MANILA, Philippines – The Philippine economy remains well insulated despite the ongoing crisis in Marawi City and the increased political risk that comes with it, according to global research and consultancy firm Oxford Business Group (OBG).

Investor uncertainty in the new environment has already been voiced out with major credit watchers Standard & Poor's and Moody's both warning of increased political risk under the administration of President Rodrigo Duterte.

Despite the state of martial law in Mindanao, however, OBG noted that the unexpected tide of populism sweeping across the globe is more of a threat to the Philippine economy.

"The bigger issue is geopolitical risk. What's happening with [US President Donald] Trump, China, this global repositioning and realignment is more troubling. Investors have quite a good stomach for regional isolated risks," said Paulius Kuncinas, OBG managing editor for Asia.

"I'm not saying [the increased political risk] is insignificant. People are obviously paying attention but the economy will march on. I think we should pay more attention to geopolitical risks," he added.

Another expatriate, Michael Russell, who is president of the Clark Freeport-based Global Gateway Development Corporation, echoed this sentiment.

"You've seen so many economies throughout ASEAN (Association of Southeast Asian Nations) that have had their own hotspots over the years, but those economies have done incredibly well," Russell said.

"The Philippines has so many macroeconomic and socioeconomic factors that are driving the growth, so I think that's going to be [economic] momentum that's hard to stop," he added.

Ayala Corporation managing director and AC Energy Holdings Incorporated president John Eric Francia also shared what he said was the prevailing view of the business community that recent developments are "just political noise" and "it's business as usual."

The 3 executives were the panelists at the launch of OBG's 2017 annual economic report on the Philippines on Wednesday, June 14.

"The Report: The Philippines 2017" charts the country's long-running growth story, with particularly detailed coverage given to the Duterte administration's major economic moves, such as the proposed tax reform package and efforts to cut red tape as well as attract new investments.

This year's report also contains interviews with the President himself, Finance Secretary Carlos Dominguez III, and other members of the Cabinet.

Handling infrastructure projects

The panelists noted that investors' eyes are firmly on the Philippine government's ambitious infrastructure plan, dubbed "Build, Build, Build," which Francia said is at an important policy crossroads.

The Duterte administration has also said it would fund most projects through Official Development Assistance (ODA) or through the national budget, thus breaking with the established public-private partnership (PPP) scheme used by the previous administration.

"I think the government does have the financial capacity to do that. In my mind that's not an issue," Francia said.

He pointed out that the government's balance sheet is well-equipped for it, "given that the country's debt-to-GDP ratio stands at around 41% compared to Malaysia's 50+%, the US' more than 100%, while Japan is even higher."

But Francia cautioned that the government could be putting too much on its plate in terms of projects.

"I think the bigger issue is the organizational capacity and capability of government to carry out all of these large and complex infrastructure projects. It's not easy," he said.

"The government has put forward a lot of big, ambitious projects, whether rail-related or airport-related or roads. On top of that, they are also entertaining unsolicited bids. That also requires some real organizational capacity. So how do you do all that?" he added.

"My hope is that they make some hard choices early on to prioritize and recognize that we do have limited resources that should be channeled in a focused manner so that we get to execution fast." – Rappler.com

WASHINGTON DC, USA – The US Federal Reserve raised its benchmark interest rate by a quarter point to 1.0-1.25% on Wednesday, June 14, and signaled another increase remains likely this year, despite the recent spate of weak economic data.

In explaining this second rate hike of 2017 and plans for more increases in the coming months, Federal Reserve Chair Janet Yellen said the move reflected the progress in the world's largest economy, which continues to add jobs at a solid pace.

"The economy is doing well, is showing resilience," Yellen said in her quarterly press conference.

"We have a very strong labor market, an unemployment rate that's declined to levels we have not seen since 2001. And even with some moderation in the pace of job growth, we have a labor market that continues to strengthen."

And despite recent tepid price pressures, the Fed expects inflation to pick up – eventually, citing "one-off reductions" in certain categories such as cell phone services and prescription drugs as the reason for the recent lower readings.

Those factors mean the Fed's preferred inflation measure will remain below the two percent target for some time, but will gradually rise to the target level over "the medium term."

But coming on a day when the consumer price index and retail sales fell, in large part due to falling food and gasoline prices, but with widespread declines in other categories, some economists are saying the Fed is no longer basing its decision on the data, as it has repeatedly said.

