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Banks set LTNCD, stock offerings

TWO OF THE COUNTRY’S banks are seeking to expand their capital through separate fund-raising exercises, they told the local bourse yesterday.

In separate disclosures on Tuesday, Rizal Commercial Banking Corp. (RCBC) said it is set to conduct a stock rights offering (SRO), while UnionBank of the Philippines (UnionBank) announced the launch of the initial tranche of its long-term negotiable certificates of time deposits (LTNCD).

The Yuchengco-led RCBC said its board of directors approved the stock rights offer that aims to raise up to P15 billion of fresh funds, seen to strengthen its capital base and fund its business expansion.

RCBC said proceeds from the offer will bolster its position in line with Basel 3 standards, although the lender noted that its current capital ratios are already above the central bank requirements.

The fresh funds to be raised from the SRO will also fund the continued growth of its businesses, particularly in loans, the bank said.

“RCBC seeks to focus on consumer, [small and medium enterprises], the middle market and the microfinance sector, and to pursue sustainable loan growth,” the lender said in the disclosure.

“RCBC also intends to use investments in technology to improve customer experience, broaden its customer base, and increase operational efficiency,” the lender added.

However, the timing of the SRO and other details on the offering have yet to be released, as these are still subject to the receipt of regulatory approvals and market conditions.

The SRO will be coming from the approval by the board of directors and the stockholders to raise RCBC’s authorized capital stock to P28 billion from P16 billion, or 2.6 billion authorized common shares from 1.4 billion.

Earlier, Metropolitan Bank & Trust Co. and Bank of the Philippine Islands also announced their planned SROs to fund their core business expansion and operations.

UNIONBANK
Meanwhile, Aboitiz-led UnionBank said yesterday that it has launched the first tranche of its planned LTNCD offerings.

The lender is offering at least P3 billion in LTNCDs to investors which it said will help improve its deposit maturity profile and support business expansion plans.

UnionBank’s offering has an oversubscription option. The instruments will have a tenor of five years and six months with an annual indicative rate of 4.125-4.375%.

This is the first of the bank’s approved P20-billion LTNCD program, which it previous said will carry tenors of five-and-a-half to 10 years. UnionBank plans to raise the entire amount over a period of one year.

The final rate of the LTNCDs will be determined shortly before the end of the public offer period which will run until Feb. 9. The issue date will be on Feb. 18.

Standard Chartered Bank will serve as the sole lead arranger and bookrunner, and will also serve as a selling agent together with UnionBank and Multinational Investment Bancorporation. The LTNCDs will be listed on the Philippine Dealing Exchange Corp., the lender said. — Karl Angelo N. Vidal

Nation at a Glance — (01/31/18)

News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.

How PSEi member stocks performed — January 30, 2018

Here’s a quick glance at how PSEi stocks fared on Tuesday, January 30, 2018.

Inflation accelerates in 2017 for low-income households — PSA

Senate bill hopes to cut VAT rate to 10%, eventually to 8%

SENATOR Ana Theresia Hontiveros-Baraquel filed a bill on Tuesday seeking to reduce the Value Added Tax (VAT) rate from 12% to 10% in response to the effects of Republic Act (RA) 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) law.

Ms. Hontiveros filed Senate Bill 1671, which will be known as the Bawas VAT Act of 2018 if passed, amending sections 106 to 109 and 112 of RA 8424 or the Tax Reform Act of 1997.

The sections of the Tax Reform Act tackle VAT imposed on the sale of goods or properties, importation of goods, the sale of services and use or lease of properties as well as VAT-exempt transactions and tax credits.

If the bill is passed, the measure hopes to implement the reduced VAT rate by Jan. 1, 2019.

By Jan. 1, 2022, the bill also seeks a further reduction in the VAT rate to 8% if the previous year’s revenue from VAT, as reported in the budget of expenditures and sources of financing submitted to Congress, is equal to or exceeds 4.5% of gross domestic product (GDP).

In her explanatory note, Ms. Hontiveros said the proposed measure will “provide relief for the lower economic deciles of the population by lowering the VAT rate to 10%.”

