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Capital, equities markets to bounce back this year — FMIC

MORE initial public offerings are expected this year. — SANTIAGO JOSE J. ARNAIZ

By Victor V. Saulon, Sub-editor
AFTER their dismal showing last year, First Metro Investment Corp. (FMIC) expects the capital and equities markets to significantly improve in 2019, as it forecasts stronger economic growth and lower interest rates.
“With a better economic outlook, and more favorable financial environment in 2019, we expect capital raising to recover from the 25% slump in 2018 to expand this year by 51% to P824 billion,” Jose Pacifico E. Marcelo, FMIC’s senior executive vice-president, said during the firm’s annual economic and capital markets briefing at the Grand Hyatt in Taguig City on Tuesday.
FMIC forecasts the gross domestic product (GDP) this year to expand by 6.8% to 7.2% amid a strong macroeconomic fundamentals. It expects economic growth to be driven by an upturn in consumer spending partly as a result of an improving inflation outlook. The mid-term elections in May are also expected to provide an added boost.
“Fixed income issues, down 46% in 2018, is expected to almost double to P618 billion due to the expected quadrupling of bank bonds,” Mr. Marcelo said.
“For the equities market, volume is expected to ease slightly from the record P207 billion and 61% growth in 2018 to decline to P206 billion in 2019,” he added.
Initial public offerings (IPOs), however, will pick up this year after the deferred issues last year, and could boost the volume to P62 billion from P8 billion previously, he said.
“One silver lining is that the year 2018 ended with a positive momentum, which has been carried over to this year, so far, giving us reason to be cautiously optimistic for a much better 2019,” Mr. Marcelo said.
Cristina S. Ulang, FMIC vice-president and research head, said the equities market is coming from a sharp drop last year, alongside other emerging markets.
“For this year our view is very constructive,” she said, citing the country’s “very positive” macroeconomic picture. “We believe that the Philippines is still one of the solid growth stories in Asia.”
Ms. Ulang said the positive expectations include a recovery in consumer spending, election spending, and the country’s sustained fiscal stimulus.
“The growth of government spending is big. It’s 45% in infrastructure year-to-date November. In terms of capital outlay it’s about 35% year-to-date growth,” she said.
“And our deficit is targeted this year at 3.2%, slightly higher than the 3% of last year based on the DBM (Department of Budget and Management) fiscal program this year. And our infrastructure spending is also a bit higher — 5% this year of GDP coming from 4.9% of last year,” she said.
A recovery in manufacturing and tourism is also seen this year.
Ms. Ulang said the return of the foreign funds would be critical to the sustainability of the Philippine Stock Exchange index’s (PSEi) uptrend. So far this year, the index was already up by 7.5% to 8,024 on Monday, with foreign buying at $127 million.
A number of developments could drive the market even higher, including the liquidity situation. She said that after the tightness in liquidity, the improvement in the inflation rates could result in a potential easing of the government’s benchmark reserve ratios and policy rate.
“All of these will contribute to the easing of the liquidity situation and any liquidity improvement is positive for the equities market,” Ms. Ulang said.
She noted the “much awaited” pause in the US Federal Reserve’s policy rate hike cycle as well as the Bangko Sentral ng Pilipinas “potentially pausing” its rate increases in the first half could augurs well for equities market.
“And if we are going to believe what Trump has been saying all over that he is in the midst of a fantastic trade deal, then it’s going to be an additional tailwind for the Philippine market,” she said.
Ms. Ulang said the risks this year include higher-than-expected Philippine budget deficit, slowing global economy, potential risk of a recession in the US, escalating global trade war, large yuan depreciation and some geopolitical events, including a Brexit crash and the spread of populism in Europe.