"The third rate hike in 7 months, coming not long after a relatively poor Q1 GDP print, suggests the Fed has become less data-dependent in its monetary policy decisions," Fitch Ratings Chief Economist Brian Coulton said.

One FOMC member, Minneapolis Federal Reserve Bank President Neel Kashkari, dissented from the decision, preferring to keep policy on hold for now.

Third hike coming?

Analysts in recent weeks have become increasingly doubtful there would be a third rate increase later this year, as inflation, consumption and other economic data have indicated the weakness seen in the first quarter has continued.

Fed futures markets now put the chances for another rate increase this year to below 50 percent.

Chris Low of FTN Financial said the Fed "compromised" by continuing the rate increases despite falling inflation, but "the market expects the Fed to take a break."

However, Yellen said business and household confidence remain quite strong, and echoed the statement from the Fed's policy-setting Federal Open Market Committee, which repeated its confidence that the economy will continue to expand "at a moderate pace" even with further gradual rate increases.

Asked about the criticism, Yellen said, "I don't think ...the Fed's credibility has been impaired."

She once again said the path of interest rates "is not a pre-set course," but the Fed's quarterly projections show they still anticipate making a third rate increase this year, with the median federal funds rate ending 2017 at 1.4%.

That would be followed by three rate increases in 2018 and three more in 2019, with the key rate at 2.9% by the end of that period.

Forecasts

In their quarterly projections, Fed officials saw the economy growing slightly faster than previously forecast, with GDP up 2.2% this year, a tenth of a percentage point higher than forecast in March.

But the estimate for the central bank's preferred measure of inflation, the PCE price index, was cut 3/10 to 1.6%, while the core PCE, which excludes volatile food and energy prices, was cut two-tenths to 1.7%, according to the Summary of Economic Projections.

The Fed now sees the unemployment rate ending the year at 4.3%, where it sits currently, rather than the 4.5% previously expected.

The central bank also confirmed that it will begin later this year to implement a plan to reduce the size of its investment holdings, which were built up to record levels during the financial crisis to help support the economy, especially once interest rates reached zero.

As long as the economy "evolves broadly as expected," the plan "would gradually reduce the Federal Reserve's securities holdings," the FOMC statement said. – Rappler.com

MANILA, Philippines – At first, Arsenio Balisacan wasn't sure if he should agree to be the first chairperson of the Philippine Competition Commission (PCC).

After nearly 4 years of working as the country's socioeconomic planning secretary and two years of being the dean of the University of the Philippines Diliman's School of Economics, Balisacan said all he wanted was a simple, quiet life with enough time to enjoy long-distance running.

"I've been warned that there will be some challenges along the way. I've been told that if I'm trying to change the climate, the way things are done, then certainly I will be stepping on sensitive toes and they will not take me sitting down," Balisacan said in an interview with Rappler at his office in Pasig City.

It took the country 25 years before the Philippine Competition Act hurdled the legislative mill in July 2015. It is pretty new for businesses here in the Philippines to work with a competition commission – making the chairman's duty a tough job.

Balisacan took over antitrust duties at a point in the country's economic transformation when telecommunications companies were pushing for a digital pivot and technology firms were extending their reach into transportation and other industries.

"I knew there will be lots of challenges, but I [am not] one to run away from challenges," Balisacan said, recalling how the past year has been for the one-year-old PCC.

With several corporate mergers and acquisitions on the table, independent researchers have warned that some industries are becoming too concentrated, putting consumers in danger of high prices and fewer options in key services. (READ: Monopolies, duopolies hamper PH inclusive growth)

On May 30, 2016 – just 5 days before the PCC published its implementing rules and regulations – Balisacan and the entire commission faced their biggest challenge so far: PLDT Incorporated and Globe Telecom's P69.1-billion deal to buy out San Miguel Corporation's telecommunications assets.

Test case

The deal came after Ramon Ang, chairman of San Miguel, had announced that the firm would launch a supposed 3rd player to compete against the country's two telecommunications giants – PLDT and Globe – with or without a foreign partner. (READ: San Miguel's sale of telco business: Will consumers benefit?)

Foreign business chambers see this as the test case for the PCC, which earlier said that strong public clamor for faster, cheaper internet and mobile services could be set back by a lack of competition.