“As our tax system becomes more efficient and corruption is weeded out by our modernizing revenue bureaucracy, we will want to rely less on taxes that are easily passed on to final consumers, such as the Value-Added Tax (VAT),” she said.

Ms. Hontiveros also noted that the bill also sought to align the country’s tax system with that of the Association of Southeast Asian Nation (ASEAN).

The proposed measure contains a trigger for VAT collections at the 10% rate; if the total hits 4.5% of GDP, that will pave the way for a further reduction “to achieve full alignment with the ASEAN norm of 8%.” — Camille A. Aguinaldo

The basics on Bitcoin for y’all who are clueless

Bitcoin. Bitcoin. Bitcoin. Everyone’s talking about it and frankly, it can get intimidating. Bitcoin is continuously gaining traction in the Philippines, prompting the government to raise concerns towards the virtual currency (VC) and all activities related to it. And as business‑minded millennials, we have to make sure we’re not left out. #FOMO

So here’s the basic info:

Used solely through digital platforms, meaning, unlike bills and coins, it cannot be held in one’s hand. It is used in purchasing products online, and is a form of investment for some because of its fluctuating value. As of writing, Bitcoin’s value per unit has plunged below the $10,000 from almost $20,000 just before 2017 ended.

The underlying technology behind Bitcoin and other electronic currencies is called “blockchain,” a network of interconnected ledgers or data bases that allows the easy access to and transfer of VC’s. (Here’s a related story about that)

Unlike physical currencies, VC’s are not regulated by any state or central bank, with the their security and verification as well as production highly dependent on cryptography. Hence, the attempt to regulate companies that serve as trading entities in many countries, including the Philippines.

The Bangko Sentral ng Pilipinas (BSP) in February last year issued an order requiring all VC providers present in the country to be under its watch. At present, BSP is in the process of authorizing 12 bitcoin exchange entities, following the approval of two VC exchanges last year.

The Securities and Exchange Commission (SEC) also recently issued an advisory, warning the public against investing in initial coin offerings (ICO), the counterpart of initial public offering in the startup scene. The announcement came after SEC’s previous announcement that it would look into the ICO of KROPS, a digital marketplace for farm produce led by Joseph Calata, chairman of now delisted agribusiness firm Calata Corp. The ICO was, later on, declared illegal.

Through an ICO, startups raise a certain amount of money for a project by selling a VC in return of another digital currency or fiat money. Fintech startup Qwikwire, for example, last December launched its ICO with an aim to raise $9 million for a new digital real‑estate market.

According to Zach Piester, co‑founder of venture development and innovation firm Intrepid Ventures, the country has a “really large and robust blockchain and [cryptocurrency] community.”

“Our hope in the ecosystem is that we can create new global financial systems based on the notion of transferring value without [a] third party,” Piester said during the first Blockchain & Bitcoin Conference Philippines last January 25 at EDSA Shangri‑La Hotel in Mandaluyong City. The event drew hundreds of local and foreign Bitcoin enthusiasts.

Jeremy Goodwin, CEO of peer‑to‑peer manufacturing network SyncFab, claims: “The reason why cryptocurrencies exist is that they were [a] product of financial crisis in 2008. With the corruption in the financial market and all the untrusted central banking system, they (cryptocurrencies) are [a] trust‑worthy medium of financial banking.” He added: “They can be used and de‑centralized and for which the system is set up by movement undertaken by some libertarians and some technologists who create alternatives to the existing financial, central banking system [in the form of] de‑centralized ledgers.”

Goodwin also said that cryptocurrencies are “meant to address double spending,” easing payment transactions by eliminating third party platforms.

For Luis Buenaventura, chief technology officer at BloomSolutions and author of the book “Reinventing Remittances with Bitcoin,” the number of people involved in VC trades is growing because of the “excitement behind the technology and the real‑world application of what blockchain is gonna do to transform many industries.”

“Humanity has proven itself not up to the task of managing its money. I think that our governments are particularly good at that, and we’ve seen it time and time again,” Buenaventura said.

“An alternative now exists that we trust more in math, in electricity, and in many ways [cryptocurrencies] feel particularly more sound as a solution.”

