SPROUT SOLUTIONS Philippines, Inc., a human resource and payroll management systems provider, announced on Monday its $6-million Series A investment for expansion across the country.
Patrick Gentry, Sprout Solutions founder and chief executive officer, announced on Monday that the company has closed its Series A round and raised around $6 million of capital from foreign investors, including the US investment firm Point72 Ventures, Dymon Asia, Next Billion Ventures (NBV), and Endeavor Catalyst.
“We are going to be expanding through provinces. We are now spreading a lot more nationwide,” he said during a media roundtable at the Bonifacio Global City.
Mr. Gentry said the company’s existing investors, including local firm Kickstart Ventures and Singapore-based firms Beenext and Wavemaker Partners, also took part after participating in the company’s 2017 seed round that raised $1.6 million.
With the fresh funds, Mr. Gentry said Sprout Solutions is targeting to put up offices in areas outside Metro Manila next year, including Davao City and Clark in Pampanga.
He said the company already has at least 300 client-companies nationwide.
“We are serving larger and larger companies here in the Philippines. Actually today, we have a nationwide presence already. Like we have a lot of clients in Davao, Cebu, Clark, Baguio, Palawan, but we don’t have offices in these places,” he added.
In a press release, he noted that the perception that “the Philippines is a highly demanding investment environment has kept it off the radar of traditional Western investors.”
“Growing a business in the Philippines from scratch is nothing like in Silicon Valley. The trust barrier here is so high, so you really have to focus on overcoming that obstacle before you start to see any success,” Mr. Gentry explained.
“This means you need to have solid business fundamentals and solid revenue streams, but more than that, you have to do the right thing and take care of people before you can establish that trust,” he added. — Arjay L. Balinbin
THE LIGHT Rail Transit Authority (LRTA) on Monday announced that it has started working on the extension of the LRT-2 System to Tutuban, Divisoria, and Pier 4. “Mas magiging madali na ang biyahe ng mga gustong pumunta para mamili sa Tutuban at Divisoria, o mga sasakay sa barko sa Pier 4 ng North Harbor (Travel will soon be easier for those who wish to go shopping at Tutuban and Divisoria, or those who will take boats at the North Harbor),” LRTA Administrator Reynaldo I. Berroya said in a statement. Once the project is completed, LRTA said travel time from Recto station to Pier 4 will only take five minutes while the journey from Masinag station to Pier 4 will not exceed an hour. The government targets to finish by 2023 the P10.1-billion, five-kilometer West Extension Project, which is part of President Rodrigo R. Duterte’s Build, Build, Build program. “Currently, the LRT-2 System which traverses the East-West routes with terminal stations at Santolan in Pasig and Recto in Manila, moves about 240,000 passengers daily. Upon completion, this number is projected to add 16,000 more passengers each day,” LRTA said. Transportation Secretary Arthur P. Tugade said last week that he is open to proposals to privatize the LRT-2, which had to be partially shut down after a fire damaged the rail line’s power system. The LRTA has estimated that at least P430 million is needed to fix the damage. — Arjay L. Balinbin
A FISHERFOLK group wants more transparency in the government’s Manila Bay rehabilitation program as more incidents of fishkill are recorded in bodies of water connected to the bay.
“It’s not enough that BFAR (Bureau of Fisheries and Aquatic Resources) and DENR (Department of Environment and Natural Resources) would only explain scientifically the causes of the fishkill. We are already aware of that and we believe that this is not a natural phenomenon,” Pambansang Lakas ng Kilusang Mamamalakaya ng Pilipinas (PAMALAKAYA) said in a statement on Monday.
“What we want to hear from them is who was the responsible, what are the measures, and what concrete actions can the affected fisherfolk expect from the government to continue their wheels of production,” the group said.
BFAR said on Monday that the reported shellfish mortality in Bacoor and Sangley Point in Cavite was caused by lower level of salinity from 19 to 25 part per thousand (ppt) versus the required level at 27 to 35 ppt, triggered by heavy rainfall in the area.
Low level of dissolved oxygen and high concentrations of ammonia and phosphates were also observed in the water. High levels of such chemicals is harmful to marine life.
PAMALAKAYA reported that coastal towns of Cavite were also affected by water pollution, as dead mussels and oysters were collected in a mussel farm in Bacoor City.
Fish kill was also reported in Las Piñas City and Parañaque City on Oct. 11, which was caused by low levels of dissolved oxygen compared with the standard 5.0 part per million (ppm), and high levels of ammonia and phosphates, versus normal levels of 0.05 ppm and 0.5 ppm, respectively.
