MANILA — In a bid to address the financial needs of corporates more effectively, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. is pushing for improved access to the capital market.

Remolona’s statement comes in light of the findings from the 2023 Financial Stability Report (FSR) by the Financial Stability Coordination Council (FSCC), which revealed a heavy reliance on banks among companies for financial support, rather than utilizing the bond market and local stock exchange.

According to the latest FSR, corporate loans outstanding as of June 2023 amounted to PHP6.8 trillion, while corporate securities totaled only PHP1.6 trillion for the same period. The report also indicated a significant increase in corporate loans between September 2022 and September 2023, rising by PHP388.2 billion, with new corporate issuances increasing by PHP17.9 billion.

“We anticipate a growing demand for liquidity and term funding. While the banking industry can accommodate this increased leverage within regulatory limits, there is potential for the capital markets to play a more significant role,” noted the 2023 FSR.

Remolona emphasized the need to diversify the corporate bond market, stating, “Currently, it’s predominantly triple-A rated, with few double-A issuances. This limited accessibility does not reflect a robust corporate bond market in my view.”

Addressing concerns about portfolio investment, Remolona remarked, “We have traditionally viewed portfolio investment as hot money, potentially destabilizing. However, nowadays, portfolio investments, particularly passive investments like index funds and global exchange-traded funds, are becoming more common.”

Furthermore, Remolona underscored the importance of the FSR in identifying underlying risks amidst favorable economic conditions. The report offers insights into the macroeconomy and international markets, focusing on systemic risk and analyzing how various factors may interact.

“This FSR provides an institutional-level assessment of our capital markets and their potential to enhance the resilience of the Philippine economy,” stated the BSP governor.

(el Amigo/MNM)