Central bank readies new risk buffer

By Melissa Luz T. Lopez
Senior Reporter

THE CENTRAL BANK is looking to introduce a new risk management measure that would require banks to set aside additional capital as reserves, this time to cover potential losses amid rapid loan growth.

Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. said that the central bank is now looking to introduce the countercyclical capital buffer (CCyB) that will require big banks to maintain such a “sufficient capital base” at times of “excessive” credit growth.

This prudential tool is included in the international Basel 3 framework, although the central bank initially decided not to adopt the standard.

“This is part of the Basel III framework which the BSP had not included in our 2014 application of the revised capital standards. As we consider the remaining components of the Basel III agenda, our framework for the CCyB will be issued for comments in the first half of the year, including the calibration of the extent of the buffer,” Mr. Espenilla said in a recent e-mail to BusinessWorld.

The central bank chief said the measure is being studied in the face of the “potential buildup of systemic vulnerabilities” in the financial system.

The BSP joined other central banks in adopting the new set of Basel standards starting with the capital adequacy ratio (CAR) — the amount which banks need to deploy as buffers to protect themselves for possible episodes of funding crunch.

Currently, banks are required to keep funds on standby equivalent to 10% of their assets that pose significant potential risk to their health.

This is higher than the eight percent global standard.

Once imposed, the CCyB means big banks in the Philippines need to accumulate additional capital during a credit boom, on top of the regular CAR.

“In downturns, the regime should help to reduce the risk that the supply of credit will be constrained by regulatory capital requirements that could undermine the performance of the real economy and result in additional credit losses in the banking system,” according to CCyB guidelines published by the Bank for International Settlements (BIS).

Economists have been flagging the Philippine economy’s increased risk of overheating amid sustained double-digit growth in bank lending.

Mr. Espenilla has said that the economy is simply “warm but not red hot,” with the rapid increase in bank lending simply matching the pace of robust gross domestic product (GDP) growth.

Philippine GDP expanded by 6.7% in 2017, cementing the country’s place in the ranks of Asia’s fastest-growing economies — next to China’s 6.9% and Vietnam’s 6.8% — albeit slowing from the 6.9% pace recorded the preceding year.

At the same time, bank lending increased by 19.2% year-on-year as of end-November, according to latest available central bank data.

The BIS — which drafted the Basel III reform agenda — requires regulators to set a sufficient buffers relative to banks’ risk-weighted assets.

The BIS said authorities are expected to look at a country’s credit-to-GDP ratio as a benchmark in prescribing buffer levels. The Philippines posted a credit-to-GDP ratio of 63.6% as of end-June 2017 which is among the lowest in Asia.

A central bank may choose to raise capital requirements to temper credit growth.

Sought for comment yesterday, Union Bank of the Philippines President and Chief Operating Officer Edwin R. Bautista said introducing the CCyB “indeed enhances risk management” as it allows lenders to cover losses when the credit cycles goes on a downturn.

“As to whether banks would be able to meet the requirement, it would depend on the specifics that BSP will use in crafting the circular,” Mr. Bautista said in a mobile text message.

“Nonetheless, please take note that Philippine banks have been well-capitalized comfortably above minimum standards.”

Other Basel III measures currently in place in the Philippines include the 30-day liquidity coverage ratio and the framework for domestic systemically important banks. A five percent minimum leverage ratio will also kick in by July which seeks to avert excessive debt exposures among banks.

Gov’t, PCCI to feel pulse on tax reform

THE GOVERNMENT has teamed up with the Philippine Chamber of Commerce and Industry (PCCI) for a nationwide road show this quarter designed to drum up support for Republic Act No. 10963 — the first of up to five planned tax reform tranches — and to feel businessmen’s pulse on the proposed second package that cuts the corporate income tax (CIT) rate and streamlines fiscal incentives, the Department of Finance (DoF) said in a statement yesterday.

DoF said it is undertaking the effort in partnership with the Participatory Governance Cluster-Open Government Partnership led by the departments of Budget and Management and of Interior and Local Government as well as with PCCI, and with the support of the United States Agency for International Development’s Facilitating Public Investments Project.

