (or net lending) of the domestic
economy from abroad as reflected in the National

i Income Accounts.
The sectord struchue of the Philippine Flow of

CB REVIEW September 1990


(Continued on page 42)
a -

NEWS

Some PSOO million worth of the on October 17, 1990. Metro Manila was also raised from
third series of Reconstruction As this developed, the Monetary PI0 million to P20 million and
Bonds was sold on September 19. Board approved the issuance of those in other areas, from P5 mil-
This brings to P1.5 billion the total TuIong sa Bayan .Bonds in an lion to PI0 million.
volume of Reconstruction Bonds amount not exceeding P1 billion. A big number of the country's
sold since the first series were is- The Tulong sa Bayan Bonds 106 operating thrift banks have
sued this year. have a maturity of 10 years and already complied with the new re-
The bulk of P500 million sales are priced at par value in denomi- quirement. Those which have not
went to government financial in- nations of P500, P1,000 and yet met the requirement are re-
stitutions, P295 million; govern- P10,OOO. One interesting feature quired to submit within six months
ment corporations led by the of the bonds is that their holders from September 27, the date of its
Pag-ibig Fund, P121.3 million; in- are entitled to participate in a effectivity, a two-year plan of psy-
surance companies/stock ex- weekly raffle. The prize fund in ment.
changes, P64.6 million; investment the raffle is equivalent to 4 per-
houses, P11.8 million; commercial ce t of outstanding issues per an- S!X BANKS ACCREDITED
banks, P3.2 million; and private
institutions and individuals, P4.1
!I
nu' . The raffle prizes and the
eight percent interest income of
GOVERNMENT SECURITIES
DEALERS
million. the bonds which is payable annual-
The Reconstruction bonds have ly, are exempt from tax. Six banks have been accredited as
a term of three years and are priced dealers in government securities
at par value in denominations of by the Monetary Board.
P100,000, P1 million and PI0 mil- CAPITAL REQUIREMENT The six have been chosen on
lion if paid or settled on issue date FOR THRlFT BANKS RAISED the basis of their track record in
in manager's/cashier's check or government securities and their
through bank authorization to Thrift banks to be established in capital strength in undertaking
debit demand deposit account Memo Manila are now required to dealer performance requirements
maintained with the Central Bank. put up a minimum paid-in capital for competitive auction market
Purchases after issue date are priced of PlOO million and those to be and secondary market develop
at par value plus accrued interest established outside, P20 million. ment
from issue date. The bonds are The Monetary Board approved The banks were Citytrust Bank-
payable semi-annually at an inter- this new measure to strengthen ing Corporation, Development
est of 14 percent per annum and the capital base of the thrift bank Bank of the Philippines, Pruden-
are eligible as collateral, as bidder industry. tial Bank, Rizal Commercial Bank-
or performance bond and as judi- The previous capital require- ing Corporation, Standard Char
cial bond. ments were P20 million for thrift tered Bank, and Banco de Oro.
Proceeds of the bonds will be banks in Metro Manila and PI0 Earlier, some 18 institutions
used to finance the reconstruction million for those intending to composed of 14 banks and four
of infrastructures damaged by the operate in other areas. investment houses were accredited
recent earthquake. The fourth The minimum paid-in capital and reevaluated in accordance
P500 million series will be offered for existing/oId thrift banks in with the revised criteria adopted