Roxas Holdings reports lower profit in 2018

ROXAS Holdings, Inc. (RHI) reported its attributable net income dropped 60% in 2018, as gross income fell and interest expenses increased.
In a regulatory filing, RHI said its net income attributable to the parent stood at P47.66 million for its fiscal year ending Sept. 30, 2018, lower than the P119.77 million in the prior year.
Consolidated gross income slipped 11% to P1.25 billion, which the company attributed to “sugar operations higher manufacturing costs resulting from decreased production volume due to decreased ton canes milled and factory breakdowns.”
RHI saw an 8% rise in consolidated revenues to P11.81 billion for the full year, due to higher average selling prices and sales volume of refined sugar.
Sugar operations contributed P8.56 billion or 73% of total revenues. The 30% rise in refined sugar sales volume offset a 3% dip in raw sugar sales volume in 2018.
Revenues from alcohol operations fell by 10% to P3.24 billion, amid a drop in volume sold and average selling prices.
RHI said its interest expense rose 13% to P502.1 million as the company availed of short-term loans amid higher interest rates in 2018.
At the same time, RHI said the proposed sale of its sugar milling and refining operations in Batangas to Universal Robina Corp. (URC) has yet to be completed, since the deal is under review by the Philippine Competition Commission (PCC).
Last July, Gokongwei-led URC said it will acquire all buildings, improvements, machineries and equipment, and laboratory equipment, owned by RHI and its subsidiary Central Azucarera Don Pedro, Inc. (CADPI), as well as the land on which these assets are located.
RHI, which is described as the largest integrated sugar business in the country, manages sugar miller Central Azucarera de la Carlota, Inc., ethanol producers Roxol Bioenergy Corp. and San Carlos Bioenergy; and RHI Agri-business Development Corp.

Charot isn’t joking

FILIPINO slang that means “just kidding,” the word “charot” is conveniently used to lighten things up and make them fun with the aim of reducing serious discussions into jokes. But PETA’s new political show Charot will take matters seriously.

Charot is about an upcoming national election and tackles the move towards Federalism with additional layers about our Filipino-ness and our psyche added to the story for more texture and social context.
It is the final show of the group’s 51st season which has the theme “Stage of the Nation.”
Written by young writers Michelle Ngu and J-Mee Katanyag, Charot is an imagined Philippine society set in 2020 where there’s an impending constitutional change and an ongoing national election. A group of people — two millennial lovers, a Tita of Manila, a vendor, a police officer, and a couple of proletariats — find themselves stuck in a traffic thanks to a flood after a heavy downpour. All of them were going to a precinct to vote at the last minute, and in the process maybe change the course of history: whether the Philippines will be a federal country or not is in their hands.
“It will tackle the two sides of Federalism, but more than that, mas mahalagang makilahok at bantayan ang boto sa eleksyon (it is more important to participate and monitor the vote in the elections),” said Ms. Ngu.
Her co-writer, Ms. Katanyag, added that while Charot will tackle constitutional change, it will also analyze how democracy works and how Filipinos use it or take it for granted.
“More than taking a hit at the administration, it’s taking a hit at someone, sino ka man: tita ka, vendor ka, millennial ka, endo-han ka na worker (whoever you are: a middle-aged middle-class woman, a vendor, a millennial, a short-term contract worker). It’s asking the questions: How do you live out your democracy? What are your choices every day?,” said Ms. Katanyag.
POLITICAL SHOW
While the script already has a backbone, it’s still evolving as Congress is still discussing provisions and other matters involved in the proposed change in the country’s form of government to federalism.
“It’s very challenging because we’ve been educating ourselves also. We cannot write [about] something we don’t understand, right? Honestly, we went through a lot of story concepts. Before, Charot would be a fantasy, may mga aswang (there were shapeshifting evil spirits) and then we figured out why not play on characters of ordinary people of the mundane? Kasi mayron din namang aswang sa totoong buhay (because there are aswang in real life),” Ms. Ngu told BusinessWorld at the sidelines of a press conference at the PETA Theater Center in Quezon City on Jan. 9.

