Senator Win Gatchalian asked the Bangko Sentral ng Pilipinas (BSP) to demonstrate its capability to respond to possible monetary crises and other financial challenges if it is tapped to provide capital for the Maharlika Investment Fund (MIF) and its own full capitalization is delayed.
Gatchalian made the scrutiny after learning that tapping the central bank’s dividends as a fund source for the MIF would lead the financial institution to achieve its own full capitalization only after 17 years. The BSP is mandated under Republic Act 11211 or the Act Amending the New Central Bank Act, which was enacted into law in 2019, to increase its capitalization from P50 billion to P200 billion out of its declared dividends.
The senator took note that without a mandate to contribute its dividends to the MIF, it would take the BSP only 8 years to fill up its target capitalization. On the other hand, requiring BSP to pump into the MIF 100% of its dividends for 2 years and 50% thereafter would take the central bank 17 years to achieve full capitalization or a delay of 9 years.
“What I am quite concerned with is the ability of the BSP to respond in times of banking challenges and we cannot isolate that. The size of the banking industry was the compelling reason why we needed to build up the capitalization of the BSP. Now, delaying it for almost 2 decades does not give me the confidence that nothing bad will happen in the next 17 years. Anything can happen in the next 17 years. That is why the sooner we can build up the capitalization of BSP, the better for all of us,” Gatchalian stressed during a recent Senate hearing.
“If there’s trouble in the banking system, let’s say a currency crisis, are we ready to face all those challenges? Demonstrate to us that in the worst event, the BSP is ready to fight those challenges with a 50-billion capitalization,” the senator told the BSP.
“We were made to understand that the size of the banking industry has already outsized the capital of BSP. So, by delaying it by another 9 years obviously the size of the banking industry will be much bigger compared to the capitalization of BSP. Can you explain why the BSP is willing to forego 9 years of its capitalization build-up considering that your argument in the past was that the economy was 11.3 times bigger compared to 1993 and the banking system was 12.2 times bigger? What calculations have you done to make you forego your capitalization build-up by 9 years? What safeguards do we have to protect our banking industry?”, asked Gatchalian.
The senator emphasized the BSP needs to demonstrate that even in a worst-case scenario, the institution is equipped to respond to those challenges even if its full capitalization is delayed. In an earlier statement, Gatchalian also said that the privatization of government assets is a more logical and less controversial fund source for the MIF.