RA 10963, or the Tax Reform for Acceleration and Inclusion Act that was enacted on Dec. 19 last year, cuts personal income tax rates and offsets the expected foregone revenues by hiking or introducing consumption taxes on fuel, automobiles, sugar-sweetened drinks, tobacco products, coal, minerals, cosmetic surgery and some investment products, among other items. The enacted version of this first package is estimated to yield some P90 billion in additional revenues in the first year of enforcement, down from P133.8-157.2 billion originally after provisions were toned down.

The DoF submitted to the House of Representatives on Jan. 15 the second package, which will cut the CIT rate gradually to 25% from 30% over the next five years in order to put the Philippines at par in this regard with its closest Southeast Asian competitors like Indonesia, Thailand and Vietnam and will make up for the foregone revenues by scrapping redundant fiscal incentives that have been costing the government some P300 billion a year. The DoF hopes to secure this package’s enactment in time for start of enforcement in January 2019.

The department said the planned “caravan” will preach the merits of tax reform in Bacolod City (Jan. 31), General Santos City (Feb. 7), Subic/Clark (Feb. 13), Zamboanga City (Feb. 21), Makati City (Feb. 28), Cebu City (Mar. 2), Baguio City (Mar. 7) and Tacloban City (Mar. 23).

DoF Undersecretary Karl Kendrick T. Chua and Assistant Secretary Ma. Teresa S. Habitan will lead speakers from the government, while lawyers Tomasa “Tammy” H. Lipana and Benedicta “Dick” Du-Baladad, co-chairpersons of PCCI’s taxation committee, will represent the business sector. Lawmakers from both chambers of Congress have also been invited to speak in the road show.

The DoF statement quoted PCCI President Ma. Alegria S. Limjoco as saying that the road show will “solicit… business sentiments and positions on the proposed tax measure.”

“We fully recognize the efforts of government to raise revenue to support its infrastructure projects and we hope that the proposed measure, once passed into law, would be beneficial for everyone,” she said.

It also quoted Ms. Du-Baladad as saying “[i]t is high time the granting of tax incentives is rationalized to remove the redundancies and make incentives clearer and more accountable.”

DoF’s proposed bill will repeal 150 laws granting fiscal perks and replace them with an omnibus law covering the 14 investment promotion agencies.

At the same time, PCCI Taxation director Edgardo Lacson said: “We cannot discount the fact that our country has the highest corporate income tax rate in ASEAN (Association of Southeast Asian Nations).”

“There is a need to reduce the rates to a level that will make us competitive in a field of countries competing for the same direct investment funds.”

But Tax Management Association of the Philippines President Raymund S. Gallardo said last Sunday that DoF’s plan to make the graduated CIT rate cut contingent on the raising of at least P26 billion per year from a streamlined fiscal perks regime could turn off investors. — Elijah Joseph C. Tubayan

Improved anti-dengue vaccine seen from mess

CHICAGO — New dengue vaccines being developed by Takeda Pharmaceuticals Co. Ltd. and US government scientists are poised to provide a safer alternative to Sanofi’s Dengvaxia, according to vaccine experts, because they already take into account some of the issues that sidelined the product last year.

Sanofi revealed in November that Dengvaxia — the world’s first dengue vaccine — might increase the risk of severe disease in people who had never been exposed to the virus.

The news prompted an uproar in the Philippines, where more than 800,000 school-age children had been vaccinated.

Next-generation vaccines by Japan’s Takeda and the US National Institutes of Health (NIH), in conjunction with Brazil’s Butantan Institute, are now in late-stage testing.

They both differ significantly from Dengvaxia, which may increase the chances for a stronger, more durable immune response, according to more than a dozen dengue experts interviewed by Reuters.

They expressed especially high hopes for the NIH vaccine, which protected 100 percent of volunteers who received it in a small study.

Merck & Co., Inc. holds an exclusive license for the NIH vaccine in the United States, Canada, China, Japan and the European Union, and plans to begin its own trials in the first half of 2018.