Loss was estimated to be at one to two tons of various fish species. — Vincent Mariel P. Galang
THE ILOILO City government will include bicycle lanes and other related infrastructure in its ongoing review and updating of its Comprehensive Land Use Plan (CLUP).
“The bike lanes and biking will become part of our comprehensive land use plan so that whatever infrastructure needed to make it easier for bikers to go around the city, we will be able to include it in our plan,” Mayor Jerry P. Treñas said last week after receiving the results of the “Think Bike Workshop” organized by the Dutch Cycling Embassy.
Representatives of the Dutch Cycling Embassy, together with Dutch Ambassador to the Philippines Saskia Elisabeth de Lang, presented to the mayor last October 9 the output from the workshop, which was participated in by members of the tourism and planning offices of the local government, the transport sector, and cycling civic society organizations.
The Dutch Cycling Embassy is a public-private partnership of The Netherlands government and private consultants on urban planning and cycling in Asia.
Mr. Treñas acknowledged that bicycles, as a form of transportation, can help decongest the city and improve its mobility.
“We have a growing population on biking, most of them do it for recreation. Biking for transportation can be a tool to decongest the city,” he said.
Ms. De Lang, for her part, said with some bike lanes and a growing community of enthusiasts already present in the city, it is only a matter of making biking more accessible and safe for everybody in terms of infrastructure.
“It is already in the tradition, now it’s about making it accessible for everybody in terms of infrastructures. Biking should be safe, it should easy to take a bike when going to work, shopping, or biking along the river,” she said.
“I am pleased that the mayor sees the future and he knows that this will develop more economic growth and more investments. Thinking about the future and the zoning and land use planning in the city, I am pleased to hear that biking can be fitted in those future plans,” she added.
LOCAL OFFICIALS, together with representatives of the Department of Transportation (DOTr) and the Civil Aviation Authority of the Philippines (CAAP), have decided to expand the development plan for the airport in Mati City, Davao Oriental to include a runway for bigger aircraft. In a meeting last week, the parties also agreed to push through with construction work using the approved P200 million rehabilitation fund for this year, according to a statement from the provincial government. The initial plan was to rehabilitate the airport and develop its system for Class 3C operations, which would allow for turbo-propelled aircraft operations. With the new plan, the government will have to acquire another 27 hectares in addition to the current 34 hectares that is enough for the terminal building and the shorter runway. The property owners, the Rabat and Rocamora families, have reportedly agreed to support the project. Davao Oriental 2nd District Rep. Joel Mayo Z. Almario stressed during the meeting that there is a need to immediately look into how to fast-track the project considering that there is only about two months before the fund is reverted to the National Treasury. Gov. Nelson L. Dayanghirang said the operations of the airport is necessary to open up the province to more tourists. “We have a lot of destinations to offer in terms of tourism which can be maximized if we could offer our tourists an alternative and inviting means to reach us,” said Mr. Dayanghirang. — Carmelito Q. Francisco
DAVAO CITY — The Pilipino Banana Growers and Exporters Association, Inc. (PBGEA) has condemned the action of the Davao del Norte provincial government to clear the roads leading to banana plantations, which would have led to the destruction of biosecurity facilities.
In a press release Monday, PBGEA said the provincial government’s attempt last week to supposedly clear the entry leading to the farm of Tagum Agricultural Development Co. (Tadeco), under a national program to clear roads and sidewalks from obstruction, threatened not just the farm of the Floirendo-owned company but also the entire industry.
PBGEA, through its chair, Alberto F. Bacani, said biosecurity facilities must not be considered a traffic obstruction.
“These should be seen as a protective measure which helps the community in its income generation,” said Mr. Bacani, adding that the removal of these facilities would mean “you destroy the people’s source of income.”
The PBGEA statement added that in areas where these facilities are absent, the dreaded Panama disease has thrived and resulted in the wiping out of about 2,400 hectares of banana plantations in the province.
This has also resulted in the shutting down of about 300 packing houses, it added.
Data from the Philippine Statistics Authority show $1.38 billion worth of fresh bananas were exported last year, seventh among the county’s top 10 commodities.
PBGEA members account for about 50% of the total area planted to Cavendish, the export variety.
PBGEA Executive Director Stephen A. Antig said instead of exposing the industry to possible dangers, local governments should help protect one of the biggest contributors to the local economy.