CENTRAL BANK OF THE PHILIPPINES


NEWS

by the Monetary Board last April actual telegraphic or cable costs menting CB Circular 1252, the
20. These were Bank of the Philip- shall be collected by the banks loan value of these papers, how-
pine Islands, China Bank, Citibank from its clients. ever, remains at 80 percent.
N.A., Equitable Bank, Interbank, The circular also specified that
Land Bank, Metrobank, PBCom, MB AMENDS RULES the lending rates the banks may
PCIBank, Philippine National Bank, ON FOREIGN BORROWINGS' charge on their rediscounted papers
Solidbank, U ~ B Union
, Bank, UP are not subject to any ceiling.
ban Bank, Anscor Capital Invest- Proceeds of foreign loans may However, their spreads will be
ments, Inc., PEB Investments, Inc., now be used to finance the foreign closely monitored by the CB to
Multinational Bancorp, and Philip- exchange cost of eligible projects ensure that these are consistent
pine Commercial Capital, Inc. of private enterprises. The loan with the prevailing market rates.
proceeds can also be used to fi- Meanwhile, the monthly aver
CB REGULATES nance up to 50 percent of the total age reserves of commerciaI banks
FOREX TRADE peso cost of eligible projects of have gradually improved from a
private enterprises. deficiency of P4.2 billion in April
The Central Bank has prescribed The authority to this effect has to a surplus of P1.4 billion in June.
the rates to be used by commercial been granted by the Monetary The number of banks in surplus.
banks in buying and selling foreign Board under its Resolution No. position also increased from 28 to
exchange. 829 dated August 20, 1990. The 29 indicative of their liquid posi-
Under CB Circular Letter 1251 authority, however, is subject to tion. On the other hand, Treasury
dated September 15, 1990, the the following conditions: Bill yields across maturities have
minimum buying rate for spot The enterprise must be regis- steadily risen from 21.8 percent
transactions should not be less tered with the Board of Invest- during the week ending August 1
than one percent below the Bank- ments and certified as export-ori- to almost 29 percent as of end-
ers Association of the Philippines tnted by the Central Bank. Its August.
(BAP) reference rate. The maximum project must generate foreign ex-
selling rate, on the other hand, change. CB EASES FOREX RULE
should not be more than two per- There shall be no net foreign FOR GOVERNMENT
cent above the BAP reference rate. exchange outflow for the duration ENTITIES
Spot transactions are to be set- of the foreign loan.
tled within two business days The loan shall not be ccwered Private domestic banks can now
from transaction date. by a guarantee of the government freely service the foreign exchange
For transactions other than or any of the government corpora- requirements of all departments,
"spot," the minimum buying rate tions/financial institutions bureaus and agencies of the na-
should not be less than one per The total amount of foreign tional government, including gov-
cent below the rates for spot trans- loans for local cost/financing shall ernment-owned and controlled
actions. The maximum buying not exceed the indicative limit to corporations, state universities and
rate should not be more than one be set by the Monetary Board and colleges and local government
percent above the rate for spot applications shall be evaIuated on units.
transactions. a first-come-first-served basis. If the peso cost of the foreign
The ceiling was adopted because The above conditions are con- exchange sold by the authorized
of the wide margin between the tained in CB Circular 1249 which agent bank is funded by the Bureau
buying and selling rates of foreign amended Circular 1232 covering of Treasury, this should be settled

I exchange by the commercial


banks.
The CB has also decided that all
the revised policy and guidelines
on foreign borrowings.
by the CB through the clearing
accounts of the servicing bank.
Circular Letter dated Septem-
forward sales of foreign exchange REDISCOUNT RATE ber 12, 1990 was issued by the CB
by the commercial banks shall on- UPPED TO 14% to implement the new regulation.
ly be for debt servicing, made-re- Previously, the foreign exchange
lated transactions and other pur- The Monetary Board has raised requirements of government agen-
poses authorized by the CB and the rediscount rate on eligible ciedoffices were to be serviced
which are to be delivered upon papers from 13 to 14 percent. Eli- through the Philippine National
maturity. gible papers pertain to agricultural Bank (PNB),the Land Bank of the
The new regulation, which took production, cottage and small in- Philippines (LBP) and other gov-
effect on September 24, 1990, dustries credits, general purpose ernment-owned and controlled
specified that no additional com- working capital financing and other commercial banks (GOCCB). For
missions or charges other than short-term credits. Under implt the GOCCB, the authorization was

