Teaching employees how to fish

Money Matters

By: Efren Ll. Cruz
Philippine Daily Inquirer  
12:59 am | Wednesday, September 21st, 2011 

Question: At what age should companies start preparing their employees for retirement?-HR practitioner
Answer: As soon as they are hired!

What?!

Oh yeah. Have you ever experienced asking for directions while already traveling? Don’t you just hate it when a person tells you that if you have gone past a certain landmark then you have already missed your turn? Why can’t they give a landmark before you hit your turn?

With the average life expectancy getting longer, retirement planning five years before retirement age is now too short and risky. While retirement planning at 40 still seems reasonable, doing it for employees who are just hired is much better as it is like giving PDOS (pre-departure orientation seminars) to OFWs.

Firstly, why should companies even care about employees’ welfare in retirement? When I started in the trust industry, I quickly learned that companies set up retirement plans not only to better fund retirement benefits mandated by law but also to attract talented employees and foster loyalty. Why, who wouldn’t want to be working for a company that provides financial security even after employment?

We have done a lot of retirement planning training programs. Many of the participants, usually in their 40s and 50s, would always reply that they wish they had taken the training much earlier. Why? These individuals may have raised their cost of lifestyle so high that it would take years to unwind such high living.

Consequently, little is left for retirement planning. They may have taken on huge mortgages (car or home), racked up so many charges on their credit cards, kept insurance coverage to below what is necessary for them and forgotten about investing entirely. The worst part is that such individuals try to play catch up by planning to set up their own business upon retirement. We tell these people that what they are planning is a very dangerous thing as the money they are paid on retirement is their last. A business, on the other hand, bears the highest level of risk among all investment alternatives.

But would the newly hired even pay attention to retirement planning when the lure of consumerism is so strong? Surprisingly, they do. In fact, our online discussion group is composed more of people who are younger than 40. And we credit this to the growing popularity of financial planning.  Even magazines devoted to mothers, babies and the like feature personal finance articles. The Philippine Daily Inquirer is one of the first to feature personal finance among broad sheets, both in print and on the Internet.

One other thing we noticed is that employees treat company benefits like entitlements and get so addicted to them. Company loans in particular are normally “maxxed” out. An emergency loan is contracted even though the real purpose is not for an emergency. If there are loans from a cooperative within the company, these too are taken out. Once the addiction sets in, loans outside of the company are contracted. So how does the addiction to loans arise? The answer is fairly simple. In our programs, we ask people to list down their expenses in a year. Then we ask if, before the program they knew they were spending that much. The answer is invariably no. People prefer to remember fewer things, like the amount of monthly salary. But they shut out of their minds the myriad of things they spend on. And when another item is up for spending now, the normal reaction is that future salary or wage will take care of it.

So in our training programs, we help participants develop the habit of monitoring their cash flow through our unique 30-day EnRich Financial Milestones Journal. Here they actually list down daily their beginning cash, sources of cash and uses of cash for the next 30 days. Beginning cash + sources of cash – uses of cash = ending cash for the day and beginning cash for the next day. So they will not forget to do their journal, we send text messages to each participant every single day for the duration of the 30-day program. The text messages contain not only words of encouragement but also reminders of the lessons in the training program. Text messages are sent very early in the morning.

One more thing, it is more effective if a company teaches employees financial planning using a third-party trainer that is not selling any financial product. That training will be perceived as objective and a true caring action on the part of the employer, and not just a tactic to subdue requests for pay increases. As a result, deeper loyalty is fostered.

If you want to see how we train people for their retirement in particular and other major life events in general, join us on October 27 for another EnRich program. And as a special treat, we are giving away five free seats to the first HR practitioners who will attend. Visit www.personalfinance.ph or www.income-tacts.com or call (02) 216-1541 for details.

Here’s to a long and healthy retirement for all of us.

(Efren Ll. Cruz is a registered financial planner of RFP Philippines, personal finance coach, investment adviser and best-selling author. Inquiries may be sent by SMS to 0917-505-0709 or e-mailed to efren@personalfinance.ph. To learn more about the RFP program, visit www.rfp.ph or e-mail info@rfp.ph.)

http://business.inquirer.net/20477/teaching-employees-how-to-fish

47 listed firms must sell more shares

By: Doris C. Dumlao
Philippine Daily Inquirer  
9:30 pm | Sunday, September 18th, 2011 

Forty-seven companies are racing against time to meet the 10-percent minimum public ownership required by the Philippine Stock Exchange to remain publicly listed and enjoy preferential tax on stock trades as the November 30 deadline draws near, based on a list obtained by the Inquirer.

