Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. eyes better access to the capital market to cater to the financial requirements of corporates.
Remolona made the statement as the 2023 Financial Stability Report (FSR) of the Financial Stability Coordination Council (FSCC) showed that companies are heavily dependent on banks for their financial requirements rather than tapping the bond market and the local stock exchange.
According to the latest FSR, outstanding corporate loans in June 2023 stood at PHP6.8 trillion, while corporate securities only amounted to PHP1.6 trillion for the same period.
It also noted that between September 2022 and September 2023, corporate loans jumped by PHP388.2 billion, while new corporate issuances increased by PHP17.9 billion.
“(W)e expect the demand for both liquidity and term funding to increase. The banking industry has enough space for this increased leverage, subject to regulatory limits. But the capital markets could take an increasing role,” the 2023 FSR noted.
Remolona said one way of boosting the capital markets is to diversify the corporate bond market.
“Right now it’s basically, triple-A, few double-A. That’s not the real corporate bond market if you ask me if it’s only accessible to some guys,” he said at the launch of the 2023 FSR at the BSP Headquarters on Tuesday.
The central bank chief also wished for increased participation in the local bourse, especially from foreign investors.
“We used to be so scared of portfolio investment because we saw it as hot money… not good for stability. But these days, that’s not how portfolio investment works. These days most portfolio investments come in—not to us but to other countries—in the form of passive investment, in the form of index funds, global exchange-traded funds,” he added.
Meanwhile, Remolona highlighted that the release of the FSR “tries to address the risks beneath the rosy scenarios.”
The FSR provides a view of the macroeconomy and international markets from a perspective of systemic risk, presenting headline numbers and analyzing how these might interact with each other.
“This particular FSR takes a very institutional level focus and makes an assessment of our capital markets in playing a greater role in the resilience of the Philippine economy,” the BSP chief said. (PNA)
