PinoyBroker Philippine Real Estate Forum
General Category => Real Estate Laws and Current Events => Topic started by: Administrator on January 15, 2015, 01:50:07 PM
Media Releases - Bangko Sentral ng Pilipinas
FDI Net Inflows Surge by 103 Percent in October; Reach US$5.3 Billion in the First 10 Months of 2014
Net inflows of foreign direct investments totaled US$444 million in October 2014, increasing by 102.7 percent from its year-ago level of US$219 million as all FDI components registered increases.1,2 The marked increase in FDI net inflows during the month was largely attributable to the surge in net equity capital placements to US$213 million from US$73 million in the previous year. This developed as equity capital placements rose by 80.9 percent to US$217 million from US$120 million, while equity capital withdrawals declined by 91.5 percent to US$4 million from US$47 million. Equity capital investments during the period—which came mostly from the United States, Germany, Singapore, the United Kingdom and Japan—were channeled mainly to the financial and insurance; manufacturing; real estate; wholesale and retail trade; and administrative and support service sectors. In addition, net placements of foreign direct investors in debt instruments issued by local affiliates expanded by 74 percent to US$168 million from US$96 million. Reinvestment of earnings during the period increased by 28.1 percent to US$63 million.
As a result of these developments, cumulative FDI net inflows for the period January to October 2014 amounted to US$5.3 billion, higher by 64.1 percent than the US$3.2 billion level posted a year ago. The increase in FDI net inflows during the period was buoyed by favorable investor outlook on the Philippine economy on the back of sound macroeconomic fundamentals. Specifically, net placements in debt instruments expanded by 55.4 percent to US$3.3 billion from US$2.1 billion, accounting for about 61 percent of total FDI net inflows during the 10-month period. This came about as parent companies abroad continued to lend to their local subsidiaries/affiliates to fund existing operations and/or the expansion of their businesses in the country. Moreover, net inflows of equity capital grew by 88.9 percent to US$1.4 billion from US$716 million. The bulk of equity capital investments for the first ten months of 2014—coming largely from the United States, Hong Kong, Japan, Singapore and Taiwan—was channeled to the financial and insurance; manufacturing; real estate; wholesale and retail trade; and transportation and storage sectors. Meanwhile, reinvestment of earnings increased by 65.4 percent to US$713 million from US$431 million in the comparable period a year ago.
1 The BSP adopted the Balance of Payments, 6th edition (BPM6) compilation framework effective 22 March 2013 with the release of the full-year 2012 and revised 2011 BOP statistics. On 21 March 2014, the BSP released the BPM6-based series from 2005-2013. The major change in FDI compilation is the adoption of the asset and liability principle, where claims of non-resident direct investment enterprises from resident direct investors are now presented as reverse investment under net incurrence of liabilities/non-residents’ investments in the Philippines (previously presented in the Balance of Payments Manual, 5th edition (BPM5) as negative entry under assets/residents’ investments abroad). Conversely, claims of resident direct investment enterprises from foreign direct investors are now presented as reverse investment under net acquisition of financial assets/residents’ investments abroad (previously presented as negative entry under liabilities/non-residents’ investments in the Philippines).
2 BSP statistics on FDI covers actual investment inflows, which could be in the form of equity capital, reinvestment of earnings, and borrowings between affiliates. In contrast to investment data from other government sources, the BSP’s FDI data include investments where ownership by the foreign enterprise is at least 10 percent. Meanwhile, FDI data of Investment Promotion Agencies (IPAs) do not make use of the 10 percent threshold and include borrowings from foreign sources that are non-affiliates of the domestic company. Furthermore, the BSP’s FDI data are presented in net terms
(i.e., equity capital placements less withdrawals), while the IPAs’ FDI do not account for equity withdrawals.
MB Issues Macro-Prudential Measures for Banks' Real Estate Exposure
The Monetary Board (MB) approved a pre-emptive macro-prudential policy measure to ensure the banking industry’s continuous healthy exposure to real estate development.