Companies that fail to comply with the requirement will have 36 months more before facing trading suspension and eventual delisting from the PSE but they will have to pay monetary fines until then. Investors who will trade the shares of non-compliant companies after the deadline, however, will have to brace for higher taxes.

The Bureau of Internal Revenue has indicated that it would slap the 5- to 10-percent capital gains tax on trading of shares issued by non-compliant companies simultaneous with the lapse of the PSE’s grace period. This means that investors will no longer enjoy the preferential tax rate of 1/2 of 1 percent of gross selling price if they are trading shares of non-compliant companies.

Some companies led by large groups like San Miguel, First Pacific, Lucio Tan, Ayala, Andrew Gotianun, George Ty, Henry Sy, Alfonso Yuchengco and Roberto Ongpin were among those with inadequate public float.

The biggest companies in the list in terms of market capitalization are those led by diversifying San Miguel Corp. These companies and their respective percentage of public ownership are: Petron Corp. (7.5 percent), San Miguel Brewery Inc. (0.6 percent), San Miguel Pure Foods Co. Inc. (0.1 percent) and San Miguel Properties Inc. (0.1 percent), based on the PSE’s list.

Ayala-led Integrated Micro-Electronics Inc., which listed by way of introduction or without a public float last year, also falls short of the requirement with its public float of 9.7 percent.

Two companies led by the First Pacific group also fell below the requirement—PLDT Communications and Energy Ventures Inc. (0.5 percent) and Metro Pacific Tollways Corp. (0.2 percent).

Within the group of tycoon Lucio Tan, several companies also need to improve their public float: Eton Properties Philippines Inc. (5.6 percent), Tanduay Holdings (2.9 percent), PAL Holdings (2.3 percent), Allied Banking Corp. (0).

Two companies led by former Trade Minister Roberto Ongpin—Alphaland Corp. (7.8 percent) and Atok Big Wedge Co. Inc. (4.2 percent)—also need to widen their public ownership to meet the 10-percent minimum requirement.

Other companies affiliated with taipans that need to address insufficient public ownership are: the Yuchengcos’ Bankard Inc. (8.3 percent); Gotianuns’ Filinvest Development Corp. (7.3 percent) and Tys’ First Metro Investment Corp. (1.9 percent).

http://business.inquirer.net/19965/47-listed-firms-must-sell-more-shares

Cha-Ching: Money-smart kids

By: Michelle V. Remo
Philippine Daily Inquirer
10:21 pm | Sunday, September 18th, 2011 

HONG KONG—Most successful investors would say that their skills in handling money were learned at an early age. Usually, their parents or guardians have a big role in instilling in them sound values related with money management.

Prudential Corporation Asia (PCA), which operates life insurance and asset management businesses across countries in the region, says it believes in the crucial role of financial literacy for the very young ones in helping economies perform well. For this reason, the multinational company has invested in a worthwhile project involving money-management education for kids.

In particular, PCA embarked on a multimillion-dollar investment that involves the production of a television show for kids that airs on Cartoon Network. The cartoon television show, titled “Cha-Ching: Money Smart Kids,” is geared toward teaching very young viewers the concept of money and how to manage and prudently use it.

PCA is encouraging parents to introduce the program to their kids, saying the show will aid in the parents’ teaching of money management for the kids.

Cha-Ching, an English slang for “cash,” is a 10-episode program, with each episode running for three minutes, that has started to air this month and will continue to be aired repeatedly until January 2012. The program focuses on the four concepts related with money management, namely, earning, saving, spending, and donating.

The show, which is in English, is aired in Hong Kong, Singapore, Malaysia, Thailand, Vietnam, Indonesia and the Philippines.

“Children have to learn early that money is not something that fall on trees and does not simply come out of automated teller machines,” PCA chief marketing officer Julie Lyle tells Asian journalists during the launch of the television show earlier this month.

“At an early age, they have to be taught that money is something that is earned,” Ms. Lyle adds.

Besides the value of working hard to earn money, Lyle says, the program also teaches children how to save, how to properly spend, and the value of giving back to society through donations. All these values will be taught using interesting cartoon characters, catchy musical lines, and easy-to-digest story lines, she says.