Charot will be staged at the PETA Theater from Feb. 8 until March 17, a few days before the upcoming general elections in May.
It is a PETA tradition to produce political shows prior to elections, like Boto ni Botong.
PETA’s artistic director and Charot director Maribel Legarda told BusinessWorld that the musical has two goals: to educate the audience about Federalism, and to inspire people to use their right of suffrage.
The challenge, she said, is in making an original Filipino play that tackles heavy issues without making it boring.
She said: “More than directing it on stage, mas mahirap talaga [what is harder] is creating a text. How do you tell stories of our conflicts now, with different personalities? Finding the story telling. It’s not Czechov or Shakespeare. We have one objective: we have a bunch of people whose objective is to be able to vote. Where’s the drama there? So finding that drama, we can explore and show kung ano ba ang Pinoy [what is the Filipino]. It’s objective is to educate what Federalism is, paano mo ngayon ipapasok itong information [how to include this information in the play] but still making it creative and interesting? Maraming [There are many] challenges at all levels.”
VOTE FOR THE ENDING
One way of keeping things interesting is getting the audience involved — Charot will be an interactive play that will deconstruct traditional idea of theater viewing. Even before the play starts, there will be interactions, and a debriefing with the audience will also happen after the show.
A few scenes before the play ends, the audience will be asked a question and will be asked to vote online via their phones. Their votes will change the course of the story as the play has two possible endings, depending on whether the voters are for or against the idea of the Philippines becoming a federal country.
“The cast wouldn’t know what will happen during the show because the ending will depend on the audience’s choice,” said Charot’s writers.
But then again, when something is political in nature, it can’t just stay neutral, right? Will PETA’s Charot take a stand? Will it be for or against Federalism?
“No, you can’t be neutral — in the end that you have to choose as an individual. What we’re trying to say is that there’s a lack of information. It has nothing to do with the name of the person [who is] our leader [in] a particular given time. We’ve always been critical of our government and society. Artists have that goal, to be critical…. with the president right now, therefore we are being critical in the same way that we’ve been critical of GMA, Erap, Marcos. Ang feeling namin, dapat siyang kuwestiyunin, dapat siyang magkaron ng diskurso sa mga nangyayari sa society natin (We feel that he should be questioned, there should be a discourse about what is happening in our society), and the only way you can create your own power is to get educated, even if it’s not in politics. Ignorance is always your worst enemy, but when you find out what it is, first nawawala ’yung fear mo and then nakakagawa ka ng choice (first you lose your fear, then you can make a choice). At the end of that day, that’s neutral,” said Ms. Legarda.
Nothing is neutral, she said. Thanks to their study of Federalism, PETA cast members and artistic team have become more informed and critical about the proposed constitutional change.
Ms. Legarda said: “In principle, Federalism a good thing, but the problem is, is now a good time given the condition of our politics: political dynasties, corruption, the amount of money it would cost? Should we do it now? This is generational in effect so we should care. Later on down the line, kung mas maayos ang government [when the government is better] and when we’re ready, then why not. But not now, we’re not yet ready, therefore [there’s Charot].” — Nickky Faustine P. de Guzman

NLEx Harbor Link Segment 10 to open this month

THE Department of Public Works and Highways (DPWH) said the North Luzon Expressway (NLEx) Harbor Link Segment 10 is finally set to open this month.
“We are happy to announce that the NLEx Harbor Link Project will be accessible to the public by January. When this is completed, travel time from C3 in Caloocan and NLEx, will be reduced to 10 minutes,” DPWH Secretary Mark A. Villar said in a statement on Tuesday.
The project was originally scheduled for completion in December after the DPWH delivered 100% right-of-way on the toll road’s main line in October.
Harbor Link Segment 10 is an expressway project by the government’s private concessionaire NLEX Corp., which aims to connect Karuhatan in Valenzuela City to C3 road in Caloocan City, with a spur road to Radial Road 10 (R-10) in Navotas City.
About 30,000 cars a day are expected to benefit from the toll road once it opens, a bulk of which are trucks coming from the port area.
NLEX Corp. is part of Metro Pacific Tollways Corp., the tollways unit of Metro Pacific Investments Corp. (MPIC).
MPIC is one of three key Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Denise A. Valdez