“Their constituents are largely dependent on the banana industry for their livelihood. They should help the banana growers, and not interfere in their operations,” Mr. Antig said.
Last week, Gov. Edwin I. Jubahib ordered the road-clearing operation but was halted through the intercession of Mindanao Development Authority Chair Emmanuel F. Piñol and a temporary restraining order from a Regional Trial Court.
The provincial government wanted to remove the entry barriers that guide vehicles to tire dips and pedestrians to foot baths, which are intended to prevent the potential spread of diseases in the farm.
The Provincial Information, Communication, Knowledge and Management Office has yet to reply to BusinessWorld’s request for comment. — Carmelito Q. Francisco
The Philippine insurance industry remains bright and robust, exhibiting positive growth in recent years despite some internal and external challenges. In fact, in 2018, the local insurance sector marked another banner year after posting new record highs in terms of premium, assets, net worth, and net income. Preliminary data based on unaudited reports submitted by all industry players to the Insurance Commission (IC) showed that the industry’s assets reached an all-time high of P1.58 trillion as of end of 2018, up 1.28% from the P1.56 trillion recorded as of end 2017.
The industry also posted the highest amount of premiums collected for the recent years. The industry’s total premium income grew 11.67% to P290.15 billion in 2018 from P259.82 billion posted a year ago.
In terms of net worth, the local insurance industry likewise posted a record-high net worth amounting to P337.37 billion in 2018, an increase of P17.07 billion from P320.3 billion a year ago. The industry’s total net income also rose to a record high of P37.43 billion from P36.39 billion, which translates to a 3% growth.
For the first half of 2019, however, the industry experienced a slight slowdown in terms of premium income, based on the unaudited quarterly reports submitted by life and non-life insurance firms and mutual benefit associations (MBA) to IC. The latest report released by the regulator on Oct. 10 showed that the industry’s overall premium income dropped 2.64% to P141.91 billion in the first six months of the year from P145.76 billion posted in the same period last year.
“The decrease in the total premium of the insurance industry can be attributed to the decrease in the uptake of single premium variable products due to global market uncertainty and economic slowdown,” Insurance Commissioner Dennis B. Funa was quoted as saying in a statement.
“Despite the year-on-year increase in the first year and renewal premiums in variable life products of 11.67% and 32.04%, respectively, the decline in the premium from the sale of variable life insurance products was caused by the significant decrease of single premium of 52.5% from P43.24 billion last year to P20.54 billion this year,” he added.
Meanwhile, premiums collected from traditional life insurance products increased by 12.55% to P31.17 billion as of end of second quarter of this year from P27.69 billion during the same period in 2018.
“A remarkable increase of 94.97% should also be noted in single premium policies of traditional life insurance from P1.1 billion in Q2 2018 to P2.2 billion of the same quarter in 2019,” Mr. Funa said.
The non-life insurance sector’s net premiums, on the other hand, grew by 12.98% year-on-year to P27.61 billion from P24.44 billion in the previous year. Consistent with the trend in the past reporting periods, the motor car insurance business contributed majority of the total net premiums at 49.47%.
Similarly, the MBA sector’s premium income grew 13.54% to P5.88 billion as of end of second quarter this year from P5.18 billion posted in the same period a year ago.
Overall, the total assets of the local insurance industry in the first six months of 2019 rose by 11.79% to P1.72 trillion from P1.54 trillion as of end-June last year.
“As of end of the first half of this year, the three sectors of the insurance industry registered positive growth in terms of assets. A significant portion of the industry’s assets or 88.37% (P1.52 trillion) were held in income generating investment,” Mr. Funa said.
Meanwhile, early this year, IC also released the ranking of top insurance companies in the country for 2018 in terms of key insurance statistics.
Among the life insurance companies in the country, Sun Life of Canada (Philippines), Inc. emerged on top and has retained its market leadership in terms of premium income collected at P37.39 billion. In terms of new business annual premium equivalent, Sun Life also topped the other life insurance companies with P8.22 billion.
Based on net income, on the other hand, Philippine American Life & General lnsurance Co., (Philam Life) took the top spot with P9.8 billion. It also topped the sector in terms of assets and net worth, amounting to P246.75 billion and P78.87, respectively.
For the ranking of non-life insurance companies in terms of net premiums written for 2018, Prudential Guarantee & Assurance, lnc. remained on top after recording the highest premium income of P5.18 billion.
In terms of gross premiums written and assets, Malayan Insurance Company, lnc., ranked first with P10.16 billion and P34.28 billion, respectively.