Cha-Ching has six main characters who introduce to young viewers the traits that they should either adopt or avoid to become good in money management. The characters include Justin, Charity, Pepper, Bobby, Prudence, and Zul.

Con Apostolopoulos, director for Turner Media Solutions that is in charge of production of the Cartoon Network show, says the company is thrilled to partner with PCA for the production of Cha-Ching. He says this is the first extensive financial literacy program for kids that Cartoon Network is airing.

Apostolopoulos says producing a financial literacy program is a bit more difficult than coming up with any other type of cartoon show. This is because a financial literacy program is aimed at not only entertaining kids, but also ensuring they learn the concept of money management by simplifying even technical concepts. Apostolopoulos says it is important that story lines comply with the objectives of PCA.

“We communicate with PCA in every step of the production process to make sure we achieve the objectives,” he says.

Apostolopoulos adds PCA made the right decision to partner with Cartoon Network given the latter’s wide reach in several Asian countries, including the Philippines. Cartoon Network is, in fact, the No. 1 television station for kids as far as audience reach is concerned in the Philippines and neighboring countries.

Barry Stowe, the chief executive officer of PCA, says that investing in the show falls under PCA’s corporate social responsibility (CSR) function.

Stowe says that while the company invested a significant amount of money for the show, the intention is not to actually generate profit from it. He says the key objective is to promote financial education for the very young ones and to teach of children proper money management.

“This is not an investment for our business, but an investment for the communities we operate in,” Stowe says when asked how the company expects to recuperate its investments from the show.

He adds that if the show would eventually encourage parents to buy financial instruments from PCA for their kids, then that would just be a bonus.

“This project may actually benefit not only PCA but even our competitors,” Stowe says, explaining that if the TV show would indeed encourage households to buy financial instruments, then the industry in general would benefit.

Lyle says that if the TV show proves to be a hit, then PCA may consider financing the production of more episodes and make the program run for the long term.

A survey conducted by Oracle Added Value and commissioned by PCA showed that most Asian parents agree that the value of money management should be taught to kids at an early age, and that they believe they have the biggest role in making that happen.

However, teaching children money management is not always easy. The survey results further showed that most Asian parents just give money to their children every time the latter ask for it, without explaining the value of working hard to earn it.

Stowe says Pru Life, in investing in the TV show, would like to help parents in their role of honing the money-management skills of their children.

“We developed this financial literacy program in response to the growing need of parents to teach children sound financial management,” Stowe says.

Stowe says that through the show “Cha-Ching,” PCA hopes to make teaching sound money management to kids to be easier task.

http://business.inquirer.net/19979/cha-ching-money-smart-kids

Exec molds next generation of values-oriented Filipinos

By: Charles E. Buban
Philippine Daily Inquirer
9:53 pm | Sunday, September 18th, 2011 

MANILA, Philippines—Teaching morals and values to children is important at a time when distractions abound in a generation lost in a maze of technological advancements and environmental struggles.

But it is always best to know the ripe age for kids to adopt such teachings—when a child’s mind is impressionable.

These things considered, the “Value of Hard Work and Discipline Advocacy Project” was launched recently, targeting third graders or schoolchildren aged 8 to 10 years. The project entailed the use of a workbook packed with easy-to-understand principles for life improvement.

“Proper timing is important if you want to effectively impress morals and values on young children, and we believe that those in third grade is the right age,” explains D. Arnold Cabangon, president of Fortune Life, the firm initiating the project with the Department of Education and advocacy group Mary Lindbert International for the welfare of impressionable children.

The Value of Hard Work and Discipline workbook will be used to teach Grade 3 pupils initially in select public schools in Metro Manila and Bulacan.

Lessons learned

Evelyn Carada, EVP and GM of Fortune Life, explains that curriculum experts of the DepEd sat with Fortune Life executives to discuss the appropriate topics to be included in the workbook.

“This is important because we are provided with a unique, never-to-be-repeated opportunity to mold our children’s minds,” says Carada.

Apart from the workbook, Education Undersecretary Yolanda Quijano says that the department will also integrate topics such as lessons of good manners, respect for parents and elders, and even financial etiquette in a number of subjects.

“She said initiating this project among Grade 3 pupils has a huge chance of succeeding as schoolchildren in this age range will likely imbibe the lessons learned and grow up to be model citizens,” explains Quijano.

In her keynote speech during the launch, Quijano also expressed her sorrow that such values are now seldom observed by today’s youth.