It’s too early to say whether either candidate will ultimately succeed, and experts await data from large, late-stage clinical trials.

And while Sanofi’s early safety troubles may delay licensing of new vaccines for a few years as global regulators seek assurances from longer-term data, the increased scrutiny should result in a better, safer product, they said.

“We’ve learned a tremendous amount about dengue from the Sanofi vaccine,” said Dr. Anna Durbin, a researcher at the Johns Hopkins Bloomberg School of Public Health who helped develop the NIH vaccine. “There is hope the two candidates coming down the pike can provide the benefit of a good dengue vaccine without the risk.”

LESSONS LEARNED
Dengue is the world’s fastest-growing infectious disease, afflicting up to 100 million people worldwide, causing half a million life-threatening infections and killing up to 25,000 people, mostly children, each year. An effective vaccine could be worth more than $1 billion globally, according to industry analysts.

There are four distinct types of dengue. A first infection with any one of them can increase the chances of severe disease when exposed to a second.

Experts say an effective vaccine must protect against all four types at once. A weak response to one of them could act like a first infection and leave a person vulnerable to severe disease when exposed a second time.

That is what appears to have happened with Sanofi’s Dengvaxia, according to vaccine experts.

“It wasn’t a uniformly high level of response to all four subtypes (of dengue) simultaneously,” Dr. Anthony Fauci, director of the NIH’s National Institutes of Allergy and Infectious Diseases, said in an interview.

Sanofi’s late-stage clinical trials, which were designed in 2009, collected blood samples from only 10-15% of study participants before they were vaccinated.

As a result, it was impossible to know when the studies were published in 2015 whether risks were greater in children who had never been exposed to dengue, said Dr. Su-Peing Ng, Sanofi’s global medical head, in an interview.

To answer this question, Sanofi developed a special test to re-analyze its results, leading to the November 2017 disclosure.

“We’ve been extremely transparent with our data,” Ms. Ng said, adding that the company consulted with the field’s leading experts as it was developing its vaccine.

Clinical trials testing the two new vaccines both require blood samples for all participants before they are vaccinated so they can quickly identify any similar risks.

Dr. Stephen Whitehead, who developed the NIH vaccine, said in a 2016 review that the long-term follow up from Sanofi’s studies “was instrumental in identifying safety concerns that are currently being investigated.”

IMMUNE RESPONSE
Dengvaxia uses a widely effective yellow fever virus vaccine as its genetic backbone. To induce an immune response to dengue, certain yellow fever genes were swapped out for dengue genes.

“It seemed like a bright idea 20 years ago,” said dengue expert Dr. Scott Halstead, an adjunct professor at the Uniformed Services University of the Health Sciences in Bethesda, Maryland.

In hindsight, Mr. Halstead said, simply splicing select dengue genes into a yellow fever vaccine may not present enough of the virus to the immune system to induce full protection.

Instead of yellow fever, Takeda’s vaccine, TAK-003, is based on a weakened version of a live dengue 2 virus.

“We’ve taken a dengue 2 virus backbone and inserted elements of dengue 1, 3 and 4,” said Dr. Rajeev Venkayya, president of Takeda’s global vaccine business unit.

That’s important, Venkayya said, “because it exposes an individual that is immunized to a broad range of proteins on the outside and the inside of the virus, which allows individuals to generate a broad immune response.”

Data published in November in Lancet Infectious Diseases showed Takeda’s vaccine produced responses against all four virus types, regardless of previous dengue exposure. There were no safety concerns.

Takeda’s vaccine is being tested in 20,000 children aged four to 16 in Asia and Latin America. Initial data are expected in late 2018.

Venkayya said the company’s research has shown the vaccine, given in two doses, can produce both antibodies to dengue as well as a second type of response in which immune cells — known as CD8-positive T cells — recognize and kill virus-infected cells.

Several researchers suspect exposure to the full spectrum of dengue proteins is key to developing a fully protective vaccine.

Johns Hopkins’ Durbin said the presence of T-cells triggered by non-structural proteins in dengue 2 could help clear the virus before people become sick.