Since then, PLDT and Globe have been at odds with the PCC over whether the mega deal requires the regulator's approval. (READ: Battle lines drawn over San Miguel's telco buyout deal)

The PCC argues that the deal falls within the scope of its review. But PLDT and Globe insist that the anti-trust body's transitory rules provide the deal a "deemed approved" status.

This disagreement has led to court proceedings, latest of which is the PCC's petition to the Supreme Court (SC) to lift the injunction on the transaction review and to prevent the parties from further implementing the terms of the buyout.

Balisacan declined to address the controversial deal, since the battle is already in court. "We have consulted our lawyers here. At the end of the day, we will all be guided by the decision of the court."

But he gave hints of how he might act as the Philippines' top antitrust official. "In the experiences of other countries, this is not unique, especially in the public utilities. The Supreme Court has not decided yet. Several remedies can still be explored. Of course, we are not in the position to talk right now."

Despite criticism on how he is dealing with the case, Balisacan said that through the petition before the SC, he would like to send a strong message to consumers and businesses that the PCC – as the country's primary competition authority – will not back down.

Balisacan, an economist for over 3 decades, also clarified he would not go after a company just because it was big, and would do so only if there were violations of the antitrust law. (READ: PCC's 2017 priorities: Int'l shipping, cement, power, agriculture)

Hard work

Balisacan pointed out that he would not have worked hard during his time as the country's socioeconomic planning secretary if he would just burden the business community now.

"We worked very hard in the previous economic cluster to promote good business climate, [improve] the competitiveness ranking of our country, upgrade credit ratings, and entice investors. If you only know how hard we worked," Balisacan said.

"If I will be the one to burden the business community? I would rather resign. That is because it is against what I've been working for and what I believe in," he added.

In his nearly 4 years at the helm of the National Economic and Development Authority (NEDA), the full-year economic growth of the Philippines never dipped below 6%. It was also during his time, in 2015, when the unemployment rate fell to its lowest in a decade.

The PCC chief said the Philippines needs more investments to have more quality jobs. "Fostering good competition culture is what attracts investments. That is what creates quality jobs."

During his talk with William Kovacic, senior fellow at George Washington University, Balisacan said Kovacic "was quite impressed with how PCC is starting because its move is quite fast compared to other areas he has seen."

The PCC chief said Kovacic gave him advice: Invest a lot in manpower to readily face challenges as well as work closely with businesses and let them know the commission is there for the good of the community in the long haul.

Since June 2016, the PCC has received 102 notifications of mergers and acquisitions worth P1 billion and above. Most of these have already been approved, according to Balisacan.

"We are doing our best to put the competition environment here in the same environment as you've seen in places where investments are good," he said.

"In the end, an environment with good competition culture benefits consumers in terms of the prices they pay for and in terms of the quality of goods and services as well as the variety of options. That is, at the end of the day, our mandate." – Rappler.com

MANILA, Philippines – Conglomerate San Miguel Corporation (SMC) and its food manufacturing unit San Miguel Pure Foods Incorporated will comply with the planned 20% minimum public ownership being eyed by the Securities and Exchange Commission (SEC).

SMC president and chief operating officer Ramon Ang said the conglomerate as well as its unit San Miguel Pure Foods will sell some shares to comply with the public float requirement.

"Yes, [we] will comply. But it will only be small because we are almost at 20%," Ang said.

SMC's public float is currently at 15.27%, while San Miguel Pure Foods' free float is at 14.61%.

Meanwhile, SMC recently formed a wholly-owned subsidiary that will engage in buying and selling securities.

The conglomerate said its unit SMC Stock Transfer Service Corporation will acquire an existing trading right to participate in the trading of listed securities at the local bourse.

SMC chief finance officer Ferdinand Constantino said this venture will benefit the San Miguel group since it has many listed companies. Aside from SMC and San Miguel Pure Foods, the group also owns listed firm Ginebra San Miguel Incorporated.

SMC also plans to list its power generating unit San Miguel Global Holdings Incorporated in 2017.

"We are planning it before the end of the year," Ang told reporters.

The SEC conducted a public consultation on Wednesday, June 14, saying 68 listed companies will have to sell shares to comply with the 20% public ownership requirement by 2020.

Based on the regulator's proposal, the minimum public float of listed companies will be gradually increased from the current 10% to 15% by end-2018, as well as 20% by end-2020.

