UN survey praises RP financial reform accord

UN survey praises RP financial reform accord

UNITED NATIONS (AP): Restructuring the Philippine central bank
five years ago enabled the country to weather the worst of the
Asian financial crisis, a UN study says.

The Economic and Social Survey of Asia and the Pacific noted
that -- unlike Indonesia, Thailand and South Korea -- the
Philippines had made it through the crisis "without any incidence
of a failed bank or financial institution."

The report, released here Monday, said the Philippines'
relative success was due primarily to the 1993 restructuring of
the country's central bank.

"The enactment of a new Central Bank in 1993 created a new
independent monetary institution with large capitalization," the
report said. "The new Central Bank... has emerged as a much
stronger institution with more effective supervision of the
country's financial system."

The Philippines has not escaped the Asian crisis altogether.

President Fidel Ramos, whose six-year term expires in June,
has ordered all government agencies to reduce expenses by at
least 25 percent this year to avoid a budget deficit prompted by
recent declines in Asian currencies, including the Philippine
peso.

That has forced delays in many government development
projects. Furthermore, the regional drought brought about by the
El Nino phenomenon has led to food shortages in poor parts of the
country.

Nevertheless, the country has come through the Asian crisis in
better shape than many other East Asian countries.

The UN report also praised the Philippines for a series of
other reforms instituted by Ramos and his predecessor, Corazon
Aquino. These included limits on loans to directors, officers and
major stockholders, controls on interlocking directorships and
strict standards for capital adequacy and minimum risk-asset
ratios.

A series of increases over the years raised the minimum
capital requirements and mandated other measures to assure the
strength of the Philippine banking system, the report said.

The Philippine Congress approved the creation of a new central
bank in June 1993, allowing the government to restructure the
US$11.4 billion debt of the old institution.

Approval of the bill triggered the release of $450 million in
loans by the World Bank and the Japan Export-Import Bank.

The old central bank built a huge debt following the 1983
assassination of opposition Sen. Benigno Aquino, then President
Ferdinand Marcos' archfoe and President Aquino's husband.

Aquino's killing triggered a massive capital flight and
strengthened an opposition movement that culminated in the ouster
of Marcos in February 1986 and the rise of Corazon Aquino to the
presidency.