The MB clarified that the new measure does not reflect any imminent vulnerability among banks with exposures to the real estate sector. Instead, the measure simply reinforces the prudential policy that banks must have sufficient capital to absorb any possible shock on its credit exposures.
Stress tests will be conducted under the new prudential guideline to determine whether the capital level of a bank is sufficient to absorb the credit risk to real estate.
Banks are expected to meet two specific thresholds under this revised framework. Universal, commercial (U/KBs) and thrift banks (TBs) must meet a Capital Adequacy Ratio of 10 percent of qualifying capital (QC) after adjusting for the stress test results.
In addition, U/KBs as well as their thrift bank subsidiaries will be required to maintain a level of Common Equity Tier 1 that is at least six percent of QC after factoring in the stress scenario. For stand-alone TBs, however, the relevant measure will be a Tier 1 ratio of six percent of QC.
Using stress tests as a prudential measure is in keeping with the tenets of the international standards set under the Basel Accord. These stress tests are also preferred over absolute limits because they do not prejudice the development of the real estate industry. Instead, banks can have greater exposures to real estate for as long as they manifest their increased ability to absorb these risks vis-à-vis their capital position.
A breach of the prudential limit requires the bank to explain formally to the Bangko Sentral ng Pilipinas (BSP) why the bank should not merit further remedial action. If the BSP deems the explanation as insufficient, the bank shall be instructed to submit, within 30 calendar days from date of notification, an action plan so that the bank can meet the stress test limit within a reasonable timeframe.
The MB is implementing the macro-prudential measure while cognizant of the social agenda of providing shelter as a basic need. It also recognizes the continuing growth of the real estate industry in line with national demographic factors. Nonetheless, the MB believes that this is an opportune time to introduce such measure so that banks will be appropriately guided by the policy direction.
This decision of the MB expands the macro-prudential toolkit used by the BSP in pursuing its prudential objective of fostering financial stability
BSP Releases Results of Expanded Real Estate Exposure Monitoring
The Monetary Board announced that the total real estate exposure of universal, commercial (U/KBs) and thrift banks (TBs) was Php 821.7 billion as of December 2012.
This figure represents the inaugural finding of the expanded real estate report that the Bangko Sentral ng Pilipinas (BSP) has initiated for bank exposures to the real estate sector. This new report is meant to get a comprehensive reading of banks’ exposure to the real estate sector without pre-qualifying the potential risk impact of these exposures.
BSP has been reporting the aggregate real estate loans (RELs) data series. In addition, BSP has been monitoring the 20 percent cap on RELs since 1997. The new report extends the previously released data series by including loans by developers of socialized and low-cost housing, loans to individuals, loans supported by non-risk collaterals or Home Guarantee Corporation guarantee as well as exposures by bank trust departments and thrift banks.
This expanded coverage of banks’ exposure towards the real estate sector is in line with the BSP’s pursuit of financial stability. In line with its constitutional mandate over money, credit, and banking, BSP is keen on monitoring credit conditions that support the heightened activity in property development.
Governor Amando M. Tetangco, Jr. pointed out that “it is important that we have a continuing appreciation of the quality of credit standards, specially at this juncture where market rates have declined against historical norms.”
“Taking this holistic view of the market is an effective way to ensure that we preserve and build upon the gains that we have already achieved thus far,” the Governor added.
The data from the survey suggests that the non-performing RELs ratio continues to be stable, reported at 3.7 percent as of end-December 2012.
Furthermore, semestral stress tests on banks have consistently showed the ability of bank balance sheets to withstand simulated across-the-board defaults in residential real estate exposures.
Based on the latest stress test results, the capital adequacy ratio of tested U/KBs and TBs will stand at 15.77 percent despite a 50 percent simulated default on residential real estate loans.
Further data refinements may still be introduced into the expanded report.
Real Estate Exposures of U/KBs and TBs at end-2012 (in billion pesos)
U/KBs + TBs
Investments in Securities
TLP net of IBL
Your information, I have to say, and then it turns out that it is true.
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