THE collapse of US-based Silicon Valley Bank (SVB) and Signature Bank (SB) may not have an impact on the local banking sector but local economists are still closely monitoring the situation, particularly in light of remittances.
The Bangko Sentral ng Pilipinas (BSP) earlier assured the public that the Philippine banking system “remains safe and sound” despite recent developments since local banks do not have “material exposure to the failed institutions.”
However, Unionbank Chief Economist Ruben Carlo O. Asuncion said they are “closely watching” how the collapse of the banks would affect remittances coming from Filipinos based in the United States who would be affected by the closure of SVB and SB.
“We recognize that there are many Filipinos in California and [they] may be affected by the closure, specifically of SVB, that caters to Silicon Valley clients,” Asuncion told the BusinessMirror. “Although we lack specific data to garner a clearer picture, it is good to watch if Filipinos [Fil-Ams] employed or indirectly employed within the Silicon Valley system.”
One of the challenges in monitoring, however, is the availability of information. Ateneo de Manila University (ADMU) Department of Economics Chairperson Alvin P. Ang told this newspaper that there is not enough information about the sending practices of migrants in the US.
Ang said it is possible that if second generation migrants in the US are the ones working and are exposed to the collapsed financial institutions, they may not be the ones sending remittances since the first generation may also be living in the US.
However, he admitted that since there is not enough data to support this, it would be difficult to say how plausible this is. What is certain, Ang said, is that the US government’s recent decision to bailout the banks would not have an impact on remittances.
“There are few OFWs in the US. The bulk of the country’s remittances from the US come from professionals. But if these are second generation [Filipinos], it’s possible they are not sending remittances,” Ang explained to the BusinessMirror in the vernacular.
Asuncion added that “from what we know so far, we do not think that the adverse financial event will make any dent on the prospects of OFW remittances moving forward.”
Last Friday, the BSP said it recognized the actions taken by banking supervisory authorities in the US to address the potential contagion risk from the closure of banks. However, the BSP said it “will respond accordingly as market conditions evolve.”
“Our longstanding efforts in consultation with the industry in setting prudent standards and executing risk practices remain the key pillar in safeguarding the interests of the Filipino people,” BSP said. “We reiterate our earlier statement that our banks do not have any material exposure to the failed institutions.”
Earlier, the Bankers Association of the Philippines (BAP) assured the public that the fallout from failed US banks will not have a “substantial” or “material” impact on the country’s banking system.
The BAP explained that local banks have “diversified” deposit bases that include all sectors of the Philippine economy, allowing them “to continuously provide the liquidity needs of their clients.”
The group added that Philippine banks’ current capital and liquidity ratios continue to “exceed” the requirements set by the BSP.