At least P130 billion worth of capital will be raised if all 68 firms decide to meet the 20% public ownership. – Rappler.com

MANILA, Philippines – Cash remittances or those coursed through banks by overseas Filipino workers (OFWs) dropped to their lowest level in 15 months last April.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday, June 15, showed that cash remittances for April 2017 fell 5.9% year-on-year to hit $2.083 billion compared to the $2.213 billion seen in the same month last year.

The April result comes after the record $2.615 billion seen last March, and is the lowest level cash remittances have totaled since registering $1.997 billion in January 2016.

The central bank attributed the drop partly to the decline in remittances from Saudi Arabia.

President Rodrigo Duterte brought home 138 stranded OFWs during his state visit to Saudi Arabia in April under an amnesty program.

Besides Saudi Arabia, there were also declines in Singapore, Australia, and the United Kingdom.

The BSP also noted that the lower US dollar value of remittances in April could be partly due to the depreciation of major host countries' currencies vis-à-vis the US dollar, such as the Singaporean dollar, Australian dollar, pound sterling, and the euro as well as the lower number of banking days in April.

But for the first 4 months of 2017, total cash remittances climbed by 4.2%, settling at $9.036 billion compared to the $8.67 billion total from January to April last year.

At the same time, personal remittances from OFWs in April also dropped by 5.2% to $2.317 billion compared to the $2.443 billion seen in the same month last year.

Total personal remittances for the first 4 months of 2017 stand at $10.026 billion, up 4.7% from the $9.577 billion in the same period last year. – Rappler.com

MANILA, Philippines – The country's financial markets closed lower on Thursday, June 15, after the United States Federal Reserve hiked interest rates for the 2nd time this year – a move widely expected by economists and investors.

The Philippine Stock Exchange index (PSEi) settled at 7,964.49, down by 1.52 points or 0.02%. The broader All Shares eased by 1.49 points or 0.03% lower to 4,727.56 points.

The Philippine peso, meanwhile, shed 12.5 centavos, ending the day at P49.630 versus the greenback. This is lower than the P49.505:$1 close on Wednesday, June 14. (READ: How a Fed rate hike impacts the Philippine economy)

"The Federal Open Market Committee's (FOMC) decision was the primary market mover today. The impact of [its] decision was likely tempered by weaker-than-expected US reports on inflation and retail sales," Land Bank of the Philippines market economist Guian Angelo Dumalagan said in an email correspondence.

The US Federal Reserve raised its benchmark interest rate by a quarter point to 1.0%-1.25% and signaled another increase this year, despite the recent spate of weak economic data.

"The market decided to sell a bit on news today, as the decision was expected. The [FOMC's] statement included modest upgrades to its description of growth but indicated decline in inflation and unemployment rate, and moderation in job growth," Luis Limlingan, head of sales at Regina Capital Development Corporation, said in a text message.

PH seen to keep rates

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) is seen to keep interest rates steady next week despite the 3rd rate hike by the US Federal Reserve in 7 months.

Outgoing BSP Governor Amando Tetangco Jr told reporters in a text message that the decision of the US central bank didn't come as a surprise.

"The Fed's action was broadly anticipated by the market and reflects the positive outlook of the Fed on the US economy and labor conditions. It also laid plans for shrinking its balance sheet, which gives the market another glimpse of the normalization process," Tetangco said.

Since December 2016, the US Federal Reserve has raised interest rates by a total of 75 basis points, hinting 2 to 3 rate increases this year alone.

Tetangco is set to preside over his last rate-setting meeting as chairman of the Monetary Board on June 22, as his unprecedented two 6-year terms will end in July. BSP Deputy Governor Nestor Espenilla Jr will succeed Tetangco. (WATCH: Rappler Talk: Incoming BSP Governor Nestor Espenilla on his plans) – Rappler.com 

MANILA, Philippines (2nd UPDATE) – BDO Unibank said on Friday, June 16, that it received reports of "potentially compromised" automated teller machines (ATMs) after some cardholders claimed to have lost money in their accounts.

"BDO has obtained reports of potentially compromised ATMs following reported losses from cardholders," the bank said in a statement on Friday.

It urged customers who discovered unauthorized transactions in their accounts to contact the bank so that they could be reimbursed after proper investigation.

"Customers with unauthorized transactions may reach out to the bank via formal channels so that their cases may be properly investigated and, where confirmed as impacted, may be reimbursed," BDO said.

"BDO would like to reassure the public that it exerts all efforts to protect its cardholders and their transactions," it added. 