But, like Sanofi’s Dengvaxia, the Takeda vaccine appears to produce an unbalanced antibody response, with the highest protection offered against dengue 2.

In a July 2017 paper published in Cold Spring Harbor Perspectives in Biology, Mr. Halstead said that it is also not clear whether Takeda’s vaccine will provoke T-cell immunity to the other three dengue viruses, clouding its potential to succeed.

The NIH vaccine, called TV003/TV005, also features weakened versions of live dengue, but three of the four components — dengue 1, 3 and 4 — are based on whole dengue viruses. The fourth component is based on a dengue 4 backbone with dengue 2 genes spliced in.

It has been shown to provoke a strong antibody response to all four types of dengue in a single shot, as well as producing T-cell immunity.

“It appears to be a true, protective, one-dose vaccine,” Mr. Halstead said.

Brazil’s non-profit Butantan Institute is testing the vaccine in some 17,000 participants in 14 areas with widespread dengue.

“Though you never, ever, definitively predict until after everything is completely over, everything we’ve seen on the preliminary work on that looks pretty good,” Mr. Fauci said. — Reuters

Powell era arrives as Fed pace looks ripe for rethink

WASHINGTON — The American labor market is sizzling, inflation more broadly in the US looks like it’s perking up and even a decade-long global economic recovery looks ready to shift into a higher gear.

No pressure, Jerome Powell.

As Janet Yellen prepares to step aside as the Federal Reserve chair this week and hand the levers of monetary policy to Mr. Powell, her gradual approach to interest-rate hikes aimed at countering a fragile recovery and low inflation looks increasingly timid.

The leadership transition at the world’s most powerful monetary authority comes just in time for a fresh approach.

Mr. Powell takes over as stocks worldwide are soaring and rising commodity prices are lifting emerging markets — so much so that the International Monetary Fund has raised its 2018 world outlook, buoyed by rebounds from Europe to Brazil.

Adding to the momentum are US tax cuts timed to further stoke consumer spending and propel companies already boosting investment.

The Fed, though, is straight-jacketed when it comes to timing its policy moves. While no one expects the US central bank to raise interest rates when the Federal Open Market Committee announces its decision on Wednesday, investors are anticipating about three rate hikes this year, timed to coincide with meetings when press conferences are scheduled.

It’s a constraint Mr. Powell may need to address soon as his Fed debates the need to speed up the pace of policy tightening or stay on track.

“We are in a pretty good place right now economically, but we’ve got a monetary policy that still seems like it is in the remnants of a Depression era,” Jes Staley, the chief executive officer of Barclays Plc, said in Davos, Switzerland, last week.

Bankers at the forum in the Alps sounded more worried about asset bubbles, and what happens when they pop, than an inflation rate that Fed officials have regarded as too low and meriting a go-slow policy.

“Bubbles are building,” Axel Weber, UBS Group AG chairman and former president of the German central bank, said in Davos.

“The impact of this current monetary policy on markets, rather than just on inflation, is something central banks have to focus a bit more on at this point.”

Mr. Powell has an opportunity to refocus the message. Financial markets bet that he continues Ms. Yellen’s “what-me-hurry?” approach to policy. There are good reasons to be cautious. Central bankers don’t precisely know where the policy rate begins to bite down on growth, and if they tighten too quickly they could choke the upswing.

What has to change, some economists said, is the way that his Fed signals responsiveness to economic conditions that could brighten more quickly than expected.

“The issue is: Is the Fed nimble enough?” said Vincent Reinhart, chief economist at Standish Mellon Asset Management in Boston and a former senior Fed adviser.

“They don’t give evidence of being data-dependent or making decisions meeting by meeting.”

There are few successful examples of a central bank smoothly warning markets it could shift to a more aggressive posture. The long shadow of the Fed’s 2013 Taper Tantrum cautions against abrupt moves. Yields on US 10-year notes jumped by more than a percentage point over several weeks after then-Fed chief Ben Bernanke said it would start trimming its monthly bond purchase program.

PRE-CRISIS LESSONS
At the same time, gradualism carries risks: reducing volatility, and setting up conditions for spending and borrowing based on potentially over-optimistic assumptions.