Based on net worth, Pioneer lnsurance & Surety Corporation has retained its market leadership with P15.39 billion. The BPI/MS lnsurance Corporation, on the other hand, recorded the highest net income with P453.83 million.
According to IC, existing insurance companies are required to increase their respective net worth to P900 million by end of 2019 from the existing minimum of P550 million. This is the penultimate mandatory increase in minimum net worth requirement as required under the lnsurance Code, as amended by Republic Act No. 10607. By end of 2022, firms are required to have a net worth of at least P1.3 billion. — Mark Louis F. Ferrolino
Millennials, people 22-38 years old, are the single force disrupting insurance, according to IBM. “They don’t buy their father’s insurance and they don’t shop for it the way their parents do,” read an article on its web site. “Traditional insurance products just don’t match millennial lifestyles. And, almost no millennial wants to chat about his personal insurance needs with some guy who could be his father (or grandfather). Instead, millennials prefer the convenience and relative anonymity of shopping online for products that match their way of life.”
The millennial market has been posing a challenge in the insurance industry. In fact, a 2015 Gallup poll found millennials to be least engaged with insurers.
For insurers to meet the millennial market, it is necessary for them to fully understand how they think and behave and thereafter set a strategy that will reach and engage them.
In an interview with Insurance Business Asia magazine published on its web site, Nick Chadwick, a former senior researcher at market research cloud Fuel Cycle, observed that millennials “want to be engaged using multiple methods, including social media, apps, emails, online communities, or any other method available to the insurer.” In light of this, he suggested that insurers should set up direct channels of communication such as mobile apps or online web sites as well as invest in several non-traditional areas such as research and development and customer intelligence.
“[G]iving a voice to your consumers is the best way to ensure that you are meeting their expectations and needs on a consistent basis,” added Mr. Chadwick.
These things, along with more significant developments, have been done by insurance companies in addressing the challenge of engaging the millennial market.
Locally, for instance, Allianz PNB Life Insurance, Inc. in 2018 launched AZpire Growth, a millennial-tailored insurance product that acts both as protection and an investment vehicle. Philam Life, meanwhile, finds millennials to be one of its markets for its AIA Critical Protect 100. Manulife Philippines, on its part, tapped a celebrity very known to the millennial market as its endorser to attract and encourage millennials to start investing.
Overseas, an insurance start-up based in New York, USA called Lemonade has been popularly tagged as a “millennial-friendly” provider.
“Using artificial intelligence, a mobile app and other tech-centric methods, Lemonade founders Daniel Schreiber and Shai Wininger are turning the centuries-old business of property insurance into a Millennial-friendly consumer product,” reported Forbes magazine on its web site last May.
With its renters insurance covering personal property, personal liability, loss of use, and medical payments, Lemonade claims “to process claims in just three seconds” through its AI software. Its user-friendly interface on its web site and mobile app adds another edge to the product.
“It didn’t feel like we were taking the terrifyingly adult leap of insuring our belongings in case of an emergency,” read a review of Lemonade on Business Insider. It likened getting insurance on Lemonade to ordering dinner on a food delivery app, “except instead of getting chicken and broccoli, we get reimbursed if a leak in our apartment damages our couch.” — Adrian Paul B. Conoza
When his father died, the 13-year-old John L. Gokongwei, Jr. was left with the massive responsibility of supporting his family. Starting from selling candles, soap, and thread in Cebu’s bustling market, he slowly and steadily began his business adhering to a philosophy of responding to customers’ needs, making products accessible, maximizing resources, and seizing opportunities that came along. Success came, if not swiftly, then eventually.
Now, Mr. Gokongwei is the founder and chairman emeritus of JG Summit, one of the largest and most diversified companies in the Philippines, and he has interests in industries such as real estate, airline, retail, petrochemical, and banking.
He had made a lasting mark on Philippine business. Now he and his family are putting their fortune towards creating a lasting legacy.
Bringing sustainability to the next level
Taking JG Summit to a new frontier of sustainability is President and CEO Lance Y. Gokongwei — BW File Photo
His son, Lance Y. Gokongwei, in particular, is committed towards this cause, with the formal integration of sustainability at JG Summit being a key priority since he took over as president and chief executive officer (CEO) of the company in May 2018.
One milestone in JG Summit’s sustainability journey is the CEO Sustainability Summit, a conglomerate-wide alignment, where all the CEOs of the conglomerate’s strategic business units shared how their frameworks, best practices, and future initiatives toward enhanced sustainability are rooted in their business strategy.