Archaeologists restore ancient Palmyra artifacts

DAMASCUS — In the National Museum of Damascus, archaeologist Muntajab Youssef works on an ancient stone bust from Palmyra, one of hundreds of artifacts his team is painstakingly restoring after they were damaged by Islamic State.
Centuries-old statues and sculptures were wrecked by the jihadists when they twice seized control of the old city in central Syria during the country’s war, which will go into its ninth year in March.
The 1,800-year-old bust of a bejeweled and richly clothed woman, The Beauty of Palmyra, was damaged during the first offensive on the city by Islamic State fighters in 2015.
After Syrian government forces took back the city with Russian military support in March 2016, the bust, alongside other damaged ancient monuments, was taken to Damascus and archived in boxes. When restoration work on it began last year, Mr. Youssef said it was in pieces.
“The hands and face were lost completely, also parts of the dress and there are areas that are weaker,” Mr. Youssef, who has been working on the bust for two months, said.
Mr. Youssef is one of 12 archaeologists working on the arduous restoration job, which first began with the moving of the damaged pieces to Damascus.
Mamoun Abdulkarim, the former Head of Syrian Antiquities, said that in some cases broken artifacts were transported in empty ammunition boxes provided by the Syrian army in Palmyra.
How many artifacts there are in total is difficult to say, given the state they were found in.
The lack of documentation for the artifacts also adds to the restoration challenge.
“A big part of the documentation in the Palmyra museum, was damaged with the antiquities and computers,” archaeologist Raed Abbas said.
“A statue needs pictures… in order to be rebuilt.” — Reuters

Russian group eyes P8-B investment in Maguindanao banana plantation

A RUSSIAN group is looking to invest P8 billion to build a banana plantation in Camp Abubakar, the main enclave of the Moro Islamic Liberation Front (MILF) in Maguindanao and Lanao del Sur, according to Agriculture Secretary Emmanuel F. Piñol.
“The project is expected to employ about 10,000 workers, most of whom former rebel combatants and their children,” Mr. Piñol said in a Facebook post on Tuesday.
He and Maguindanao Governor Esmael Mangudadatu on Monday accompanied the Russian group led by French-Russian businessman Robert Gaspar to inspect the proposed banana plantation area in Barangay Oring, Buldon, Maguindanao.
“Right now, Russia is keenly looking at the Philippines to supply some of its requirements. Example, we don’t know this but Russia has been buying Philippine bananas through China…We indirectly export bananas to Russia. Now, this group would like to do it directly. They have expressed interest to invest in cavendish bananas,” Mr. Piñol said in a press conference in Pasay on Tuesday.
The Agriculture chief said the Russian businessmen expressed interest in investing in the Philippines after the visit of President Rodrigo R. Duterte in Russia in May 2017.
The Russian group is also in aquaculture production in Polloc Cove in Maguindanao, Mr. Piñol said.
“Everything that we will produce here, especially bananas and sea products will have a waiting market in Russia,” Mr. Gaspar was quoted by Mr. Piñol as saying. — R.J.N.Ignacio

Tanghalang Pilipino’s Coriolano: a play for turbulent political times


THE Cultural Center of the Philippines’s Tanghalang Pilipino (TP) is about to stage a play that seems familiar in the context of current politics.
Coriolano, a translation by Palanca Award-winner Guelan Luarca of William Shakespeare’s tragedy Coriolanus, tells the story of a legendary Roman soldier who engages in politics, but whose temper and tyrannical personality lead him to choose allegiances that bring about his downfall.
A rarely staged Shakespeare work, Coriolano will be directed by Carlos Siguion-Reyna and will open on Feb. 22, as the closing play in TP’s 32nd season.
TP’s senior actor Marco Viana will play the title role, while the supporting cast will come from other theater companies like Frances Makil-Ignacio of Dulaang UP and Brian Sy of Tanghalang Ateneo.
Meanwhile, TP’s 33rd theater season will “will further strengthen TP’s commitment to theater that educates, entertains, and transforms minds and social consciousness,” said TP artistic director Fernando “Tata Nanding” Josef via Facebook when BusinessWorld asked the company about its 2019 outlook.
Some time in August, TP will present a “twin bill of two significant past musical productions,” said Mr. Josef. These are Mabining Mandirigma and Aurelio Sedisyoso — two historical dramas in the form of steam punk and rock sarsuwela.
The next few months will see the production of important and socially relevant shows: Bibeth Orteza’s Katsuri, a Hiligaynon version of John Steinback’s Of Mice and Men; the classic Ilocano epic Lam-Ang; and Batang Mujahideen, a story of the reconciliation of Muslims and Christians in Mindanao.
Coriolano will run from Feb. 22 to March 17 at the Little Theater of the Cultural Center of the Philippines (CCP). Tickets are available at the CCP box office and at TicketWorld (www.ticketworld.com.ph).