That was the lesson from the Fed’s experiment with “measured” pace forward guidance when it raised rates in predictable quarter-point steps between 2004 and 2006.

Despite five rate increases under Ms. Yellen, who began the hiking cycle in late 2015, the Chicago Fed’s Financial Conditions Index is at the lowest levels since the early 1990s.

“We have had the opposite of a taper tantrum — a substantial net easing of financial conditions,” said Ethan Harris, head of global economics research at Bank of America.

“The message of the Fed is starting to look a bit stale.”

There are at least three ways Mr. Powell could signal more sensitivity to changing conditions.

The Fed holds eight scheduled policy meetings a year and he could hold a press conference every time to explain his thinking, instead of after every other meeting, which is current practice.

Investors see much less chance of a policy move at non-press conference meetings, despite repeated insistence from the Fed that each one is “live” for action.

“If they wanted to just show up and do a press conference, they could,” said Seth Carpenter, a former senior adviser at the Fed in Washington who is now chief US economist at UBS Securities in New York.

“The probability of going to eight press conferences a year could be pretty high” under Mr. Powell.

Second, the statement is over-reliant on officials’ baseline forecast. Its boilerplate guidance says “economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate.” That doesn’t say anything about the weight officials give to other outcomes and how that might be shifting now.

That leads to the third way Mr. Powell could change communications. He could talk about prominent risks to the outlook and how the Fed might respond, said Andrew Levin, a Dartmouth College professor and former Ms. Yellen adviser.

It’s a “what if” exercise that the Fed staff already provides to policy makers before every meeting, he said.

“Mr. Powell has a mandate to make the Fed more systematic and more transparent — that is what many members of Congress have wanted to see,” Mr. Levin said.

“I think Mr. Powell can move things forward.” — Bloomberg

Treasury makes partial award of T-bill offer as banks bid higher

THE GOVERNMENT made a partial award of the P20 billion it planned to raise through the auction of Treasury bills (T-bills) yesterday, with yields rising across the board as market players await leads from the US this week.

The Bureau of the Treasury’s (BTr) offer yesterday was met with P31.5 billion in demand, well above program, but it only borrowed P16.5 billion via the three-month, six-month, and one-year debt papers as banks asked for higher returns.

Broken down, the Treasury made a full award of the P9 billion programmed under the 91-day tenor as it received bids worth P18.72 billion. The average rate rose to 2.321% from the 2.233% fetched during the previous auction.

Meanwhile, the government only borrowed P4.615 billion in the 182-day T-bills out of the P6 billion it offered, even as it received P6.965 billion worth of tenders from banks. Following the partial award, yields went up to 2.577% from 2.519% in the previous auction.

The 364-day securities were also partially awarded, with the Treasury accepting just P2.853 billion out of the P5.853 billion put forward by market players.

The accepted tenders for the one-year tenor fell short of the P5 billion the Treasury intended to offer, driving the average yield up to 2.925% from the 2.849% fetched in the previous auction.

“We saw that the demand came from the shortest end, which is the 91-day T-bill rate. We had the double the size on offer on that, but for the others, it’s a little bit over the offer size,” Deputy Treasurer Erwin D. Sta. Ana told reporters after the auction.

The P31.5 billion worth of total tenders was lower than the P50.1 billion of demand the Treasury saw in the previous T-bills auction.

“We think the liquidity is there but we can sense that the market is waiting for some leads,” Mr. Sta. Ana added, citing the upcoming meeting of US Federal Reserve’s policy makers and US President Donald J. Trump’s second State of the Union address.

Although analysts are expecting no policy change or surprises at the Jan. 30-31 Federal Open Market Committee meeting, Guian Angelo S. Dumalagan, market economist of Land Bank of the Philippines, said in a previous interview that there might be “hawkish hints” from the Fed’s policy makers.

The meeting will be the last for Fed Chair Janet L. Yellen, as she will be replaced by Jerome H. Powell.

Meanwhile, Mr. Trump is expected to tackle in his Jan. 30 State of the Union address five key policy areas: jobs and the economy, infrastructure, immigration, trade, and national security, according to CNBC.