Odd jobs

The project is close to Cabangon’s heart because the project was inspired by his father, Fortune Life’s chairman emeritus and founder, Antonio L. Cabangon Chua, a self-made multimillionaire and former ambassador to Laos.

Cabangon relates that when his grandfather, a rich Chinese businessman, was killed during the war, his father and grandmother were forced to live with their wealthy relatives who often mistreated them.

“My father could not just accept their plight and do nothing. He promised his mother that someday, they will have a better life. He took an assortment of odd jobs, from shoeshine boy to fish vendor. He often tells us, as well as his other friends how, while shining an American soldier’s shoes, he was suddenly kicked by this man [who] threw a half-eaten apple to his face. Angry and insulted, he vowed that whatever happens, he will do his best to improve his sorry plight and rise from poverty,” says Cabangon.

Enough capital

From then on, Cabangon-Chua and his mother worked hard enough to earn capital for a small sari-sari store.

During the project’s launch, Cabangon-Chua says poverty did not deter him from dreaming big.

“It pushed me. It motivated me. So we scrimped and saved and, with our meager earnings, I was able to go to college and complete my accounting course. Indeed, the values of hard work, perseverance and discipline are ‘the only spring from which to drink true power.’ And apart from prayers and faith in God, one should have that burning desire to succeed in life. Do not wait for things to happen.”

The former ambassador says this project is meant to inspire a new generation of children to succeed like him.

Carada notes that discipline is a value Cabangon-Chua champions as an important aspect in the lessons that the project imparts, as highlighted in the workbook.

Quijano adds that teaching these values of hard work and discipline supports the DepEd’s current moves to strengthen basic education through its K+12 program, or the extension of the basic education curriculum from 10 to 12 years.

http://business.inquirer.net/19973/exec-molds-next-generation-of-values-oriented-filipinos

LBC Express caused bank’s fall

Tuesday, 13 September 2011 22:03
Jun Vallecera / Reporter 

NOW it can be told: The failure of LBC Express, the remitting affiliate of LBC Development Bank, to honor billions of pesos in advances caused the bank’s downfall, regulators disclosed on Tuesday.

It was also revealed, to refute insinuations the bank’s closure was precipitate, that the regulators discovered something wrong with LBC Bank’s operations a year ago and gave it time to correct the situation; it failed, however. 

Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr. said LBC Express Inc. regularly accepted money-transfer transactions from millions of customers in the country and abroad but never bothered to settle the advances.

Espenilla said LBC Bank extended billions of pesos in cash advances to LBC Express for several years as part of its role as payout agent. Each time a customer remitted money to beneficiaries through one of the many offices of LBC Express in the Philippines, and abroad, LBC Bank advanced the money to the beneficiary, effectively extending the affiliate another credit. The problem is the credits were never settled.

And because LBC Express failed to settle what it owed the bank, the steady buildup of cash advances became unmanageable and eventually too large that it broke the bank.

“The constant need to make cash advances slowly eroded the bank’s capital. Eventually, the capital deficiency resulted in the bank posting a negative capital account,” Espenilla, head of the BSP’s supervision and examination sector, said but without citing numbers.

The state-owned Philippine Deposit Insurance Corp. (PDIC) earlier said LBC Bank accumulated deposit liabilities totaling P6.09 billion at the time the Monetary Board, the policy-making body at the BSP, issued the order putting the bank under receivership by the PDIC.

LBC Bank assets are worth P5.5 billion only, based on data obtained from the BSP, which were clearly insufficient to meet the bank’s outstanding liabilities.

Espenilla said the BSP also issued a cease-and-desist order stopping the bank from making advances on behalf of LBC Express clients to prevent a further deterioration of the situation. 

Espenilla also acknowledged having placed LBC Bank under the prompt corrective action (PCA) program, which, in essence, is a rehabilitation framework that attempts to spot a bank’s problems long before these became irreversible.

“We placed them under the PCA program for well over a year and they failed to make the grade. They’ve been trying to fix the bank’s problems and that failed, as well,” he said.

Espenilla also said LBC Express does not fall under the sphere of influence the BSP has over bank and nonbank financial institutions. The BSP has some residual authority over the remittance unit only on issues pertaining to anti-money laundering issues and not much else.

He said while some of the smaller and weaker lenders eventually fall by the wayside, all the other banks in operation have posted significant improvements in the quality of management and the amount of capital they have in their vaults, among other considerations.