CB REVIEW September 1990


limited to servicing the foreign ex- at least P300 million at the end of a big decline of P3,934.5 million
change requirements of their the frst year. or 89.2 percent
respective parent corporations and/ Under RCBC's control, Asso- Only w e n out of 17 investment
or subsidiaries and the funds for ciated Bank is expected to build houses were involved in this quar
the foreign exchange transactions up its capital accounts to P500 ter's underwriting activities
involved were not reirnbursible million over a period of time, pro- Of the total volume, P466.6
against the peso deposits of the vided that RCBC immediately in- million or 97.9 percent accounted
Bureau of Treasury with the CB. fuse P300 million in fresh capital for the equity shares sold to the
The Monetary Board allowed within the first year. investing public. These equity
the private banks to service the shares which were listed with the
foreign exchange needs of govern- CB SOPS UP stock exchanges in Metro Manila
ment entities to promote the dev- EXCESS LIQUIDITY were effected through syndicated
elopment of the local foreign ex- underwriting, where group man-
change market and assure the The Central Bank issued CB Bills agers category totalled P214.7 mil-
government instrumentalities con- this month. The bills are redeema- lion while participants category
cerned of reliable and broader ble after 60 days Their other fea- registered at P251.9 million. The
sources of foreign exchange. tures are: negotiability, fully remaining balance of PI0 million
Although government banks transferable and negotiable; tax- or 2.1 percent represented debt
may lose some of their business to ability, subject to 20 percent final issues sold by a single investment
private commercial banks as a re- withholding tax; yield, market- house through private placements.
sult of the new measure, this may oriented; pricing, at a discount; New issues reached P396.5 mil-
be offset by the savings that will form, bearer or registered; deno- lion or 83.2 percent while addi-
accrue t o government entities mination, in multiples of P1 mil- tions to existing issues amounted
from their ability to get the most lion; minimum placement, face to P80.1 million or 16.8 percent
favorable exchange rates that the value of P1 million; mode of pay- The amount of P43 1.3 million or
domestic banks are willing to offer. ment, cash, manager's check paya- 90.5 percent was done on f m
ble to CB- or debit to a bank's commitment basis while those
MB APPROVES demand deposit account with the sold on best efforts basis stood at
RC6C's PURCHASE OF AB CB; eligible holders, banks, public P45.3 million or 9.5 percent
and private corporations and in- Volume-wise, the manufae
The Monetary Board has approved dividual investors; redemption, at turing industry topped the list
the proposal by Rizal Commercial maturity and upon presenration of with P372.6 million or 78.2 pert
Banking Corporation (RCBC) to ac- the matured bill, the CB's Govern- cent, followed by the mining in-
quire and rehabilitate Associated ment Securities Department shall dustry with P70.1 million or 14.7
Bank (AB). redeem the bill at face value with- percent Securities issued by the
The Board also approved R ~ C Sout interest on the date of maturi- newly included industry (publica-
acquisition of 98 percent of the ty . tion) reached P33.9 million or 7.1
total outstanding stocks of Asso- The flotation of CB Bills is percent of the total volume.
ciated in the name of the Assets meant to reduce the volume of re- Metro Drug, Inc., dassified un-
Privatization Trust on condition serve money to a level more con- der manufacturing industry, led in
that RCBC's ownership is reduced sistent with the country's econo- terms of volume with P362.6 mil-
t o not more than 30 percent with- mic program. lion or 76.l percent, followed by
in a specified period United Paragon Mining Corpora-
In accordance with the MB deci- SECURITIES UNDERWRITTEN tion with P70.1 million or 14.7
sion, Associated Bank will be FOR SECOND QUARTER percent Ranking third with P33.9
allowed to revalue its Ayala lot WORTH P476 M million issues was Manila Bulletin.
and the premises of its Ermita and Securities issued by the three cor-
Binondo branches and to book the The volume of securities under porations represent 97.9 percent
increases in value as part of its written for the second quarter, of the total volume for the quarter.
capital accounts this year, was worth P476.6 mil-
If such assets are not sold during lion. The figure represents a d e
the first year, RCBC must put up crease of P499.7 million, or 5 1.2
additional capital in Associated percent from the previous quarter's
equal to the revaluation surplus re- figure of P976.3 million. Compared
corded for such properties nor to the volume underwritten for
realized through sale to build up the same period in 1989, this
the capital account of the bank to quarter's figure likewise registered

