The Chinese are fond of wishing their friends well by saying “may you live in interesting times.” The banking industry is now at the crossroads due to the recent Bangladesh scandal and the coming elections.
It was as if it was written for the movies. It was the story that put Ocean’s 11 to shame, the story that told of millions of dollars being illegally rerouted from Bangladesh’s foreign exchange reserves into the country’s highly active casino scene. With the country’s fairly good image in the international scene, no one expected the Philippines to be the setting for such a crime and provoke universal indignation.
As soon as the story broke out, what followed were hours of different stories being told. Through mainstream and social media, everyone was soon aware of the name of a specific bank in the middle of the scandal. Their eyes were opened to the lax Philippine banking laws dating back to regime of the late President Ferdinand Marcos and the shady doings allowed in casinos. Filipinos suddenly took a closer look at the workings of personal banking and how an everyday transaction could actually affect the financial stability of the country and the world.
Through this scandal, Filipinos learned more about how remittances from overseas Filipino workers (OFWs) affected the Filipino peso and its ramifications in the whole economy.
Suddenly everyone became interested if this heist that shocked the entire world would impact on what is touted to be a good financial year for the country.
Just a few weeks ago, The Standard reported on the optimistic future of the banking industry in 2016. Now, its readers may be worrying if the scandal would result in a slide in peso value and other economic horrors.
A report by Reuters delved deep into the matter, and while Bangkok Sentral ng Pilipinas (BSP) Governor Amando Tetangco confidently told reporters that the financial system wasn’t immediately affected negatively from the moment the reports came out, he did not discount such a possibility.
And while it might be too early to see its effects, Tetangco admitted that this should spur an investigation in the legal loopholes that were instigated during the Marcos regime in the hopes of making the Philippines Asia’s Switzerland. This has then led to cases prodding on the law to avoid further problems in the future.
Tetangco, just like most decision makers in the country, naturally wished to solve this problem as quickly as possible, especially since the Philippines has significantly improved financially and this is something politicians would like to sustain.
The Philippines maintains a good standing, thanks to the remittances of OFWs, thus, fiscal authorities are working overtime to prevent the Bangladesh issue from affecting what Filipinos have long worked for: a taste of financial freedom.
The Philippines’ gross domestic product has grown by six percent annually and it is seen to expand even further in the coming year. The government’s poll bets are claiming credit for this as a part of their campaign publicity. Now, they have to work doubly hard to wash their hands of the Bangladesh scandal.
Elections and their Effect on the Economy
Local and national elections have always pumped prime the the economy mainly through increased spending during the campaign. This increased spending brings much business to government and private banks. As the the candidates intensify their campaign through the media, the Internet and sorties in different parts of the country, they create, at least temporarily, jobs and small businesses related to their campaign that (whether negatively or positively) affect the short-to-medium-term growth of the country.
Despite this, leadership change is a period of some instability. However, market confidence is highly connected with the government and in recent years, President Benigno Aquino has gained that confidence.
As the country nears the elections, more light will be shed on the platform of each candidate. This way there will be clarity about their stance and so forth.
Whoever the country decides to vote for will decide how to sustain the growth achieved by the Aquino government. Financial analysts are quick to say that Aquino has done the country good.
Aquino in his six year term was able to shrink the budget deficit and made tremendous progress in tackling corruption. The confidence invested in Aquino has helped propel the country into the growth that it is fully enjoying now.
2016 Banking Predicitions Before The Heist
Before the heist blew up, financial analysts believed that the Filipino economy will continue to grow despite the many challenges posted by the elections. The uncertainty will defintiely go away as investments from overseas continue to ring in and this will further solidify the growth of the Filipino market. Investments from foreign investors will further fuel the development of the country as well.
The Fitch Rating and Its Effect
Despite all that has happened, the Philippines continues to have a positive Fitch Rating which was awarded to the country at the end of last year. This proves that there will be continuous growth in the area.
The Fitch Rating is a positive push for the country especially since financial systems in the Asia and the Pacific or APAC are expecting a tough year ahead. The positive Fitch Rating makes a major difference in Asia because the Philippines was the only country awarded a positive rating. The Philippines was given this to due to a generally healthy profile of local lenders, sound operating environment, and the Philippines’ strong economic fundamentals.
More Institutions to Choose From
More and more banking institutions are going up everywhere. At the beginning of 2015, the BSP boasted a presence of 648 different banks, which built 9,700 branches, 15, 695 automated teller machines (ATM), 517 offices of microfinance institutions and 251 banks with e-banking facilities which includes online services and mobile banking.
This is to cater to the ever growing need of the country including a bigger audience who may have two more bank accounts per individual.
Another credit-ratings agency, Moody’s, once credited the success of the banking sector to the following factors: consistent robust economic growth despite the slowing global demand, moderate inflation, and an improved standard of the banking sector’s asset quality which led to the prevention of the overheating of domestic asset markets.
Wiser Filipino Spendings
Today as millenials, who comprise the bulk of the population, crowd the financial market, one is pleasantly surprised when they hear that millenials are actually responsible in their spending. More and more millenials are investing in their future. While some may tag them as the carefree generation, they are actually very smart about their spending.
They are more in tuned to think about the future and this is why they are open to investments. More and more millenials are also picking up financial advisor posts and this spilling over into the older generation. Since the older generation was not more careful in their investments, today’s technology is lessening that trend by presenting different options on investment.
Spearheaded by the millenial generation, today’s young people are more attuned to what they need to invest on in order to create a comfortable life in the future.
Today, financial institutions are taking better care of their customers as well by providing ways to take care of the money that Filipinos are enjoying these days.
Increasing wealth is everyone’s goal. Investment advice for the young often begins with what they would like to achieve in a few years. Investment has also become highly customized in nature and depending if the person is a risk taker or not. If the person is a risk taker, it’s imperative for them to invest in stocks and bonds that will help them in the future.
From here on, they are given several options that will help them gain returns in the future. Fund managers are the ones who are in charge of helping steer someone in the right investment solutions. Tody, it’s not just insurance options but investment options as well.
More and more financial institutions are becoming increasingly creative with the way they present their investment options. Diversification is also becoming an increasingly important factor for people who want to invest. Profits and return may be smaller but this allows people to have different gains from it as well.
Because of this more and more Filipinos are moving forward with a chance of a brighter life with better options. If all goes well despite the scandals and the elections, the Philippines is looking for yet again another bright, prosperous year ahead.
For now, we can only hope for a peaceful and permanent solution to problems like the Bangladesh heist.
Highlights of the National Baseline Survey on Financial Inclusion, 2015
- 25% of Filipino adults (those aged 15 years and above) have never saved, 32% used to save, and only 43 % presently have savings.
- Of those who save, only 33% keep it in banks; the rest keep their savings at home.
- About 47 % of adults have outstanding loans. The main source of borrowing is informal – from family, relatives, friends and informal lenders. The share of bank loans is only 4.4% of the total.
- Only 3.2 percent of adults have microinsurance coverage.
- Clients rated themselves as only “somewhat satisfied” with how issues were resolved in most financial service access points.
(From the Bangko Sentral ng Pilipinas website)