“There are a few that may be mismanaged by their owners but, by and large, the thrift- banking system in the country is financially healthy,” Espenilla said.

The BSP earlier ordered the closure of Banco Filipino Savings and Mortgage Bank and the operations of Express Savings Bank organized under the charter created for the Local Water Utilities Administration and headed by former legislator Prospero Pichay.

http://www.businessmirror.com.ph/home/top-news/16511-lbc-express-caused-banks-fall-

LBC Bank placed under receivership

By: Michelle V. Remo
Philippine Daily Inquirer
4:16 am | Sunday, September 11th, 2011

LBC Development Bank, a unit of the LBC Group, has been placed under receivership of the Philippine Deposit Insurance Corp. (PDIC).

In a statement over the weekend, PDIC said it took over the assets and liabilities of LBC bank after the Monetary Board of the central bank determined that the institution was plagued by liquidity problems.

“All valid accounts and deposit insurance claims will be paid as soon as possible,” PDIC said in a statement.
LBC Development Bank, with head office on JP Rizal St. in Makati City, had 19 branches nationwide.

As of end-June this year, total deposits placed with the bank amounted to P6.09 billion. Of the amount, P3.73 billion is covered by insurance, PDIC said citing bank records.

In terms of number of accounts, there were 321,516 as of June, 99.4 percent of which are fully covered by deposit insurance, said PDIC.

The government insurance agency said the placement of the thrift bank under its receivership would not significantly affect its resources. PDIC noted that the insured deposits with LBC Development Bank made up only a tenth of one percent of total deposits in the country’s banking system.

Under PDIC’s charter, deposits worth P500,000 or below are covered by insurance. Deposits in excess of the amount may or may not be paid depending on the amount to be raised from the liquidation of a closed bank’s assets.

PDIC will conduct forums in areas where branches of LBC are located so that depositors of the bank will know how to claim insurance.

Owners of deposit accounts worth P10,000 or below need not apply for insurance claims. In their case, PDIC will simply mail notices to them and they can withdraw from designated redemption offices, like branches of Land Bank of the Philippines.

The placement of LBC Development Bank under receivership may come as a surprise to the bank’s depositors given the institution’s track record.

LBC Bank was previously awarded the “superbrand” status by Superbrands Philippines Council, which cited it for being one of the most reliable and trusted brands.

Banks boost kids’ savings project

Thursday, 25 August 2011 19:14

 

SEEING the importance of what saving up can do in building their future, 12 of the country’s major banks have teamed up to support the Kiddie Account Program (KAP) jointly promoted by the Bangko Sentral ng Pilipinas (BSP) and the Bank Marketing Association of the Philippines (BMAP).

The KAP was designed to encourage children 12 years and below to develop the habit of saving money regularly via easy access to the participating banks’ deposit facility.

BDO Unibank Inc., the Bank of the Philippine Islands, Allied Bank, China Bank Savings Inc., Development Bank of the Philippines, East West Banking Corp., Maybank Philippines Inc., Philippine National Bank, Philippine Savings Bank, Philippine Veterans Bank, RCBC Savings Bank, and Security Bank Corp. have all committed to assist children with at least P100 to open savings accounts with them.

BSP Gov. Amando M. Tetangco Jr. lauded the banks’ action, saying that with their combined network of about 3,000 branches, the KAP makes the opening of savings account affordable and convenient in many parts of the country. 

The BSP is actively working together with the Department of Education to integrate the concept of savings and money management in the latter’s elementary education curriculum.

BDO president Nestor V. Tan said this effort is part of the ongoing campaign of the bank to provide products for small depositors. Even before the KAP, BDO has been offering, among others, the Junior Savers Club, a fixed interest-bearing savings deposit for kids 12 years and below.

Attending the launch of the banks’ joint program were advocates of the KAP.  These included Mai Sanggalang, Bennett Zerrudo, Lon Fernandez, Emmanuel Tuazon, Maricris San Diego and Mike Villareal, and Jude Montinola, BMAP directors; Mary Jean Ibuna, BMAP vice president; Allied Bank president Anthony Chua; BDO president Nestor V. Tan; Philippine Savings Bank president Pascual Garcia III; Philippine Veteran’s Bank president Ricardo Balbido Jr.; Security Bank president Albert Villarosa; RCBC Savings Bank president Rommel Latinazo;

DBP senior executive vice president Ma. Theresa Quirino; BPI president Aurelio Montinola III; China Bank Savings Bank president Alberto Ramos; BSP Gov. Amando Tetangco Jr.; BMAP president Allan Tumbaga; East West Bank president Antonio Moncupa Jr.; Maybank president Ong Seet Joon; and PNB president Carlos Pedrosa.

