Corporate Securities Info
Dealing with hard times
By Raul J. Palabrica
Philippine Daily Inquirer
First Posted 06:24:00 10/10/2008
Filed Under: world financial crisis, Banking, Financial & Business Services, Crisis
Should we advise our clients to withdraw their money from banks that have investments in Lehman Brothers?
This was one of the questions raised during the briefing that the Securities and Exchange Commission conducted in Bacolod City last Friday for the Negros Occidental Chapter of the Philippine Institute of Certified Public Accountants (PICPA).
The SEC’s speakers bureau was asked to keep PICPA members abreast with the developments in, among others, accounting rules, corporate reportorial requirements and the capital market.
By uncanny coincidence, that week was also the start of the city’s Masskara festival, an activity conceived in 1980 when the province’s major product, sugar, suffered from low prices in the world market.
At that time, the world was awash with cheap Caribbean sugar, and the province’s biggest market, the United States, had shifted to sugar substitutes sourced from other farm products to meet its food requirements.
With the principal source of income severely restricted, the business environment in the city and the province became dire and gloomy.
As if the economic woes were not enough, the year before, a passenger ship collided with a tanker bringing many of the province’s residents to their watery grave.
Slowdown
The festival was meant to give the people a temporary respite from the economic difficulties and emotional trauma they were going through during those times.
And what better way to do it than to have a party with brightly colored masks and artistically designed costumes!
In true Filipino fashion, the activity took a life of its own and evolved into an annual ritual that has caught the attention of local and foreign tourists.
Amid the colorful decor of the streets of Bacolod, the then pending $700-billion bailout package in the US Congress was at the back of mind of many of the accountants during the briefing.
With the year drawing to a close, they would soon be going through the books of their clients to prepare the 2008 audited financial statements required by the BIR and SEC.
Some of the participants I talked to believe the adverse effects of the US economic slowdown were already being felt by their clients, especially those in the export business.
An accountant said he was obliged to read (and understand) the news reports about the problem so he could intelligently answer his clients’ queries on the matter.
Concerns
In the course of the discussion of the latest accounting rules and other related matters during the briefing, several questions were raised about the US financial crisis.
What is short selling of stocks and how did it contribute to the collapse of well-known US investment companies?
What are hedge funds and what is their involvement in the problem?
If the prices of stocks in our stock exchange continue to go down due to the situation in America, is it okay to buy stocks now?
Should our clients withdraw their money from banks that have links with failed investment companies and transfer them to “cleaner” banks?
On the sidelines, somebody asked why US regulatory authorities were unable to detect the problem early enough to be able to take the proper remedial steps before things got out of hand.
The resource speakers answered the questions in detail, avoiding as much as possible the use of words and phrases (or financial gobbledygook) that are unique to the financial world.
From the follow-up questions that came after every reply, it was apparent the accountants’ interest on the subject matter went beyond the professional level. They knew it would have a significant impact on their personal lives.
Confidence
Although the discussions on the US financial crisis were serious, I did not sense any feeling of depression about the situation from the participants.
They were aware of the looming economic uncertainty and the hard times ahead, but that was no reason to throw in the towel and let the coming events dictate the tempo of their lives.
The clarifications they sought about the accounting rules that relate to the province’s principal business, the preparation of audited financial statements and revival of corporations whose registrations have been revoked indicate that they were looking beyond the current economic situation.
It was like saying the present can take care of itself, it’s the future we have to prepare and be ready for.
The atmosphere of optimism did not surprise me. The province is no stranger to severe economic conditions.
It was able to get back on its feet despite the plunge in sugar prices in the 1980s by shifting its production efforts to non-sugar-related businesses. A similar resiliency was shown during the 1997 Asian financial crisis.
I’ve seen Bacolod up close before and after the initial years of the Masskara festival. It looked like a second-class municipality that masqueraded as an urban community.
Today, moving around Bacolod, with its well-paved roads and booming business environment, no one would think that things were bad before.
Going back to the question that appears at the beginning of this article, my reply was, the potential losses of those banks are too small to adversely affect their viability.
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For feedback, please write to rpalabrica@inquirer.com.ph.
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