IFR Asia - August 18, 2018

People

&Markets

Philippines steps up bond reforms

"ANKERSûINûTHEû0HILIPPINESûAREûPREDICTINGûANû

uptick in bond issuance from local lenders

after the country’s central bank dropped a

rule requiring prior approval for debt sales.

Local DCM bankers reckon that banks,

which have generally eschewed bonds in

favour of deposits or raising fresh equity to

fund credit growth, will start tapping the

debt market soon.

“The new rules will essentially allow

BANKSûTHEûmEXIBILITYûTOûTAPûTHEûCAPITALû

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Capital.

"ANKSûHAVEûSOûFARûYETûTOûPUTûANûEXACTû

timeframe on when they will start issuing

bonds. Jonathan Ravela, market strategist

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studying the regulations and had not come

to a decision on any plans to issue bonds.

h"ONDSûCANûPROVIDEûAûmEXIBLEûALTERNATIVEû

to sourcing funds from public, besides

traditional deposits,” he said.

MARKET DEVELOPMENT

BANGKO SENTRAL NG PILIPINAS published a

circular on August 9 in which it said

it would it would allow banks to issue

bonds without prior authorisation, subject

to certain criteria around corporate

governance, risk management, capital

adequacy and other such areas.

In order to be eligible to issue bonds,

banks would need to have a capital

adequacy, asset quality, management,

earnings and liquidity rating of three or

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OFûONEûTOûlVE

They should also not have any

governance or risk management issues,

BEûINûCOMPLIANCEûWITHûRELEVANTû"30ûRULESû

ANDûSUBMITûCERTAINûCERTIlCATIONSûINCLUDINGû

supporting documents to show approval

from the board for any issuance and that

the plan is part of an overall funding

strategy.

)NûADDITIONûBANKSûWILLûNEEDûTOûCONlRMû

in writing that they intend for the bonds

to be traded according to SEC rules. This

will help promote price discovery and

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"30ûSAIDûISSUINGûBANKSûANDûTHEIRûAFlLIATESû

would be prohibited from underwriting

their own issues.

The new rules are part of efforts to

develop the local debt market, which is still

small even compared with the country’s

regional peers. According to the central

bank’s 2017 annual report, local currency

bonds in the Philippines account for just

28% of the country’s GDP compared with

Thailand and Malaysia, where it is more

than 50%.

"30ûALSOûSAIDûTHATûFOSTERINGûGROWTHûINûTHEû

local debt market would help the country

reach its infrastructure spending target of

53BNûBYû

LIQUID MARKET

"ANKSûINûTHEû0HILIPPINESûHAVEûGENERALLYû

tended to rely on customer deposits

for funding.

Simon Chen, vice president and senior

ANALYSTûINûTHEûlNANCIALûINSTITUTIONSûGROUPû

at Moody’s, said that long-term negotiable

CERTIlCATESûOFûDEPOSITSûHAVEûBEENûTHEû

preferred route for banks to raise long-term

funding in recent years “due to the broad

demand of higher yielding deposit-like

products among retail investors”.

According to data from Philippine

Dealing & Exchange Corp, banks have

issued LTNCDs totalling Ps36.5bn

53M    ûSINCEûTHEûBEGINNINGûOFûTHEûYEARû

whereas the total issuance volume for

bonds is nil.

During the past few months, banks

have begun raising fresh capital to keep

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Philippine Islands raised Ps50bn from a

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and JP Morgan.

According to Euben Paracuelles,

economist at Nomura, the central bank is

turning its attention to the debt market as

part of broader efforts to ensure that banks

are able to support credit growth, which

has been hovering around the high double

digits in recent years.

h"ANKSûNEEDûTOûRAISEûFUNDSûBECAUSEûTHEIRû

balance sheets are growing,” he said.

Market observers reckon there will be

ample demand among investors following

THEûBPûHIKEûINûINTERESTûRATESûTOûû

earlier this month and given high levels

of liquidity. The central bank has cut

the reserve requirement for banks twice

this year and has said it will lower the

rate to single digits eventually, boosting

liquidity.

“Given the increase in rates, investors

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#APITALSû"ONOAN

KRISHNA MERCHANT

Who’s moving where...

„ DEUTSCHE BANK has

hired Melody Ngan as

managing director

in its equity capital

markets syndicate

team in Hong Kong.

Ngan was head

of ECM at CEB

International. She

joined the Chinese

investment bank in

February 2017.

Prior to that, Ngan

worked at Bank of

America Merrill Lynch

for 15 years, with

her last title being

Asia ECM syndicate

director.

She will report to

Simon Galvin, head of

Asia ECM syndication,

in her new job and

starts in September.

„ BOCOM

INTERNATIONAL, the

investment banking

unit of Bank of

Communications, has

hired Kenneth Chan as

head of equity capital

markets, according to

people familiar with

the situation.

Chan, who was

an ECM executive

director at China

Merchants Securities,

started last Monday

at BoCom as

managing director.

Chan had worked

at China Merchants

Securities for more

than three years.

BoCom’s ex-head of

ECM, Esther Wong,

joined Chinese

artificial intelligence

startup SenseTime

as managing director

earlier this year.

„ Gaurav Bhagat ,

head of capital

markets within

STANDARD CHARTERED ’s

financial institutions

group in South Asia,

has resigned after a

stint of more than 12

years.

Bhagat is on

gardening leave and

will be joining MUFG

as head of financial

institutions coverage

around mid-October,

according to a source.

He will be responsible

for cross-selling all

financial products,

including debt capital

markets and loan

syndication.

Before Standard

Chartered, Bhagat

worked at ICICI Bank

and SBI Capital

Markets.

According to data from

Philippine Dealing & Exchange

Corp, banks have issued

LTNCDs totalling Ps36.5bn

since the beginning of the year,

whereas the total issuance

volume for bonds is nil.