During the summit, Edgar O. Chua, chairman of the Philippine Business for Environment and former country chairman of Shell Group of Companies in the Philippines, highlighted how sustainability has evolved to socially conscious, “green” or ethical investment. From its early forms as philanthropy and corporate social responsibility, Mr. Chua said that “Sustainability has now evolved to social investment, an investment strategy which seeks to consider both financial return and social, environmental good to bring about positive social change.”
The CEO Sustainability Summit was also an opportunity for the JG Summit Strategic Business Unit (SBU) CEOs to explore potential synergies within the conglomerate that address issues like waste management and reduction, as well as water and energy efficiency. With its scale, diversity, and strong ecosystem, JG Summit hopes to utilize and build on its expertise in different areas of business to deliver long-term, positive impact on a wider and more inclusive scale.
Meanwhile, in the transportation scene, Cebu Pacific’s (CEB) investment in game-changing “ecoplanes” that can fly passengers farther and faster at less fuel burn manifests the airline’s commitment to reduce its carbon footprint. Its multi-awarded tourism campaign “Juan Effect” is a multi-sectoral advocacy whose goal is to influence tourists, local business owners, and LGUs to make a difference by changing at least one daily habit to mitigate the negative impact of tourism on popular tourist spots.Supporting this is CEB’s implementation of environment-friendly processes and investments in their operations.
At URC’s Sugar & Renewables and Agro-Industrial Divisions, over dependence on fossil fuel-based energy has been considerably reduced with the help of biomass and biogas technologies that use waste and by-products generated by the plants. Generating energy from plant and animal waste has resulted in lower electric consumption while protecting the environment.
For Robinsons Land Corporation, integrating business and sustainability strategies entail fostering responsible growth, reaching underserved markets, and reshaping communities. Robinsons Starmills in Pampanga boasts of having the world’s largest rooftop solar panel. Total investment in solar panels for the various Robinsons malls all over the country will reach close to P1.7 billion by the end of 2019.
JG Summit Petrochemical Group’s flagship environmental programs in Batangas City manifest that environmental responsibility is a priority. One such initiative is the construction of artificial reefs in Barangay Simlong where the plant is located. Now on its 17th year, the project has demonstrated a long-term positive impact on the marine environment in the area. As it supports abundant marine life, fishermen from nearby communities now have better fishing opportunities. The potential for the artificial reefs to become tourist income-generating diving sites is also being explored.
Robinsons Bank focuses on financial inclusivity to serve the typical Filipino who remains unbanked. Simplé Savings, which was launched in October 2018, opened gateways to easily obtain a savings account with its simplified requirements.
As one of the country’s largest multi-format retailers, JG Summit affiliate Robinsons Retail Holding, Inc. contributes to the growth of small-to-medium enterprises (SMEs) within its supply chain. Out of its total 2,300-strong supplier base across all its categories, around half are SMEs. Meanwhile, TGP (The Generics Pharmacy), which has the widest network of community drugstores in the country with around 2,000 branches nationwide, encourages aspiring entrepreneurs through its franchise model.
The various SBU CEOs also shared their dashboards, which identified the key material topics that need to be monitored for their upcoming sustainability reports.
“Today, more than ever, business exists for a nobler purpose. Business has an inherent responsibility to uplift the lives of people while ensuring that this one Earth where we live in remains viable for future generations,” Lance Gokongwei said of the SBUs’ efforts to become increasingly sustainable.
A legacy for future generations
While the CEO Sustainability Summit was an opportunity to affirm JG Summit’s top-level commitment to its transformation, it was also a chance to ensure that sustainability is ingrained in the way the company does business for generations to come.
In one area of the room, Lance Gokongwei’s wife and children sat and listened while different strategic business units shared their road maps toward enhanced sustainability.
For the JG Summit chief, the presence of his children in the summit is not only a continuation of the family tradition of exposing their children early on to the business that their grandfather built and expanded to the next generation. More importantly, he wanted them to learn how business today is evolving — how an entrepreneurial mindset needs to include commitment to the common good.
“I have my kids here listening so they can see that their father is working for a company that is socially responsible. I do think that’s probably true for you, with your own families,” he told the summit’s participants.
And with this, the conglomerate’s journey to sustainability continues.