CENTRAL BANK OF THE PHILIPPINES


QUERIES -
/'-

:( Loans Granted by Lending Investors

Q. Are lending investors engaged in the business of ''xxx there appears to be an indication that the Com-
lending money on personal property delivered as mission did not even have 'lending investors' in mind when
security deemed engaged in pawnbroking operations the recommendations mentioned haeinabovc were made
(since the Commission specifically mentioned m c d y 'mutual
if such ladings constitute 50 percent or less of their savings banks, non-so& savings and loan assoaations, d i t
lending operations? units, pension funds, cooperatives, finance companies, so
allcd 'investment banks9 and pauwshops). In fact, it appears
A. It was stated that some lending investors (LIs) that, at that time, it was only in thc NIRC where the phrase
operating in Metro Manila appeared to be performing lending investor' could be soen, and very inconspicuously at
pawnbroking or pawnshop operations; that although that. However, since 'lendii ir~vcstors'was defined in rhc
the receipts looked similar to the standard pawn said Code to include all persons who lend money at htaest,
tickets prescribed by the Central Bank, they were they aummstically fell within the scope and cowemplation
worded as promissory notes and that said LIs were of the NBPL without QBFs which should be subject to rrgulr-
all registered with the Central Bank to operate as such tion by the Ccntral Bank. It appears to be in this context that
financial intermediaries. upon the issuance of the implement@ regulations, ak,Ma-
It is represented that said LIs are corporations. nual of Regulations for Banks and Othcr Finanad Interme-
During their incorporation, the Central Bank favor- d i e s (MOR), 'lending investors' w m specifically included
among the institutiond lenders Wing within the catcgory of
ably indorsed their Articles of Incorporation to the NeFr without WR, such as finance compuries,investmat
SEC for approval with a qualification that their busi- houses, pawnshops, nc. thereby in effect giving implicit rr-
ness shall be confined to their primary purpose as cognition to lcndiq investors ps an indmtional lender. In
LIs to the exclusion of other forms of financial in- thki regard, it is relevant to note that the MOR did not define
termediation. Moreover, it was pointed out that Sec. what lending investors wac and therefore, it can only be M-
41SlP.6 of Book IV of the Manual of Regulations sumad that the lending iwcsors contemplated in the MOR
for Banks avd Otber Financial Intermediaries were those embraced in the term as defined in thc NIRC,"
prohibits the establishment of pawnshops or branches (Undusaoing ours)
thereof in Metro Manila and said regulation will be
circumvented if subject LIs operate as pawnbrokers. It may seem from the definition of LIs in the N a g
In a memoradum of SES IV to the Monetary Board, that LIs are in fact persons authorized to extend,
said Department mentioned that as early .s1954, grant or lend money with intenst. It appears that
t . term "leading investors" appeared in the National there is no legal impediment for the lending investor
Internal Revtnue Code defining it as persons who to lend money on the security of personal property,
make a practice of lending money for themselves or as said security may be delivered by way of chattel
others at interest. Moreover, it was stated therein that mortgage or pledge. These arc credit transactions re
LIs are organized either as a single proprietorship, cognized under rhe Civil Code. In the present case,
partnership or corporation: tbat said entities are therefore, the mere fact that the LIs accept personal
primarily engaged in tbe bvsiaess of extending, property as security for loans extended does not
granting or lending money witb internst to persons necessarily meh that said LIs arc engaged in pawn-
or entities in tbe f o m of secured or unsecured direct broking. As may be seen, the phrase "lending h n -
loans: and that their clientele indudes public and or" appears to be a generic term since reference is
private employees, school teachers, store owners/ made thereby to "all pemons who lend money at
market stallholdtrs, jeepney drivers, housewives, interest."
pensioners/retirees, farmexslfishermen and other The mere lending of money on personal property
small businessmen. delivered as security, whether such lending is done
However, thm is no Ccntral Bank definition of regularly or not and irrespective of the volume of
the term. such lendings in proportion to the total lendings of
In this connection, the Office of the General the LI is not a conclusive factor in resolving whethex
Counsel, in its memorandum to the Monetary Board such activity is pawnbroking or not. In herein case,
dated July 18, 1988, stated thus: it is not clear upon what security a~~mpnmt the