It was not clear in the BDO statement whether the reported problem only affected its cardholders or all also cardholders of other banks who used their supposed compromised ATMs.

BDO received the reports a week after another major Philippine bank, the Bank of the Philippine Islands (BPI), suffered a "system glitch" that led to wrong amounts reflecting in its clients' accounts.

Last month, BDO also suffered a glitch, although on a smaller scale than BPI’s. BDO's connectivity issues prevented customers from using BDO ATM and credit cards, and its online and mobile banking systems for almost half a day.

Don't panic

BDO president and CEO Nestor Tan reassured clients that the bank exerts all efforts to protect them.

He said the issue will be addressed by the shift to the Europay Mastercard Visa (EMV) technology. 

“This is nothing out of the ordinary. ATMs are compromised every now and then, and banks take the pre cautionary measure of disabling cards if we have reason to believe they may have been compromised. Issues on this, will be addressed with EMV implementation,” he added.

The BSP has given banks one more year to fully comply with the mandatory shift to the EMV technology.

“This is a security protocol, moving cards from magnetic stripes to chips, which will make them secure. It is just a matter of time until the industry completes the implementation,” Tan said.

In a text message sent to Rappler, Honey Reyes, BDO assistant vice president for PR and external communications, urged customers not to panic.

“BDO reassures the public that there is no cause for alarm.  ATMs are compromised every now and then, with skimming being the most common form,” Reyes said.

"To protect our customers, we take the precautionary measure of proactively disabling the cards if we have reason to believe they may have been compromised.  In the meantime, customers whose cards have been disabled can transact over the counter at our branches anytime,” she added.

The problem of ATM skimming has been widely publicized in recent years and has led the Bangko Sentral ng Pilipinas (BSP) to adopt measures to fast-track local banks’ migration of its bank cards to the EMV standard.

EMV cards are distinguishable by the electronic chip embedded in them. They are considered more secure than cards that use the magnetic strip.

In a guideline issued on June 15, the BSP gave banks and other financial institutions until June 30, 2018, to fully comply with the standard, a year past the original target date of January of this year.

Banks that fail to comply with the order will face monetary sanctions from the BSP.

In the interim, the BSP said, non- or partially-compliant banks or financial institutions are mandated to book provisions for probable fraud losses starting September 30, 2017, until full compliance is achieved.– Rappler.com

MANILA, Philippines – Owners of some of the country's biggest listed firms would have to reduce control by selling more shares to the public by 2018, under a proposed rule of the Securities and Exchange Commission (SEC).

Under the proposed rule, the SEC wants to hike the minimum public float of Philippine listed firms to 20% from the current level of 10%.

Diversified conglomerate San Miguel Corporation and its major shareholder, Top Frontier Investment Holdings; Lucio Tan-led airline firm PAL Holdings Incorporated; and the Gotianun family's holding firm, Filinvest Development Corporation, are among those to be affected by the proposed rule.

Their public float level was at 15.25%, 11.9%, 10.22%, and 10.08%, respectively, as of end-2016. (READ: San Miguel to comply with 20% minimum public float)

They are among 68 companies – 25% of the 268 companies whose shares are traded in the Philippine Stock Exchange (PSE) – to be affected by the proposal, data from the local bourse show.

These companies are controlled by some of the largest firms in the Philippines and control a range of businesses that make up the daily fabric of Filipinos' lives, from financial services to property development, food and drink, and power supply.  

Others in the list are subsidiaries of the country's biggest business groups: Aboitiz Power Corporation (19.15%), San Miguel Pure Foods Company Incorporated (14.61%), Lopez family-led Rockwell Land Corporation (12.79%), and former senator Manuel Villar-led Starmalls Incorporated (10.3%), and recently listed Golden Haven Memorial Park Incorporated (15%).   

Tycoon Andrew Tan has 4 business units that would also need to comply: beverage firm Emperador Incorporated (16.53%), property unit Empire East Land Holdings (16.98%), tourism subsidiary Global-estate Resorts Incorporated (14.01%), and Resorts World Manila operator Travellers International Hotel Group (10.03%).

Here's what you need to know about the SEC proposal:

Why increase public float?

In a bid to increase liquidity and market depth, the SEC announced its plan to increase the public float in listed Philippine firms to 20%. 