Let your bank work for you

1:14 am | Wednesday, August 24th, 2011

With P250,000 in extra cash, one can already buy a second-hand car or make a down payment for a brand-new one. It can be used as equity for a condo unit, or spent for your Bucket list—be it a budget European sightseeing or a cruise somewhere. But if you are not in the market for a car or a house, in no mood to splurge, scared to do your own stock picking or simply uneasy to even consider bringing your money out of your bank, just make your bank work harder for you.

The Inquirer’s Doris C. Dumlao polled banking experts what products would they recommend to their clients at this time and these are their suggestions:

Theresa Javier

Teresa Marcial-Javier
EVP/head of asset management and trust group
Bank of the Philippine Islands

“For a moderately conservative portfolio worth P250,000, invest 15 percent, or P37,500, in BPI Short-Term Fund; 26 percent, or P65,000, in ALFM Peso Bond Fund; 26 percent, or P65,000, in BPI Premium Bond Fund; 23 percent, or P57,500, in ABF Philippines Bond Index Fund; and 10 percent, or P25,000, in BPI Equity Fund.”

Pascual Garcia III
President
Philippine Savings Bank

“Given the volatility of markets worldwide, money market funds and bank time deposits are ideal to maintain liquidity in order to be able to enter the equity markets via equity funds when price levels are lower and more favorable.”

Tony Cripps

Tony Cripps
Chief executive officer
HSBC Philippines

“The second half will be quite volatile for developed markets given the risks of European contagion and the US debt problems. Developed markets will be quite challenging in the second half and be risk-averse so, personally, I’d be in cash just because I think the markets are going to be choppy. The best thing to do is open an HSBC account and put the P250,000 in it. I think that, in the short term, the market will be quite challenging. On a longer term horizon (three to five years), I’d invest in Philippine growth stocks. I like the mining sector. I’m positive on the Philippines and upbeat on sectors like infrastructure. So on a longer term horizon, I’d recommend investing in a growth fund—more equity than fixed income.”

Eugene Acevedo

Eugene Acevedo
Retired banker/former president
Philippine National Bank

“I still like my (buy) Aussie dollar idea, a proxy play on gold and China growth. Allot P100,000 for this. Add to that P50,000 for power generation equity shares as I expect demand to keep rising faster than the economy. For the remaining P100,000, invest in YOURSELF. That’s right—YOURSELF. Pay for gym membership and get a trainer. Save on future medical expenses. Learn Mandarin to make your resumé more marketable regionally. Pick up a musical instrument to open up the creative side of your brain.

Get a trusted style icon friend to help you fix your look.”

Arcus Fernando

Arcus Fernando
Country treasurer
Citi Philippines

“I like long tenor peso government bonds, 10 years or longer. There is good value in locking in at the current levels. With global growth at risk and with the inflation outlook benign, monetary authorities worldwide are expected to keep interest rates low. The concern over the poor growth in the United States and Euro area will lead global investors to focus on emerging markets assets and currencies—Philippine assets and the peso included. Local equities may show some interesting valuations, but given the poor global growth picture, equity markets will tend to be more volatile. Investments in stocks over the near term would be best for those with higher risk tolerance.”

Marvin Fausto

Marvin Fausto
Chief investment officer
Banco de Oro Unibank

“If the funds will be needed within 12 months, I suggest you invest in our BDO Peso Money market (PMMF) fund to enjoy relatively high yield for a short term and very conservative investment. Investments are in deposits, government securities and SDA [special deposit accounts] of the BSP [Bangko Sentral ng Pilipinas]. One can terminate and withdraw from the fund anytime. Yields are very stable and earns higher than what you get from an ordinary deposit. BDO PMMF generates returns of 3 to 4 percent per year. If funds can be invested longer, I suggest the BDO Equity fund. The fund is invested in listed equities that are designed to outperform the stock market. The fund has outperformed the stock market for the past five years due to disciplined and professional management. It is for investors with higher risk appetite and who are willing to ride the volatility of the market in order to generate higher returns over the long term.”

