• Banking gains overshadowed by greed and stupidity

    Ben D. Kritz

    Ben D. Kritz

    IT is unfortunate that two of the biggest and most positive pieces of news in years for the Philippine banking sector have been completely overshadowed by a story more representative of the reputation more commonly associated with the Philippines, one that at least some in this country are trying hard to undo.

    Over the weekend, the Bangko Sentral ng Pilipinas (BSP) and Bank Negara Malaysia (BNM) signed an agreement, believed to be the first such agreement or at least the first major one under the Asean Banking Integration Framework (ABIF) that will allow the entry of up to three major banks from each country into the other’s banking market.

    And on Tuesday, executives from Japan’s largest bank, Bank of Tokyo-Mitsubishi UFJ Ltd. (BTMU), visited Manila to discuss their plans in light of BTMU’s recent 20 percent buy-in of Security Bank, a deal worth nearly P37 billion.

    Unfortunately, these two developments, which have nothing but good implications for the local banking sector and the economy as a whole, were pushed aside by the ongoing $100-million RCBC money-laundering scandal, which took a sadly predictable turn for the farcical on Tuesday with the conduct of day-long Senate hearings on the matter.

    The hearing clearly had no purpose but to serve as a promotional exercise for the Senate, particularly Senators Recto, Guingona and Osmeña, because it was obvious from its opening moments that no substantial knowledge about the internationally embarrassing scam would emerge from it. The principal players from RCBC, CEO Lorenzo Tan and branch manager Maia Deguito, refused to answer many questions, citing bank secrecy laws, with neither they nor the camera-conscious senators realizing or admitting that invoking bank secrecy on questions involving accounts that have already been determined to be fraudulent actually doesn’t make any sense.

    Why the Senate is even permitted to question personalities in a live criminal investigation is an unhelpful quirk of politics that the country should reflect deeply upon. Even the boilerplate excuse “in aid of legislation” is irrational, especially in this case; with the investigation hardly begun, the senators, even if they were serious, couldn’t possibly know yet exactly what they’re supposed to be legislating, and any legislation that might result from the present scandal wouldn’t be applicable to it anyway.

    As far as what may have happened in the RCBC scandal, a couple of banking executives I spoke to said, with a visible effort to maintain circumspection, that in their banks and according to banking regulations in general, it would simply not be possible to carry out a transaction of that magnitude without the cooperation of more than one department and the authorization of, as one of them put it, “managers at a fairly high level.” What really transpired at RCBC, of course, will only be revealed through a proper investigation, one that we can only hope at this point hasn’t been compromised by the Senate’s grandstanding.

    And we can only hope that the large-scale greed and stupidity being displayed in the RCBC scandal does not undermine the evident interest foreign banking investors are showing in our otherwise creditable banking sector.

    The Philippines-Malaysia agreement under the ABIF is a welcome sign of progress toward the grand scheme of Asean economic integration, which is proceeding more slowly than most hoped it would.

    Under the pact, up to three banks—ones that are deemed large and stable enough to manage it successfully—will be allowed to operate subsidiaries in the other country. For the Philippines, this raises the potential for foreign capital inflow, and gives local banking customers access to the Malaysian market, which can, at least indirectly, support efforts to expand the regional export market, particularly for those companies smaller than the conglomerates who would extract the most from the opportunity.

    BTMU’s foray into the Philippines may pay more immediate dividends; based on the comments of BTMU executives on Tuesday, it certainly will if they’re given any say on the matter. While specific details were not divulged, BTMU stressed that it is angling to establish business in two key areas: Financing for Japanese investors in various sectors in the Philippines, and financing for projects, whether they involve Japanese participants or not, under the country’s public-private partnership program.

    It should not need to be said that the impression of the local banking sector made on the Filipino public and foreign interests should be based on progress of the sort exemplified by the ABIF and BTMU deals, and not the sort of sleaze and ineptitude revealed by the RCBC scandal. Unfortunately, despite the best efforts of the BSP and most of the banking industry, the Philippines obviously has a long way to go before greed and stupidity are not viewed as some sort of a norm.



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