Most of the country’s bank treasurers and traders went along—many grudgingly—when their bank presidents told them to fall in line a decade ago and support the then nascent Philippine Dealing System Holdings Corp., the firm in charge of the bond exchange and securities depository.
For many years, they gritted their teeth and complied with what they felt were cumbersome requirements and hefty membership fees for a services they could do without. They were already trading debt securities efficiently and safely, the treasurers argued (while the leaders of the bond exchange, called the Philippine Dealing and Exchange Corp. or PDEx argued that their service made trading more transparent and resulted in better prices for buyers and sellers).
But the fortunes of PDEx and its parent PDS Holdings seem to be flagging of late and the professional group of treasurers and traders seems to smell blood in the water.
Biz Buzz learned that this group of banking professionals called Money Market Association of the Philippines, or MART for short, recently voted overwhelmingly to apply for self-regulatory organization (SRO) status to allow its members to trade among themselves a security called “overnight index swaps” using their own platform.
That may sound like Greek to the layman, but an SRO status —if granted by the Securities and Exchange Commission— will put MART on near-parallel footing with other organizations like PDEx and the Philippine Stock Exchange, in the sense that it will have the power to self-police members and regulate the trading of whatever it is they have SRO status for.
This is the same concept that the Bankers Association of the Philippines (BAP) thumbed down years ago when its leaders decided to throw their weight behind the PDEx concept, due in part to pressure from regulators to support the program. But now it seems some bank presidents are beginning to see (or perhaps “beginning to accept”) the wisdom of their treasurers and traders.
In any case, it does look like there are no significant barriers for MART to become a self-regulating body once it complies with the SEC’s requirements. The question on everyone’s mind now is … how long before MART can expand its SRO status to include some of the functions now held exclusively by PDEx? And once that happens, what will become of PDEx’ value, given that it doesn’t have too many fans among the bankers it serves? We think we won’t have to wait too long to learn the answer. —Daxim L. Lucas
Speaking of which …
With a new administration in place—and maybe with hopes for a paradigm shift in line with change-is-coming theme of President Duterte—the Philippine Stock Exchange has rekindled its bid to merge with the Philippine Dealing System, the holding firm for fixed-income trading platform Philippine Dealing and Exchange Corp. (PDEx), Philippine Depositary and Trust Corp. and Philippine Securities Settlement Corp.
To recall, the Securities and Exchange Commission (SEC) rejected last March a request from the PSE to be exempted from the 20-percent limit that any single industry could own in an exchange. The SEC argued, for instance, that the PSE had not been able to demonstrate any meaningful benefit to the investing public and capital markets under a monopoly.
We heard from several reliable sources that the new finance secretary, Carlos “Sonny” Dominguez, was willing to give his imprimatur to the merger of the country’s capital market infrastructure for as long as stockbrokers would commit to comply with the 20-percent single industry ownership limit.
“There’s a way that we have agreed (to bring down brokers’ ownership),” said a PSE source privy to the renewed discussions. “We’re trying to put a formula together.”
“They will free the market, allow the market to get better values, but they cannot go beyond the 20-percent threshold,” the source said.
Under such a scheme, stockbrokers can only buy shares of the unified exchange when the industry is below the limit. PSE chair Jose “Titoy” Pardo now seeks to put a formal agreement in writing.
Meanwhile, Dominguez has set a Nov. 15 deadline for the PSE to iron out the kinks. —Doris Dumlao-Abadilla
Globe’s dare
Say what you will about PLDT Inc. and Globe Telecom’s legal maneuvering against the antitrust body’s review into their acquisition of San Miguel Corp.’s telco unit but it seems to be working quite well. That’s because the legal system isn’t exactly the swiftest means to resolve any dispute, and in this case, every minute lost works in favor of our telco giants.