Rene Sarmiento

Rene Sarmiento
First vice president/head of trust group
China Bank

“Those with conservative risk profile may invest in time deposits or special savings deposits of China Bank where they can earn fixed rates of returns. Conservative persons with longer-term orientation may buy government securities from the bank’s treasury department. Yields on GS investments vary depending on the term of the instrument and the prevailing market prices.

The more sophisticated and aggressive individuals may opt to invest in pooled funds such as the Unit Investment Trust Funds (UITFs). Yields on UITFs vary depending on the specific fund’s performance. The performance of UITFs will exhibit some volatility since assets held by these funds are marked-to-market daily. China Bank offers three peso-denominated UITF variants: China Bank Money Market Fund, GS Fund and Balanced Fund where the investment requirement is only P100,000. These UITFs cater to investors with varying risk appetites, needs and objectives. For instance, if a client desires a high level of liquidity and still wishes to enjoy better earnings potential than letting his funds remain in a deposit account, he could look at the Money Market Fund. Those with higher risk tolerance may consider the Balanced Fund. For those who also want added insurance coverage, variable life insurance plan from China Bank’s bancassurance arm, Manulife-China Bank Life Assurance Corp. (MCBLife), may be an option.”

Branching out to where no bank has gone before

By: Michelle V. Remo
Philippine Daily Inquirer  
1:06 am | Wednesday, August 24th, 2011

In a bid to widen people’s access to banking services and support the growing funding needs of the economy, the Bangko Sentral ng Pilipinas has issued regulations that will effectively allow banks to open more branches.

According to the central bank, the time has come to allow more competition among banks to meet the twin objectives of meeting the rising demand for banking services in wealthy cities and encouraging banks to put up branches in lower-income areas to help spur economic activities there.

No more restricted areas

Under the first regulation, the BSP lifted the restriction to put up branches in the eight highest-income-earning cities in Metro Manila: Makati, Mandaluyong, Manila, Parañaque, Pasay, Pasig, Quezon and San Juan.

The lifting of the restriction comes in two phases. Under the first phase, universal and commercial banks with less than 200 branches as of end-2010 may expand in the eight cities. Under the second phase, which starts on July 1, 2014, all universal, commercial and thrift banks may put up branches in the same areas.

BSP Governor Amando Tetangco Jr. said the move is in response to the growing needs of the eight key cities for more banking services as economic activities in these areas increase.

The previous restriction on bank branching was meant to avoid excessive competition among banks, which had a tendency to concentrate on high-income areas to take advantage of income opportunities.

But Tetangco said that, as local economies expand further, so should the supply of banking services.

In areas where more and more businesses are being put up and economic activities are rising, there must be more banks to meet the demand for loans and other financial services.

He said it’s time to allow more competition.

“Liberalization will further improve the competitive environment, which should translate to better financial services to the public. The new policy also aims to encourage banks to further scale up and improve their operations in order to be competitive,” Tetangco said.

Liberalization for rural banks

Under the second regulation, rural banks, which are mandated to provide services in the countryside, are now allowed to put up more than one branch in Metro Manila to cater to the growing demand for microfinance services in urban areas.

According to regulators, while there are quite a number of large banks operating in urban areas, they do not cater to the funding needs of microenterprises. Most commercial banks tend to focus on large companies and small and medium enterprises (SMEs).

The BSP believes that, to sustain robust growth of the economy, it will be necessary to boost the micro-business sector, which accounts for bulk of the number of enterprises in the country.

Providing microenterprises with adequate financial and technical support is one of the most effective ways to reduce poverty incidence, which has remained significant even though the economy has been growing over the past decade.

It appears that only the middle-and high-income earners are the ones benefiting from the economic upturn to the detriment of the poor.

The BSP said that with more rural banks providing financial services to microenterprises, it would be easier to attain the goal of broad-based growth of the economy.

More countryside services

The move of the BSP to allow rural banks to expand to urban areas is complemented by its move to encourage large banks to operate in rural communities.

Under the third regulation, the central bank has cut by half the processing fee charged on universal/commercial banks or their subsidiary thrift banks to put up branches in third-to sixth-class municipalities.

Industry players welcome the liberalization of bank branching, saying that this will give them opportunities to take advantage of the growing economy and generate more income.

Alex Buenaventura, president of One Network Bank, one of the biggest rural banks in the country based in Mindanao, said the liberalization would encourage rural banks to expand outside their usual areas of operation.

He said rural banks would appreciate a level playing field, gaining the chance to serve not only microenterprises but bigger corporate clients.