ADB eyes credit facility for insurance pool

THE ASIAN Development Bank is eyeing a credit facility for parametric insurance.

THE ASIAN Development Bank (ADB) said the Philippines will benefit from a fast-disbursing parametric insurance pool, eyeing a credit facility for the program.
“There is a strong case for the development of a city disaster insurance pool in the Philippines. There is significant disaster risk across the Philippines, with many cities exposed to high levels of typhoon and/or earthquake risks. Moreover, with the expected continuation of rapid urban growth, future disaster losses could be significantly higher than recently experienced,” the ADB said in a report titled Philippine City Disaster Insurance Pool Rationale and Design.
“Parametric insurance coverage would enhance the effectiveness of current post-disaster funding sources by providing rapid post-disaster liquidity,” it added.
Unlike traditional indemnity-based insurance that takes a long time to assess the damage involved, a parametric insurance policy program will immediately disburse a pre-determined amount once certain disaster-related indexes are met such as peak gust for storms, and spectral acceleration for earthquakes, among others.
The program does not aim to cover total damages and losses as the payout may not automatically match actual loses, but instead seeks to provide immediate funds until additional resources become available, which will allow the government to provide better emergency response.
“Under current arrangements, a number of cities do not have adequate dedicated financial resources to combat the effects of severe typhoons or earthquakes,” the regional development lender said.
The ADB said it is eyeing to support the Philippines in financing a parametric insurance pool.
“PCDIP (Philippine City Disaster Insurance Pool) is expected to be primarily capitalized through a sovereign loan from ADB in its initial years,” the ADB said.
“Parametric insurance can provide payouts within a few weeks of a disaster, and can be structured to allow payouts to be flexibly used to address a range of potential funding needs. Such rapid payouts would complement existing post-disaster financing arrangements, such as indemnity insurance purchased through GSIS (Government Service Insurance System) which is targeted at longer-term financing needs during the post-disaster reconstruction phase.”
“To enable cities to take full advantage of the benefits of parametric insurance, it is crucial that the implementation of the proposed parametric pool is embedded into the Philippine legal and regulatory environment, and that appropriate inputs and guidance provided from relevant national government agencies, including from COA (Commission on Audit) on the use of payouts, are implemented,” it added.
The Philippines currently has a one-year parametric insurance policy with the World Bank that began on Dec. 20 worth P20.49 billion covering 25 disaster-prone provinces after paying a P2-billion premium. — Elijah Joseph C. Tubayan

Tuguegarao City gov’t taps Globe for Wifi project

THE enterprise arm of Globe Telecom, Inc. said it partnered with the local government of Tuguegarao City for its free WiFi project.
The telecommunications company said in a statement on Tuesday the Tuguegarao City government signed up for Globe Business’ Direct Internet service.
“Aside from the need to have fast and reliable internet connectivity to effectively cater to the communication needs of all offices in the City Hall, the project also aims to extend its reach to Public Schools, specifically the students and teachers,” Tuguegarao City Mayor Jefferson P. Soriano said in the statement.
Direct Internet is Globe Business’ WiFi offer for enterprises that gives direct and secure connection within an office to ensure seamless connection for data transfer, voice and video call activities.
Globe said the partnership with the Tuguegarao City government is aligned with the company’s goal of encouraging local government units to adopt the integration of information and communications technology in government procedures.
“Globe Business is thrilled and privileged to have been chosen by the City of Tuguegarao. We are very excited for the partnership as this pushes us to strive for excellence and commit to our purpose to help build our nation,” Peter D. Maquera, Globe’s senior vice-president for its enterprise group, said in the statement.
In the nine-month period ending November 2018, Globe said its attributable net income rose 17% to P15.15 billion, driven by a 9% hike in consolidated service revenues to P103.3 billion on increased data revenues across all business segments. — Denise A. Valdez