CB REVIEW September 1990


1 QUERIES
personal property was delivered to the LIs. Also, money on personal property delivered as security is
there is explicit mention that the forms beiig used not conclusive proof of engaging in pawnbroking
by the LIs are promissory notes although they look under P.D.No. 114 since said transactions could be
like pawn tickets. In other words, the facts given are covered by other laws.
not suficient to arrive at a conclusion as to whether The foregoing considered, it is believed that there
the LIs concerned are engaged in the business of is no basis to conclude that subject LIs are engaged
pawnbroking. in pawnborking under P.D.No. 114. (Opinion dated
It is observed that the authority of subject LIs ex- December 12,1989 of the General Coun%l)
cludes other forms of financial intermediation parti- -Compiled by Rowena S. Martinez
cularly pawnbroking. However, the mere lending of

I b c Flow ofFundr ...Frompage 37 may be provided a deeper insight of the effects of


POF system of accounts is that it provides a basic policics recommended and being implemented, as
framework for analyzing trends in the fmancial sys- well as the opportunity to take corrective measures
tem, fluctuations in investment activity in the coun- or design new strategies, through an analysis of the
try, and the effects of internal and external develop- historical flow of funds.Moreover, a strongempirical
ments in the economy base and the effective monitoring of the interlocking
As stated by Ocol and Filart, the matrices reflect nature of the intermediation and transformation
the nature and volume of financial transactions con- processes in the financial system can provide a good
ducted in the system for a particular period of time, foundation for the country's financial and economic
and how the different sectors play their roles in the development.
financial intermediation process. Economic managers -M. B. Suleik

CENTRAL BANK OF THE PHILIPPINES


--

I
CENTRAL BANK REGULATlOl

Rules on KBs9Purchase/Sale of FX Issued

Circular No. 1250 dated September 7, 1990-pro- airport, provided that the site is within the senice
vides that local banks' purchases of USS200 million area where the applicant bank has a regular branch
(Series of 1990) Treasury Bills of the Republic of to service the offsite AMCMC. Adequate internal
the Philippines shall not be sourced from the banks' control and security measures shall be adopted, which
regular accounts. However, such purchases may be includes immediate rejection and detection of fake
sourced from banks' respective Foreign Currency currencies by the machine. The services of the
Deposit Units (FCDUs), without need for prior Cen- off-site AMCMC s h d be solely for changing foreign
tral Bank approval. exchange currency into peso notes and coins and
not pesos to other foreign currencies.
Circular No. 1251 dated September 13,1990--pro-
vides the rules/regulations on the purchases and sale Circular No. 1254 dated September 27,1990-raises
of foreign exchange by commercial banks (KBs) as the minimum paid-in capital requirements for thrift
follows: banks. (TBs). Paid-in capital for existing TBs with
1. For spot transactions (those transactions for head office located in Metro Manila s h d be raised
settlement within two (2) business days from trans- to P20 million (from PI0 million) and with head of-
action date), the minimum buying rate shall not be fice outside Metro Manila to PI0 million (from P5
less than 1 percent below BAP Reference rate while Million). Capital requirements f6r new TBs establish-
the maximum selling rate shall not be more than 2 ed after September 13, 1990 with head office out-
percent above BAP Reference rate. side Metro Manila will likewise be raised from P20
2. Transactions other than spot, the minimum million to PlOO million while those with head office
buying rate shall not be less than 1 percent below outside Metro Manila from PI0 million to P20 mil-
the rate for spot transactions while the maximum lion.
selling rate shall not be more than 1 percent above
the rate for spot transactions. Circular Letter dated September 12,1990--super-
In addition, banks shali not collect any additional sedes/revokes Circular dated September 17, 1987
commissions or charges other than actual telegraphic and instructs all heads of departments/bureaus/
cable costs incurred. All forward sales by KBs to agenaesflocal government units, including govern-
commercial clients shall be for debt-servicing, trade- ment owned and/or controlled corporations and
related or other purposes authorized by the CB and state universities and colleges and authorized agent
shall be deliverable upon maturity. banks (AABs), that servicing of their foreign ex-
change requirements shall be made thru any of the
Circular No. 1252 dated September 14,1990--raises GGBS. In cases where the peso cost of the foreign
the rediscount rate of eligible papers for agricultural exchange sold by the AAB is funded by the Bureau
production, cottage and small industries credits, of Treasury, the CB shall settle the same thru the
general purpose working capital financing and other clearing accounts of the servicing banks. Regarding
short-term aedits by one percentage point to 14.0 applications for fiscal agency service together with
percent. Previously, the rediscount rate was 13.0 the supporting documents, this shall continue to be
percent. fded with the CB for prior approval.
Circular No. 1253 dated September 18,1990-pro- Memorandum to Authorized Agent Banks No. 11
vides guidelines pertaining to the installation of dated September 26, 1990-includes as one of the
automatic multi currency money changers (AMCMC) terms and conditions in the letter of credit (WC)
by banks outside their bank premises. Applicant opened for an importation that all copies of ship
banks should obatain prior authority from the Cen- ping documents such as but not limited to Bill of
tral Bank for the installation of AMCMC. The instal- Lading (B/L), Airway Bill (AWB) or postal receipt
lation of off-site AMCMC will be in centers of activi- must legibly contain the WC number pertaining to
ties like shopping centers, supermarkets, hotels and the shipment.
-M D. S d

