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MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) urged yesterday fund managers in the Philippines handling P3.8 trillion worth of funds to prepare for challenges brought about by the economic uncertainties in the US as well as the debt crisis in Europe.
BSP Governor Amando Tetangco Jr. told members of the Fund Management Association of the Philippines (FMAP) that there is a need to maintain prudence amid uncertainty.
“The asset management industry, as a whole, faces a market landscape that has fundamentally changed in the last four to five years. Today we live in an environment of more stringent capital requirements, steeper yardsticks of governance and higher standards for consumer protection,” Tetangco stressed.
He pointed out that heightened market volatilities are likely to persist due to difficulties in the eurozone and in the US.
“Thankfully, for the asset management industry in the Philippines, all of this gloom and doom across the globe appears to contrast with what we have here today. With the proactive collaboration amongst stakeholders, the outstanding volume of assets managed under a fiduciary arrangement has significantly increased,” he added.
According to him, total assets under management by FMAP members stands at about P3.8 trillion or more than double the September 2008 level of P1.7 trillion.
He added that both the growth of the industry and the Philippine financial market should not be taken in isolation of worldwide parameters.
He explained that the domestic financial market has become more vulnerable to external developments due to increased mobility of capital across global financial centers.
“The uncertainties across the globe have become more easily translated into volatilities in the domestic financial markets, complicating both how you manage funds and how we manage policy,” Tetangco said.
The BSP chief said the rapidly changing market landscape heightens the fiduciary responsibility of fund managers as the value of funds being managed declined significantly as global and domestic interest rates have come down.
He said fund managers should be able to explain to investors that the gains from risk-taking may not be substantially higher than the joys of outright consumption today.
“Indeed, prudence must take precedence so that we maintain a balance between what clients would like and what the market can offer,” he added.
Tetangco said the BSP has revised the corporate governance and compliance frameworks for financial institutions, including banks and fund managers, toprotect investors as well as the banking public.
“Now, more than ever, prudence and proper perspective are key to working within a global market that remains unpredictable. If the Philippine market is to avoid the same volatilities, we must ensure that we move forward with deliberate circumspect,” he said.
However, the BSP chief was quick to add that the direct exposure of the Philippines to Europe is insignificant at 1.4 percent as of end-June last year from January 2010 level of 2.9 percent.
“But a disorderly or massive deleveraging of banks could deepen recession fears in Europe as a whole, and then translate to weakness in the economies of its trading partners among the emerging markets, including the Philippines. Indeed, we have seen some of this weakness gets reflected in our own lower trade numbers,” he said.
As for the US, Tetangco said the BSP would remain watchful of developments to see if the recent run of positive economic numbers would in fact translate to sustained improvements in their unemployment and housing situations.
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