Alternative movie, video entries solicited

THOSE who think that the annual Metro Manila Film Fest is rubbish, full of recycled formulaic films, here is their chance to create their own better and smarter movies: they can join a contest for alternative films and videos.
The Cultural Center of the Philippines’ Film, Broadcasting and New Media Division (CCP FBNMD) is calling for and accepting entries for the 31st Gawad CCP Para sa Alternatibong Pelikula at Video. The deadline of submission of entries is March 15. Submissions must be in no later than 6 p.m. that day at the CCP FBNMD Office, located at the 4th floor of the CCP Main Building. Entries can be submitted before the deadline.
They must include a duly accomplished entry form, which can be downloaded at www.culturalcenter.gov.ph and www.cinemalaya.org.
Here are the other requirements: one digital data file of the entry in full resolution (saved on USB or burned on a DVD as data with file properly labelled or identified); one DVD or USB containing the synopsis, genre, running time, rating, production credits; two black and white photos from the film entry in jpeg format; and a film entry poster, if available, in jpeg format.
The festival will have the following categories: short feature/narrative, experimental, documentary, and animation. Interested parties can submit a maximum of three entries, but can only submit one per category.
The selected entries will be screened during the 31st Gawad CCP Para sa Alternatibong Pelikula at Video Festival on Aug. 3 to 5, as part of the 15th Cinemalaya Philippine Independent Film Festival, which is slated from Aug. 2 to 11 at the CCP theaters and various venues.
The best films will be announced during the awards night on Aug. 5 at the CCP Tanghalang Manuel Conde (Dream Theater).
Winning entries in each category will receive P25,000, P15,000, and P10,000 for 1st, 2nd, and 3rd prize, respectively. An honorable mention awardee will get P5,000.
This year, special Awards include: Best Regional Entry and Best Entry On/For/By Children.
For the complete guidelines, visit www.cinemalaya.org, www.culturalcenter.gov.ph or call the CCP FBNMD Office at 832-1125, local 1705 & 1712.

Fintech firms want to shake up banking, and that worries Fed

WASHINGTON — The US Federal Reserve is wary of giving “fintech” firms such as OnDeck Capital Inc. or Kabbage Inc. access to the country’s financial infrastructure, putting the central bank at odds with other regulators looking to bring them into the fold.
The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) are exploring granting federal bank-like licenses to tech-driven firms that offer financial services, such as money transfers and lending.
The plan is part of a broader push by President Donald Trump’s administration to boost small businesses and promote job growth.
Federal licenses would allow fintech firms, which currently operate under a patchwork of state rules, to reduce their regulatory costs and expand into new regions and products.
However, fintech firms say they are reluctant to invest heavily in nationwide expansion without access to the payment systems, settlement services, and other Fed tools and the central bank has yet to decide whether to let those lightly-regulated players in.
Many Fed officials fear these firms lack robust risk-management controls and consumer protections that banks have in place.
“They probably do want access to the payments system, but they don’t want the regulation that would come with that access,” St. Louis Fed President James Bullard told Reuters in November. “I am concerned that fintech will be the source of the next crisis,” he added.
Companies such as PayPal and LendingClub Corp. have attracted millions of customers by offering greater convenience or better prices than traditional banks. The OCC and the FDIC say such firms can broaden access to financial services because their low-cost models allow them to reach poorly served areas and offer small loans that are uneconomical for bigger banks.
But some fintech firms say they would be reluctant to invest the time and resources in applying for and maintaining the new OCC fintech license unless the Fed gives them access to the payments system, so they will not have to depend on banks to route money for them. Direct access would eliminate bank routing fees, a top-five operating cost for many fintech firms, and would allow them to compete more effectively with traditional lenders.
“It’s hard to know if it’s worthwhile applying if you don’t know what access you’d have to the Fed services,” said Jason Oxman, CEO of the Electronic Transactions Association, which represents fintechs and banks. “It would be helpful for the Fed to clarify.”
Banks are pushing back, arguing fintech firms should access the Fed system only if they comply with the same rules banks face.”You don’t want a new charter that skirts existing rules and regulations and call that innovation,” said Paul Merski, executive vice president for the Independent Community Bankers of America.
Unveiled in July, the OCC special charter allows fintechs to operate nationwide under a single license, provided they satisfy some liquidity, capital and contingency planning requirements.
Currently, state regulators that oversee fintechs focus primarily on consumer protections, such as capping interest rates on lending products, privacy safeguards, and preventing unfair or deceptive practices. Some states may also require firms to comply with anti-money laundering rules, submit business plans or allow onsite examinations.
By comparison, nearly every aspect of banks’ operations is subject to rigorous scrutiny and multiple federal and state laws. These include a host of capital and liquidity requirements, operational risk, cyber risk, vendor risk, anti-money laundering and bank secrecy rules, fair lending and anti-discrimination lending laws.
The OCC fintech charter does not permit companies to collect federally insured deposits, now a precondition for accessing the Fed’s payment system.
RAPID GROWTH
In private meetings, Fed officials in Washington are divided on the issue, with many reluctant to offer any reassurances or even guidance on how fintechs should proceed, said fintech executives.
“It’s not a two-way street, it’s a one-way radio channel right now,” said Sam Taussig, Atlanta-based Kabbage’s head of global policy, of communication with the Fed. “We don’t know what’s going on.”
Some officials are unsettled by the rapid growth of fintech firms, which half of US consumers now use to transfer money, according to consultancy EY.
From 2010 to 2017, more than 3,330 new fintech firms were created, according to the Treasury, with financing for such firms soaring thirteen-fold over that period to $22 billion.
Officials worry these young players favor growth over risk-management and regulatory know-how — a concern exacerbated this month when fintech Robinhood mistakenly claimed its new checking and savings accounts were federally insured.
“Atlanta’s trying to be a fintech hub, so I get the opportunity to talk to a lot of entrepreneurs in this space,” said Atlanta Fed President Raphael Bostic at a banking conference late last year. “Almost none of them has risk at the top of what they’re thinking about, and that makes me nervous.”
Some officials worry that direct access to the payment network would mean that a fintech firm’s collapse, a major IT stumble or cyber breach, could spread risk across the system or hurt consumers.
Fintech firms argue their rapid growth simply reflects strong demand for their services and that many are already complying with a host of state regulations.
A spokeswoman for the Federal Reserve Board in Washington declined to comment, but Lael Brainard, one of its governors who is leading the Fed’s thinking on the issue, has also urged caution over letting fintechs into the Fed system.
OCC spokesman Bryan Hubbard said its proposed charter still offers many benefits for fintech firms, which can continue to partner with banks that can access Fed services.
The regulator is in discussions with dozens of firms and expects to award the first national license under the new charter early this year, a development fintechs hope will put pressure on the Fed to formally clarify its stance. — Reuters