CB REVIEW September 1990


CONGRESS UPDATE

Selected Economic Bills

A. Senate Bills
Author Tide

291 Sen. Romulo et. aL "An act providing for the 1988 Submitted Committee Rc-
charter of the lslomic Amanah port rtcommending consoli-
Investment Bank of the Philip dation with SBN 890. CB
pines, authorizing its conduct of comments scnt to Sen
Islamic banking business, and Romulo d t d June 15,1988
repealing for this purpose P.D. & to PLLO d t d 4/9/89.
5429 mating the Philippine
Amonah Bank."

"An act to amend Republic Act Submitted Committee Re


No. 3591 entitled 'An Act port recommending substi-
Establishing the Philippine -
tution by SBN 828
Deposit In~uranceCorporation,
Defining its Powers and Duties,
and for Other Purposes' "

B. House Bills
H y d Author Status at House

,Ay,/ Cong. Romero e t al. "An act fixing the ntes of


interest for other purposes"
Pending with the Commit-
tee on Banks & Currency

Cong. Reyes & Ojeda "An act prescribing rules on Pending with the Commit-
the disposition of deposits tee on Banks & Ckrnncy
of depositors of distressed,
foreclosed, discontinued banks"

Compiled by:

Senate : Concbita V. de Leon


House : Corazon k Capid

CENTRAL BANK O F THE PHILIPPINES


MONTHLY STATISTICAL INDICATORS 1

August 1990
i
Latest Month Ymr Latest Month Year
Partioulan Month No Ago Particulan Month lPqo AW

MONETARY AGGREGATES !Million Pesos)'