The demands of top executive posts can sometimes be too heavy to handle. But smart technological devices can help ease the workload. Here are some of them:
Microsoft Surface Pro 6
Microsoft’s very own creation, Surface Pro 6 is one of the best Windows 10 devices in the market today. This two-in-one tablet computer is lightweight and therefore easy to carry around. And it’s remarkably powerful as well, running on the latest 8th generation Intel Quad Core processor. Microsoft says it’s 67% faster than the fifth generation Surface Pro. Surface Pro 6’s 12.3-inch screen is also one of the sharpest around for a tablet and a laptop, with a resolution of 2736 x 1824, resulting in pixels per inch of 267. What’s more, the device offers a battery life of up to 13.5 hours of local video playback. There are several storage options available: 128 GB, 256 GB, 512 GB and 1 TB solid-state drives. Surface Pro 6 has unibody magnesium design and comes in two colors, platinum and black.
Apple iPad Pro
Described by Apple as its most advanced and powerful iPad ever, iPad Pro has two models, an 11-inch one and a 12.9-inch one, which both possess the Liquid Retina display technology. According to Apple, the screen of the iPad Pro is the brightest and the most color-accurate iPad display, with wide color gamut and anti-reflective coating for a natural and accurate viewing experience indoors and out. The new iPad Pro also features ProMotion technology that automatically adjusts the display fresh rate up to 120 Hz for smooth scrolling and better responsiveness. Despite being a laptop and running on the mobile operating system of Apple, iOS, iPad Pro is no slouch when it comes to performance. Apple says the A12X Bionic chip, with four performance cores, four efficiency cores and next-generation Neural Engine, in the iPad Pro outperforms most PC laptops. The other key feature of the tablet is the USB-C connector, which replaces the Lightning connector present in previous iPad Pros and can be used to charge an iPhone.
Samsung Galaxy Note10
The newly released flagship phablet of Samsung, the Note10 is a sophisticated piece of technology crafted to be sleek, slim and distraction-free. For the first time, the new Note series comes in two screen sizes: 6.3 inches (Note10) and 6.8 (Note10+) inches. The display on both models is considered to be Samsung’s best smartphone display yet. It is a Dynamic AMOLED kind of display that has a stunning wide color range, an HDR10+ certification and Dynamic Tone Mapping. Among the key productivity features of the Note10 series is the handwriting-to-text functionality; users can scribble down notes with the S Pen and convert their handwriting into digital text in Samsung Notes, an app, and export it to different formats, including a Microsoft Word file. The Note10 smartphones that have 5G can reach hyper-fast speeds (There are Note10 versions that have LTE instead). Note10+ 5G, in particular, is capable of harnessing the full power of the next-generation network for streaming high-resolution video, among other activities.
THE BANGKO SENTRAL ng Pilipinas (BSP) has enhanced its framework for watching banks deemed too big to fail, the monetary authority said in a press release on Saturday.
The BSP said the approved “enhancements” to its framework for watching domestic systemically important banks (D-SIBs) are designed to better determine how important a bank is to the health of the financial system.
The new features which the BSP’s Monetary Board has approved include adoption of threshold levels and other revisions to weights of indicators and their composition, as well as calibration of additional capital requirement.
These changes are applied both on a consolidated basis on all universal and commercial banks, as well as their subsidiary banks and quasi banks, as well as branches of foreign lenders.
Initial guidelines for D-SIBs were released in October 2014.
A bank is considered “systematically important” if — because of its size — its distress or failure would disrupt the domestic financial system and threaten general economic activity.
Apart from requiring such banks to have bigger capital, they are also subject to closer supervision and are required to have a recovery plan that addresses the risk they pose to the financial system and the entire economy.
Under the revised framework, a bank’s systemic importance is gauged according to indicators for size, interconnectedness, substitutability and complexity. Among these four indicators, size and interconnectedness bear the greater weight “as these factors are more critical… in determining a bank’s systemic importance in the Philippines, taking into consideration the simple structure of the Philippine financial system,” the BSP said in its news statement.
D-SIBs are then identified based on overall scores against certain thresholds.
Depending on their degree of systemic importance, such banks are categorized into higher loss absorbency groupings and will be required to raise their minimum common equity tier 1 (CET1) capital by 1.5-2.5% of total risk-weighted assets. This, the BSP said, “aims to bolster resilience of D-SIBs”. This requirement will be on top of the existing CET1 minimum, capital conservation buffer and countercyclical capital buffer (an extension of the capital conservation buffer) required of all universal and commercial banks, as well as their subsidiary banks and quasi-banks.
“Failure to meet the foregoing regulatory minimum will subject the bank to constraints in the distribution of their income,” the central bank said. — L. W. T. Noble
