By Ducky Paredes
THE Hongkong and Shanghai Banking Corp. (HSBC) said the Philippine banking system remains one of the strongest in the 10-member Asean with credit growth seen strengthenings in the next few years.
HSBC economist Frederic Neumann said Philippine banks possess excess liquidity with robust consumer demand growth while property prices continue to pick up steam.
“The Philippines is in a bucket of its own,” Neumann said in a recent report.
Liquid assets as a share of deposits have also increased, which implies that banks also have ample buffers – not to mention the robust external fundamentals on the sovereign side.
The Bangko Sentral ng Pilipinas (BSP) is currently the only central bank in Asia expected to hike rates next year. It has also implemented some macro-prudential measures to prevent asset bubbles.
“We don’t really worry about bank-related liquidity in the Philippines as banks are in better shape from a loan-to-deposit ratio (LDR) perspective,” the HSBC economist said.
The country is also in the process of further opening up the financial sector to foreign banks.
Last month, the Philippine government passed a law allowing foreign banks to operate in the country and to acquire up to 100 percent of a local lender from the previous ownership ceiling of 60 percent.
This move is in line with increased services integration with Asean under the Asean Economic Community (AEC), which is expected to come into force in end-2015.
Neumann said the increased foreign financial presence is quite timely, and provides an additional conduit for Japanese bank lending to flow into the Philippines to increase liquidity.
The global financial institution pointed out that LDRs have increased sharply in recent years in most Asean markets, and that the high-level of liquidity are likewise becoming tighter.
“These raise two immediate challenges,” Neumann said.
It means that high credit growth could lead to slow overall demand, and that it could render local financial systems more vulnerable to volatility in global markets and a sudden rise in funding costs.
In most of the Asean, deposit growth has slowed down thus constraining loan growth.
A low LDR generally signifies that a bank has excess deposits to deploy, and because deposits are relatively cheap and stable funding source, loan growth is easier to sustain.
When LDRs rise above 100, a bank can turn to wholesale or interbank markets to top up its funds. But this is risky and drives up the cost of funding. As a result, bank lending slows or at least becomes more sensitive to potential shocks.
Thailand has the highest LDR in the Asean while Singapore has a robust wholesale market as well as deep non-bank corporate and interbank lending channels.
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The headline read: “Lagmay noted PAGASA never made a mistake in the past two to three years, specifically during the onslaught of major storms from Pablo to Glenda.”
We can only hope that Dr. Mahar Lagmay was quoted out of context. PAGASA scientists just did their best work the Nation has ever seen in preparation for Ruby, we actually saw disaster risk reduction happening. People had already learned the lessons of Yolanda and cooperated with authorities. PAGASA storm surge warnings and detailed maps and ‘spot on’ forecasts helped. Kudos are well deserved.
Is this hyping by DOST PAGASA really necessary? Who actually believes a scientist who says - we have had perfect record in understanding and forecasting extreme events?
Did the Typhoon victims (>10,000) who perished during past years and the billions in relief and rehabilitation spent happened largely because of the incompetence of Local Government officials.
Were all our radars operating and well calibrated during these last three years, all their available satellite data resources used, the best computer models and best scientists involved in predicting Yolanda’s storms surge and incursion, the rainfall measured and understood well before Sendong, and LGUs notified way ahead of time. Many of us know this simply wasn’t so.
Secretary Mario Montejo owned up to major shortcomings, when he apologized for failing to warn people before Yolanda.
I quote from a news report: “The Department of Science and Technology (DOST) admitted on Tuesday that the agencies had shortcomings in terms of warning the public of the storm surges during the onslaught of super typhoon Yolanda as confirmed by DOST Secretary Mario Montejo.” “According to Secretary Montejo the state weather bureau PAGASA and the Project Nationwide Operational Assessment of Hazards (NOAH) only managed to warn the people of the height of storm surges in particular areas, but were not able to give more details about the threats they pose to coastal areas.”
Amid the confusion brought by different forecasts ahead of the onslaught of typhoon Ruby, disaster scientist and Project Noah executive director Mahar Lagmay praised the country’s own Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) for being spot on in its track of the storm.
In separate interviews with ANC and dzMM, Lagmay said: “Let us not ruin the institution. Scientists are also human, they can make mistakes. If PAGASA loses credibility, they will not be followed by the public. Some groups will make use of weather forecasting for purposes of profit.”
He added the reports from PAGASA are being used by different government agencies to determine and assess their next steps in connection with evacuations, prepositioning of assets, and others. PAGASA’s forecast track was different than that of the US-based Joint Typhoon Warning Center and the Japan Meteorological Agency, but the state weather bureau correctly predicted where it will hit and where it will move.
Lagmay noted PAGASA never made a mistake in the past two to three years, specifically during the onslaught of major storms from Pablo to Glenda.
Lagmay said the weather bureau saw Ruby making its landfall in Borongan and then later in Dolores in Eastern Samar. “Later, while it was barreling towards Central Philippines, it was seen it will somehow weaken,” he said.
As of 11 a.m. on Sunday morning, Ruby was already packing maximum sustained winds of up to 140 kilometers per hour from 160 kph just a few hours earlier.
Lagmay explained that all models are being shown to demonstrate that the forecasts of different agencies are being considered.
Nonetheless,” giving a severe weather forecast is just about the weather. We want to translate that into useful disaster information,” he said.
He also pointed out that the accuracy of weather forecasts depends on the data inputted to come up with a simulation. “It depends of the quality of data you put into the model” he said. “Example, PAGASA has an assimilation of Doppler data, sensor data, pressure data from the ground. The weather bureau has that, which other agencies don’t.”
He stressed that it is important that there is a central system being followed. “The official statement is from PAGASA. Why? Because everyone will depend on that: the NDRRMC, DILG, DSWD, etc..,” he said. ‘We always learn something new.’
Lagmay also noted that PAGASA correctly predicted the storm surges during the barreling of super typhoon Yolanda in November last year.
“Although the storm surge height and locations were predicted, the people in the communities did not have the appropriate maps to refer to,” he said, adding that today the country has almost complete hazard maps from landslides to floods to storm surges.
For Lagmay, Yolanda offered many hard lessons. “In natural hazards, each time a disaster unfolds, there is always something new that we learn,” he said.
But he quickly said it will be a serious mistake if we say we are now “better than nature.” “The hazards will never stop. It will still be here, from this time, next year, or 10,000 years from now… The best way is to understand the hazards well and find solutions,” Lagmay says.
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What we do with what we have learned is the best judge of how smart we are as a people. Playing the blame game is the dumbest way to go. For now, only the foreign media who are around but have no deaths or destruction to report are disappointed.
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Readers who missed a column can access www.duckyparedes.com/blogs. This is updated daily. Your reactions are welcome at duckyparedes@gmail.com or you can send me a message through Twitter @diretsahan.
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