Mid-year Economic Briefing

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Recent Philippine Banking Sector Developments
26 May 2005
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Banking system remains resilient
Resources of the Banking Systemin trillion pesos

• Banks aggregate resources higher in February 2005

Feb
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Banking system remains resilient
KBs Capital Adequacy Ratio in percent
17.76

• KBs capital adequacy ratio remained comfortable
  as of June 2004

BIS 8 Statutory floor 10
2002
2003
2004
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Banking system remains resilient
Banking System NPL / Total Loans in percent

• NPL ratio declines to 12.1 as of February 2005

12.1
2004
2005
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Bank lending grows steadily
Total Loans Outstanding of Commercial
Banks Annual Growth Rate ()

• KB loans up 5.8 percent in February 2005

5.8
2001
2002
2003
2004
2005
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Recent Banking Sector Reforms

• Microfinance Program
• BSP sustains support to microfinance program
• BSP provides microfinance access to a broad range
  of financial services such as deposits, loans,
  payment services, money transfers and insurance

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Recent Banking Sector Reforms

• BSP initiatives to promote microfinance
• issued guidelines on microfinance loans
• partially lifted moratorium on branch licensing
  for banks engaged in microfinance
• issued guidelines for setting up branches of
  microfinance-oriented banks and branches of banks
• opened rediscount facility for microfinance loans

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Recent Banking Sector Reforms

• Anti-Money Laundering Initiatives
• Anti-Money Laundering Act of 2001
• Salient features
• Defines and criminalizes money laundering
• Introduces mandatory reporting system of
  suspicious transactions
• Requires customer identification
• Creation of Anti-Money Laundering Council

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Recent Banking Sector Reforms

• Special Purpose Vehicle Act of 2002
• Rationale address NPAs
• Provides framework for sale of NPAs of banks and
  financial institutions
• Follows a market-based, private sector driven
  model
• Private sector set-up SPVs
• Government provide incentives

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SPV Update (as of May 2005)

• 195 COEs have been issued
• P56.508 billion NPAs transferred
• Several banks have pending applications for COE
  for the bulk sale of NPAs to SPVs
• Banks have until 8 April 2005 to sell their NPAs
  to SPV
• A bill has been filed in Congress to extend the
  effectivity of the privileges under the SPV Law.

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Thank you
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