AboitizPower ends contract with Hanjin unit

ABOITIZ Power Corp. walked away from offering a retail electricity supply contract to Hanjin Heavy Industries and Construction Philippines (HHIC-Philippines) ahead of the expiration of their one-year contract in February this year, sparing the energy company from the issues surrounding the financial woes faced by the South Korean company.
“The price that they were asking us is too low. We’re better off offering it to another customer,” Emmanuel V. Rubio, AboitizPower chief operating officer, told reporters on Tuesday during an informal gathering on Tuesday.
“It’s not unusual. We’ve walked away from other customers,” he added.
HHIC-Philippines was previously a customer of Subic Enerzone Corp., another Aboitiz-led company and the local distribution utility in the area, before it signed up for a one-year contract with AboitizPower retail electricity supply (RES) unit Advent Energy, Inc.
“The contract, which ends in February this year, was won by another RES,” Mr. Rubio said, but declining to name the winning power supplier.
Advent is one of five Aboitiz-led retail electricity suppliers and the group’s biggest in terms of customer demand at 235.78 megawatts (MW) as of October last year. Aboitiz Energy Solutions, Inc. has the biggest number of customers at 156, beating Advent’s 77 total count as of the same period.
The other RES units are SN Aboitiz Power-RES, Inc., San Fernando Light & Power, PRISM Energy, Inc. and Mazzaraty Energy Corp.
AboitizPower said the local Hanjin unit had been a long-standing customer of Subic Enerzone, starting in 2008 with sales of around 4 MW, and peaking at one point to 95 MW.
Hanjin’s switch to Advent as its power supplier is called for under the rules on retail competition and open access (RCOA), which calls for contestable customers to move away from being part of the captive market of a distribution utility.
These are customers whose electricity consumption for the past 12 months has reached the threshold set by the Energy Regulatory Commission. — Victor V. Saulon

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