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BIZ BUZZ: The crisis down the road

/ 04:03 AM June 14, 2021

Philippine National Bank president Wick Veloso isn’t only in charge of looking out for the interests of his stakeholders, employees and clients of the storied financial institution.

On top of having to steer the large financial institution undergoing a massive turnaround (that’s another story worthy of a standalone item another day), the veteran banker also has to look after the interests of his peers and rivals in the industry.

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That’s because Veloso is also this year’s president of the Bankers Association of the Philippines (BAP), the umbrella organization representing the largest financial institutions in the country. And, apparently, many of these BAP member banks are feeling a little … well … shall we say “constrained” nowadays.

Biz Buzz caught up with Veloso last week when he joined an online Inquirer webinar and we asked him what keeps him awake at night nowadays. We asked: Is the worst of the pandemic over for the Philippine economy or are there still hidden monsters lurking around the corner?

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His reply was an interesting and far reaching insight.

According to Veloso, what worries him is the strong peso against the US dollar which, although looking good on the surface, is a clear indication that there is very little demand for hard currency among users who would normally be importing raw materials necessary for the local economy to grow.

The problem is that all this lack of activity is building up in the economy and once demand returns—and it will, inevitably—it will do so with a vengeance. Veloso fears that the existing inventory of goods currently being held in the local economy will not be enough to meet the “revenge spending” that will come in just a few months.

Not only will there be insufficient goods, he said, but there will also likely be insufficient services to meet the demand from consumers that has been put on hold for a year and a half now.

More importantly, this revenge spending is being aided by the current low interest rate regime, with the central bank deliberately keeping the cost of money cheap in order to encourage economic activity.

“When that happens, we might see too much money chasing after too few goods and services,” he said, explaining that this is the classic cause of inflation, which will then be met with a classic response from authorities of higher interest rates.

“That possibility of a sudden spike in inflation and interest rates is what worries me,” he said.

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Call it advanced thinking, but it’s something our economic managers—especially those at the central bank—have to keep in mind lest the country’s recovery from the pandemic becomes a crisis in itself.

—Daxim L. Lucas

‘Help us help them’

Meanwhile, Veloso also has an urgent appeal to bank regulators which could potentially lead to a sounder banking system and less pain among borrowers who were hit hard by the pandemic.The BAP chief noted that many banks are now faced with the dilemma of whether they should lend more cash to previously good borrowers who are now underwater because of the COVID-19 crisis … or simply bite the bullet and let them drown. Figuratively speaking, of course.

He explained that many banks want to extend more loans to borrowers who are facing temporary cash flow problems—especially in the service, food and hospitality industries, which have been ravaged by the pandemic.

The problem is that current banking rules require banks to set aside additional provisions for every peso they lend to troubled borrowers (the amount depends on how “troubled” the borrower is).

“There are some good businesses which have excellent track records, good business products and excellent prospects, but lending P100 to them will entail us having to set aside another P100 from our own capital as provisions,” he said.

Veloso said, of course, that he understands the rationale for these provisioning rules which are meant to insulate the financial system against risky lending, but expressed hope that a once-in-a-lifetime crisis like the coronavirus pandemic may merit some more leeway from regulatory zeal.

Relaxed provisioning rules maybe? That’s one possibility.

“Everyone wants to see the economy grow,” he said. “We want that to happen, too. So I hope our partners in government will allow us to help our borrowers. Help us help them.”

Now the question is will his appeal find sympathetic ears? Abangan!

—Daxim L. Lucas

Pasig River philanthropy

Business never sleeps and in the case of billionaire Enrique Razon Jr.’s ICTSI Foundation, neither does philanthropy.

The group has captured headlines recently for its efforts to combat the COVID-19 pandemic. The foundation is now turning its attention to the long-standing problem of cleaning up the Pasig River in Metro Manila. Throwing money at the problem is certainly easy and ultimately futile, but ICTSI Foundation is taking things further. It is providing $1 million and partnering with Finnish nongovernment organization RiverRecycle to pioneer a “financially stable” waste collection system. This is where it gets intriguing and will involve a device designed by RiverRecycle capable of capturing as much as 200 tons of waste, including discarded plastic, on the river per day.

The retrieved plastic waste can then be converted into oils using a process called pyrolysis that can then be converted back to plastic.

Christian Gonzalez, ICTSI Foundation president, said this was part of the company’s conservation efforts to protect host communities along the Pasig River and Port area.

Even better, the project is aligned with ongoing waste management initiatives under the Parola Solid Waste Management Project. This was a project under the ICTSI Foundation with the City of Manila and the Department of Environment and Natural Resources.

—Miguel R. Camus

Scammers abound

Trust scammers to try to take advantage of even the most positive events to make a quick buck.

In this case, we’re talking about a scam being propagated over social media platforms and communication apps inviting recipients to click on a link in exchange for freebies. The promotion was said to be in celebration of Toyota’s 80th anniversary.

Over the weekend, Toyota Motors Philippines (TMP) released a statement warning the public about this online scam for the safety and privacy of its customers.

“Recipients are strongly advised not to click on the link and to refrain from forwarding the message. The message leads to a deceptive website that will attempt to steal personal information and data,” the statement read.

If you’re one of those who were unfortunate enough to have clicked on the link, the company said it was best to change the passwords of concerned accounts and activate a two-factor authentication to further improve security.

“TMP is encouraging everyone to scrutinize every message received, most especially if they are promising prizes or free gifts for activities the recipient did not sign up for,” the company said. “It also reiterates that the company and its dealer network do not ask for any private information through unauthorized channels.”

Truly, there’s no rest for the wicked, huh?

—Daxim L. Lucas INQ

Email us at Biz [email protected]

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