As readers know, both acquired San Miguel Corp.’s telco unit last May 30 in a massive P70-billion transaction. The main target was SMC’s valuable but underutilized telco frequencies, especially those in the 700 megahertz band where SMC had a near-monopoly. Both immediately began to roll out the frequencies across their networks—hundreds of sites for each telco this year alone and many more in the years to come.
That’s natural since both promised rapid improvements in terms of high-speed mobile internet services.
The other reason, of course, was that massive deployment could make it harder to undo the deal in case that’s what our courts decide, when they do come to a decision, according to our own telco sources.
In a roundtable meeting with the Inquirer, PCC officials admitted it would indeed be “very difficult” to undo that transaction in that hypothetical scenario. In any case, we’re looking to the future with the National Telecommunications Commission eyeing to bid out leftover telco frequencies in the hopes of luring a third player.
Experts said this would amount to less than 20 percent of telco frequencies (PLDT and Globe control the 80 percent) and may not be enough to attract a real competitor.
Globe CEO Ernest Cu had an interesting dare. He told Biz Buzz that Globe was ready to give up more frequencies, only if a third player could match them in terms of market share (we’re assuming in relative terms), but not a minute before.
Of course, it’s no small feat challenging these giants in a regulatory environment that favors the incumbents. Those faint of heart need not apply. —Miguel R. Camus
Incoming …
New Landbank president and chief executive Alex Buenaventura last Friday took his oath before the state-run lender’s chair, Finance Secretary Carlos Dominguez III, committing to strengthen the bank’s agriculture financing thrust.
“We will build on the gains of Landbank over the years and channel these resources to support the farmers and fishers and other marginalized sectors. Our aim is to triple our lending to small farmers and fishers from P37.9 billion at present to P115 billion by 2022 or in the next six years,” Buenaventura said.
To do so, the former president of One Network Bank (BDO’s rural bank) said they would embark on a “re-engineering” of Landbank’s lending to farmers and fishers, now coursed through cooperatives.
“We will look into reorganizing small farmer cooperatives to enter into ‘contract growing with farm management agreement’ with big agri-buyers/processors of high-yielding, long-term cash crops. These include cavendish banana, palm oil, rubber and cacao, among others,” he said. Such move would allow traders and manufacturers to control small farms, according to Buenaventura.
The plan to beef up assistance to agricultural producers could be music to Dominguez’s ears as the finance chief had rejected the proposed Landbank-DBP merger precisely because the two lenders had different mandates and he wanted them to continue supporting the sectors they ought to serve.
According to the Landbank statement, their new chief had “consistently rallied for the advancement of communities in Mindanao and is a staunch advocate of inclusive banking and countryside development.”
With 36 years of experience in the banking sector, especially in rural banking, Buenaventura is expected to “explore other novel and innovative ways of expanding support to agriculture,” Landbank said. —Ben O. de Vera
Outgoing …
After five good years, Jeronimo “Jerry” Kilayko Jr. is letting go of the reins of UCPB and turning it over to a new president, Joey Macadaeg, a career professional who has more than a decade and a half experience with the bank.
Keeping a dispute-filled bank buoyant and profitable is no easy feat, but Kilayko adroitly steered and managed the bank, allowing it to earn more than P3 billion net every year over the past three years despite challenges in capital.
When Kilayko assumed office in 2011, UCPB was in deep trouble, registering negative income figures and far from ready for privatization. Today, UCPB stands tall as one of the Philippine banking industry’s well-established banks that is ready to take on stronger head winds and industry challenges. The bank was also able to help more farmers and their families to achieve their dreams.
Kilayko can step down with confidence, turning over a highly respected and profitable business to the new administration.
Kilayko’s professional history makes him an interesting management subject, having had equally successful stints with Bank of Commerce, San Miguel Properties, Land Bank of the Philippines, IBI Asia LTD (Hong Kong), Bank of America (Manila) and Merrill Lynch (Philippines).
And with Kilayko as its most recent addition, the country’s professional talent pool just got bigger. —Daxim L. Lucas