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.