Finance houses freeze lifted

CENTRAL BANK: ENTRY OF MORE
PLAYERS PART OF CAPITAL-MARKET REFORMS

By Jun Vallecera
Reporter

PETITIONS for the establishment of new investment houses and financing companies with quasi-banking functions are now being accepted again by the Bangko Sentral ng Pilipinas.

The central bank has lifted its moratorium on the organization of such financial institutions as part of wide- ranging capital market reforms, according to deputy BSP governor Nestor Espenilla Wednesday. He said the bank acknowledges the need to permit the entry of more players in the market apart from its traditional participants, the banks.
           
Espenilla recalled that in the past years, monetary authorities had held back establishment of financing companies and investment houses with quasi-banking functions after clients were ripped off by unscrupulous firms in the industry.
           
Financing companies and investment houses do not normally receive or accept deposits from the general public and develop their financial muscle via the banks, financial institutions and other money market sources of funds.
           
However, certain specialized institutions are endowed with quasi-banking functions, permitting them to accept deposits from the general public under strict guidelines of the Bangko Sentral.
           
Espenilla said the easing was in recognition of the role played by these specialized institutions in the development of the domestic capital market, where long-gestating programs needing long-haul financing are matched and mated.
           
For the longest time the banks have been the traditional and almost exclusive main source of funding for such programs, but the entry of the investment institutions with quasi-banking functions had helped develop a more mature and reliable domestic capital market.
           
Espenilla said the policy-making Monetary Board of the BSP abandoned, however, the original plan to double the minimum capital for the new entrants to P600 million and in the end, the seven-man MB kept the minimum at only P300 million.
           
He said a draft circular is in the works and “should come out in a couple of weeks.” 

Business Mirror

November 2, 2006
http://www.businessmirror.com.ph/front01.php