End of Period COMMODITY PRICES (Peso Equivalent)
R e m e Money 89,161 88,793 68,181 August 30,1990
Money Suppl (MI)* 6 9 . ~ ~ 789,771
~ 59.542 Sugar, Spot (1t-b) 2.7900 2.7740 3.0377
5
Broed Money (M2)* 264,120 260,696 2 12.43 1 Copper, Spot (IMt) N.A. 69,043 65,076
Total ~iquiditys(M3IC 266,921 263,515 215,530 Gold, Closing (/Troy 62.1 9,729 8,716 7,&84
Coconut Oil, Futurer (Ilb) 3.5625 3.2656 6.1941
NET DOMESTIC CREDITS (Million PemI Copra, Futures (IMtI N.Q 4 m N.Q.
End of Period
Monetary System 224,t38sp 220,1mp 189,316 PESO DEPOSIT RATES (% P.A.)~
antral Bank* -19,737' -17.044' -2.62 1 Weighted Average
Commercial Banking System 244.422' 237,147~ 191,937 Sevings Dsposits (Simple Averag.
of Weekly WAIR) 5.303 5.401 4.578
RESERVE POSITION OF COMMERCIAL Time Deposits
BANKS4 (Million Pesos) 30-45 Deya 18.380 18.912 15.1 12
Average for the Month 61-90 Days 18.939 19.306 11.918
Avallhle Resewes 47,347 46,864 35,611 Over 2 Years 18.475 19.327 16.837
Required Reserves 46,349 45,044 34,382
Excess (Defkit) Resem 998 1,820 1,229 BANK LENDING RATES (% P.A.)~
Weightad Average
OUTSTANDING GOVERNMENT 60 Days & Belaw 22.166 24.191 20.075
SECURITIES* 251,921 247,236 216,757 Over 1 to 2 Years 25.941 23.240 17.681
(Million Pesos) Over 2 Years 24.114 25.777 20.825
National Government 243,650 238,801 207,084
Gowrnment Corporations 3,079 3,079 6,135 MONEY MARKET RATES (% P.A.)
Monetary Institution 6,192 5,358 4,538 Weighted Average
Interbank Call Loan ~ s t e ~
16.940 10.127 11.369
C E ~ T R A LBANK TRANSACTED Promissory ~ o t - 7 18.525 17.597 15.189
RATES (% P.A.) Repurchase ~greements~ 19.029 21.950 N.T.
Weighted Average Commercial Papers
Owmight RIP N.Q N.Q N.Q Without Recoum (N.F.) 19.890 1Q4
.59 N.T.
Term R/P 19.000 N.a. N.0.
MANILA REFERENCE RATES (% P.A.1
DOLLAR DEPOSIT RATES t% P.A.) Weighted Average
Simple Aver- (Sample Banks) MRR's 60 195116 21 15518
bvlngs Deposits 3.600 3.580 3.600 90 18-13H6 20.5116 16
Time Deposits 180 161116 201116 14-1I l l 6
60 Days a Below 6.682 6.742 6.749
61-90 D a y s 6.864 6.949 6.956 TREASURY BILLS PRIMARY RATES (% R k )
91-180 Ow8 6.876 6.990 6.772 Weighted Averam
181 Days a Below 6.928 7.040 6.760 91 Days 2 1.448 20.929 19.197
182 Day8 23.157 23.096 20.114
FOREIGN INTEREST RATES 364 Days 24.673 24.637 21.426
(% P.A.) August 3 4 1990
W a y LIBOR 8.1875 8.0000 9.0000
W O W SIBOR 8.1875 8.1250 9.0000 ~ a t reflect
a expanded definition of deposit money banks
1mDay LIBOR 8.1875 8.0000 9.OQ00 2 ~ +1Swings & Time Deposits
1809ay SIBOR 8.2500 8.1250 8.9375 3M2 + Deposit Substitutes
'I~atarefer to positianagninst deposit liabilities of expanded
EXCHANGE RATES OF THE PESO cowrage of commercial banks
(In For& (Isrrency Per P1.00)
60f sample commercial banks
US Dollar .WOO000 .(Wlglll .WE7038 6~rwn CB Treawry
Hon#kow Dollar .3104047 .32!54043 .3570663 7~ubj.ctto tax
Sinmore Dollar .0708484 .0769261 .-7bs9 *Fmliminary
Pound Sterling .@206040 . a 6 8 6 9 .0289815 N.T.-No Transmion
~ ~ a .Q82M88 k ,0872HI ,093184
N.Q.-No Qu-
Skvlm Franc .a17330 .a670087 .a789888 *btmmnth is July, 1-
I Jmpanl#, Yen
DudiRiyal
Kuwaiti Dinar
6.77034U 6.1-
.I496446 ,1670894
N.Q. .012-3
6.596306
-1713502
.0135752
Iraqi Dinar N.0. .17397M .I681503

I
CB REVIEW September 1990
A