Public float refers to a listed company's stocks owned by persons other than its directors, officers, and controlling investors. Essentially, these are individuals or entities who are the minority shareholders or have little say in how a company's management decides to run its operations. They acquired from or traded their shares through the stock exchange.  

The public ownership benchmark is required in companies that want to stay listed in the exchange.

Listed companies also enjoy tax privileges in stock transactions coursed through the exchange. Those that fall short of the minimum public float lose their "public ownership" status, in which case their transactions considered will be similar to typical business deals subject to capital gains tax, among others. 

This rule was revoked in 2005 but corporate governance advocates pushed for its revival. The 10% rule was reinstated in 2011. Those that failed to comply delisted.

The increase in minimum public float is among the reforms the SEC has been championing to reduce the risk of price manipulation and collusion in the stock market as well as promote a larger and more dispersed shareholding of companies.

Which sectors would be affected?

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Should the new regulation be implemented, 25% of the total number of firms currently listed on the stock exchange would be affected. 

Of the 68 firms that would need to raise its public float, majority come from the industrial sector – 19 companies involved in energy, oil, distillery, and food processing will need to sell more shares.

About 12 holding firms, 9 property firms, and 7 financial services firms will also be affected, as well as some transport, mining, and casino firms. These include the Sy-led SM Investment Corporation investee firm 2Go group and the country's most valuable mining firm, Nickel Asia Mining Corporation.

The SEC said at least P130 billion worth of capital would be raised if all 68 firms comply.

Here is list of firms whose public float is less than 20%:

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Of the 68 firms that will be affected, 41 will need to meet the end-2018 deadline of a 15% free float level. 

Remaining firms will have until 2020 to meet the 20% minimum public float level.

What happens if firms fail to comply?

If the proposed regulation is passed, firms that fail to comply with the new requirement will stand to lose a hefty sum.

Firms will also be subject to suspension and/or revocation of Registration Statements along with administrative sanctions indicated under Section 54 of Republic Act 8799 or the Securities Regulation Code.

Under this act, firms would be subject to any or all of the following:

• Suspension or revocation of securities
• A fine of no less than P10,000 and no more than P1 million, with no more than P2,000 for each day of continued violation
• Disqualification of roles pertaining to the reporting and carrying out of violations in tender offers, proxy solicitations, price manipulation, fraudulent transactions, and insider trading
• Imposition of fines pertinent to misactions and errors carried out by members, brokers, and dealers in purchases, sales, and communication on an Exchange

Firms who fail to meet the new requirement, should it be implemented, may also be subject to higher tax rates from the Bureau of Internal Revenue.

Deadlines

Here is a rundown of important dates in relation to the proposed rule:

May 31, 2017 – The SEC releases a memorandum circular for public dissemination on the proposed requirement which states: "All companies filing a registration statement pursuant to Sections 8 and 12 of the SRC and with intention to list their shares for trading in an exchange shall apply for registration with a public float of at least 20% of the companies' issued and outstanding shares." 

June 15, 2017 – Last day for public comments on the proposed increase in minimum public float.

July 1, 2017 – Intended date of the implementation of new rules and regulations on minimum public ownership of publicly listed companies.

End-2018 – Deadline for publicly listed firms that do not meet the minimum public float level to increase public float to 15%. 

End-2020 – Deadline for all publicly listed firms to meet the minimum public float level of 20%. – Rappler.com

MANILA, Philippines – Twenty Philippine companies are included in Nikkei Asian Review's list of the 300 most powerful and valuable Asian listed companies, with SM Prime Holdings Incorporated and Universal Robina Corporation making it to the top 30.

The previous list counted 19 Philippine companies in the circle.

Nikkei Asian Review's 2017 Asia300 Power Performers Ranking showed a Philippine newcomer: Bloomberry Resorts Corporation, the owner and operator of Solaire Resort and Casino. As of June 16, Bloomberry's market capitalization is P102.98 billion, data from the Philippine Stock Exchange showed.

In 2016, it registered its highest gross gaming revenue in a year since opening in 2013, ending the year with P38.3 billion. 

Other companies in the list are Aboitiz Power Corporation, Alliance Global Group Incorporated, Ayala Corporation, Ayala Land Incorporated, BDO Unibank Incorporated, Cebu Air Incorporated, DMCI Holdings Incorporated, GT Capital Holdings Incorporated, International Container Terminal Services Incorporated, JG Summit Holdings Incorporated, Jollibee Foods Corporation, LT Group Incorporated, Manila Electric Company, Metro Pacific Investments Corporation, PLDT Incorporated, San Miguel Corporation, and SM Investments Corporation. 