Sought for comment, a trader said: “We still continue to see demand for the shorter end but players are asking for higher rates given the increases in US Treasuries and oil prices over the past weeks,”

Asked why the Treasury did not accept other offers for the six-month and one-year papers to fill its planned borrowing, the trader said the BTr is in a robust cash position following its successful retail Treasury bond offering late last year, where it raised P255.4 billion in fresh funds.

“I think its robust cash position will allow them to navigate through the volatile interest rate environment that we have right now,” the trader added.

The BTr plans to auction off P120 billion worth of Treasury bills and another P120 billion worth of Treasury bonds in the January to March period. This is higher than the P200 billion the government offered in the last quarter of 2017. — K.A.N. Vidal

SEC prepares guidelines on initial coin offerings

By Arra B. Francia, Reporter

THE Securities and Exchange Commission (SEC) will be releasing within the year guidelines for companies seeking to conduct initial coin offerings (ICOs).

SEC Commissioner Emilio B. Aquino, who also heads the agency’s Enforcement and Investor Protection Department, said the commission is now drafting the new guidelines.

“We need to act now because ICOs are sprouting globally, not necessarily in the Philippines. We want also to come out with our own set of regulations,” Mr. Aquino said in a press briefing at the Philippine International Convention Center in Pasay City on Monday.

He said the commission will be talking with financial technology (fintech) groups from the United States and Australia to come up with a model on how to regulate ICOs, given that no concrete guidelines have been set in other jurisdictions.

“We are sitting down with a fintech group from the US, we’re also sitting down with the Australian group to present to us some of their models… In short, we are sharing notes,” Mr. Aquino said.

Some companies and individuals around the world are using ICOs to raise money for their businesses and projects. Typically, investors in ICOs exchange currency such as US dollars or cryptocurrencies in exchange for a digital asset called coin or token.

Authorities in China and South Korea have already banned coin offerings, citing the heightened risks of scams.

In the United States, SEC Chairman Jay Clayton in a statement last December warned that some coins could be considered as securities and would be in violation of securities law if not registered.

Bloomberg reported start-ups have raised around $450 million in ICOs in January, citing Coinist. In 2017, ICOs raised $3.8 billion.

Mr. Aquino said the SEC is considering the inclusion of an “accredited investors plan” in the new guidelines, which it says would ensure investors participating in the ICO have the necessary background to understand the transaction.

“We would like to believe that some people, with certain levels of financial literacy, will understand the risk of investing. We might consider that, it should be somebody who understands the risks involved,” Mr. Aquino said.

SEC Director for Markets and Securities Regulation Department Vicente Graciano P. Felizmenio, Jr. noted the guidelines for ICOs would have similarities in principle with the new rules for crowdfunding, scheduled to be released within the first quarter.

“There are some basic principles that apply to an ICO. One because there is a public offer, then it would be covered by the SRC (Securities Regulation Code) for raising the funds. It just so happens that it is related to cryptocurrency… So the same exercise, but the focus would be different… because in this case the idea about the cryptocurrency itself is very much important to understand,” Mr. Felizmenio said.

In the absence of these regulations, companies seeking to conduct an ICO in the Philippines would have to comply with the SRC and disclose to the SEC all material information related to the investment.

“We’re not altogether banning ICOs. So long as you’re able to comply, you submit to us, we feel that investor protection issues are duly addressed and we get to see our investors, and then of course following strict disclosure requirements under the SRC, then more likely we will allow it,” Mr. Aquino said.

The SEC last week stopped the ICO of online marketplace KROPS, headed by businessman Joseph H. Calata, for failing to register the securities with the commission. A cease-and-desist order was served on KROPS, as well as Black Cell Technology, Inc., Black Sands Capital, Inc., and Black Cell Technology Ltd., which have been taking part in the ICO.

With the investigation on KROPS, Mr. Aquino said all other companies that have conducted ICOs but did not register with the SEC will be considered illegal.

The commission is now in the process of investigating entities that conducted such transactions without their knowledge, and will look into complaints from investors. 

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