Credit bureau to open in 2012

Posted on August 18, 2011 09:01:12 PM

BY ANN ROZAINNE R. GREGORIO, Reporter

A CENTRAL credit information bureau is expected to launch operations only in December 2012, or more than four years after the law establishing it was approved.

Baltazar N. Endriga, the newly appointed president of the Credit Information Corp. (CIC), told BusinessWorld in an interview on Wednesday that the bureau needs to secure the approval of the Governance Commission for GOCCs (GCG) as it is a government-owned and -controlled corporation.

The problem is, the GCG, established under Republic Act (RA) 10149 or the GOCC Governance Act of 2011, still needs to convene.

“We target to start the operations of the CIC, which will provide credit data to subscribers, by December 2012,” Mr. Endriga said.

“With recent developments in the capital market, there is a need for fair, accurate and reliable credit information,” he added.

The CIC was established under Republic Act No. 9510 or the Credit Information System Act of 2008. It will serve as a central registry or central repository of credit information to improve the availability of credit, especially to micro, small and medium enterprises.

The government and the private sector have pitched in the capital to set it up, but it still needs to file its Articles of Incorporation and By-laws before the Securities and Exchange Commission (SEC). A prior step to filing, Mr. Endriga said, is the go-ahead of the GCG.

“We have yet to get the approval of the GCG to be able to file our corporate papers before the SEC and operate as a corporation,” Mr. Endriga said. “The CIC, however, can’t get the endorsement of the GCG because it has not been constituted yet.”

Budget Secretary Florencio B. Abad in a text message on Wednesday said the Palace still needs to appoint GCG’s chairman and two commissioners. “But I understand that is forthcoming,” he added.

Section 6 of RA 10149 provides that the president appoint GCG’s chairman, who will have the rank of cabinet secretary, and two members, who will have the rank of undersecretary. The secretaries of the Department of Budget and Management and the Department of Finance will sit as ex officio members of the commission.

Mr. Endriga, in an e-mail last Tuesday, said he and SEC Chairman Teresita J. Herbosa, who is also the CIC’s ex-officio chairman, wrote President Benigno S. C. Aquino III last Aug. 9 to ask for his “favorable endorsement.”

“We want to get President Aquino’s approval to allow the CIC’s incorporation, even without the GCG’s approval as the commission does not exist yet,” he said.

Non-registration with SEC means CIC cannot operate, rent space, hire personnel, disburse funds, enter into any contract and function legally or officially.

All board meetings conducted are considered “pre-incorporation meetings and decisions made will have to be ratified by the board when it meets for the first time after its registration with the SEC,” Mr. Endriga said.

The CIC, according to the law, must have an authorized capital stock of P500 million, divided into 1.25 million common shares with par value of P100 each and 1.875 million preferred shares with par value of P200 each.

The government must contribute P75 million, and the private sector, P50 million.

Mr. Endriga, in his e-mail, said the government has released P17.5 million this year and the remaining P57.5 million is expected to be released in 2012.

The private sector, meanwhile, has given a total of P15 million, divided equally among the six private investors, namely, the Bankers Association of the Philippines (BAP), the Chamber of Thrift Banks (CTB), the Credit Card Association of the Philippines (CCAP), the Rural Bankers Association of the Philippines (RBAP), the Philippine Cooperative Center (PCC) and the Philippine Credit Reporting Alliance, Inc. (PCRAI).

Mr. Endriga said that even without the complete capital contribution from the government and private groups, the CIC can start working, albeit informally.

Regarding his plans for CIC, he said: “The plan for the immediate future is to develop the system or work with an outside service provider on the whys and wherefores of the bureau.”

The CIC will provide financial institutions both positive and negative credit data on borrowers.

However, not all financial institutions can access CIC’s database, Mr. Endriga said.

“Access to our database will strictly be controlled in order to protect the privacy of individuals. Before an institution can have access to our database, it must first seek CIC’s approval,” he said in his e-mail.

“The amount to be charged by CIC to those who will access its data has yet to be determined,” he added.

“We will also study if we can allow individual borrowers to gain access in their credit profiles.”

Asked how long CIC will hold on to the data it will gather, Mr. Endriga said, “data will be stored for at least three years and a maximum of five years and we will collect basic credit data [from financial institutions] at least on a quarterly basis to update our database.”

Mr. Endriga said his target to launch CIC in December 2012 will provide the bureau enough time to gather data, validate data, choose the right system provider and to ensure the security of the system from hackers.