Of the 20 companies, only SM Prime and Universal Robina are included in the top 30. 

SM Prime's lead

SM Prime, the Philippines' biggest real estate company, climbed to the 23rd spot, from 25th, after it increased its market capitalization to P989.11 billion as of June 16.

SM Prime used to be the mall development arm of SM Investments, the publicly listed holding company of the Sy family, the Philippines' richest.

"But in 2013, the Sy family decided to consolidate its property assets under SM Prime. The consolidation process saw the Sy-controlled condominium builder SM Development, leisure property firm Highlands Prime, and privately held SM Land being folded into SM Prime," Nikkei said in its summary.

"The restructuring made SM Prime the Philippines' biggest real estate company and one of the largest in the region in terms of market capitalization," the Japanese publication added.

Universal Robina's biggest jump

Meanwhile, Universal Robina, the food and beverage company of the Gokongweis, climbed 47 notches to the 26th spot.

Nikkei said Universal Robina remains the leader in market share in terms of snacks, candies, chocolates, canned beans, and ready-to-drink tea in the Philippines and the 2nd leading in terms of cup noodles and instant coffee. 

In a bid to expand its presence in Southeast Asia, Universal Robina had said it plans to put up production plants in Laos and Cambodia.

Last year, the Gokongwei-led firm teamed up with Calbee for the production and sale of the Japanese snack maker's products in the Philippines, took over New Zealand's NZ Snack Food Holdings for $550 million, as well as partnered with Danone Asia Holdings in a bid to expand its beverage portfolio.

Nikkei Asian Review's annual Asia300 Power Performers Ranking is a compilation of the most powerful and valuable listed companies in Asia.

It is the publication's exclusive selection of the biggest and fastest-growing companies from 11 economies across the continent.

"We compiled the ranking by analyzing the 327 companies on that list, taking into account a mix of 4 factors: growth, profitability, efficiency and financial soundness," Nikkei said in its report.

Earning the top spot in the 2017 list is Taiwan's Largan Precision Company Limited, the world's leading maker of lenses for smartphone cameras. Indian firms composed bulk of the list.– Rappler.com

MANILA, Philippines – In the first 5 months of the year, a net total of $543.79 million in foreign portfolio investments flowed out of the economy, according to data by the Bangko Sentral ng Pilipinas (BSP).

This is in stark contrast to the $178 million in net inflows for the January-May period last year.

The BSP attributed this year's result mainly to the lack of inflows.

"While outflows were relatively steady, there was a substantial drop in inflows which may be attributed to continued uncertainties arising from domestic and international developments," the central bank said in a statement last Thursday, June 15.

These developments included "the United States air strike against Syria, global terrorist attacks, the interest rate increase by the US Federal Reserve in March 2017, and the closure order for several mining companies in the Philippines," it added.

Beyond these, clashes in Marawi City also erupted on May 23, resulting in the declaration of martial law in Mindanao.

Total inflows for the 5-month period stood at $6.380 billion compared to $7.113 billion in inflows amassed during the same time last year.

Total outflows for the period, meanwhile, hit $6.924 billion compared to the $6.935 billion recorded for the same time last year.

Foreign portfolio investments are often referred to as hot money because these can enter and leave a market very easily, in contrast to the longer-term foreign direct investments.

May portfolio investments

For the month of May alone, net outflows amounted to $24.35 million, a reversal from the net inflows of $51 million in April and the $73 million seen in May last year.

Total registered investments for May stood at $1.5 billion, reflecting a 12.5% increase from the $1.3 billion recorded in April.

Year-on-year, however, inflows declined by 16.8% from $1.8 billion a year ago.

The bulk or 79.1% of the investments registered were Philippine Stock Exchange (PSE) listed securities, which went mainly to holding firms; property companies; banks; food, beverage, and tobacco firms; and utilities.

Another 18.4% went to peso government securities while the remaining 2.5% went to other peso debt instruments.

Transactions in PSE-listed securities and other peso debt instruments yielded net inflows of $103 million and $35 million, respectively, while investments in peso GS resulted in net outflows of $163 million.

The United Kingdom, the United States, Singapore, Malaysia, and Luxembourg were the top 5 investor countries for May, with a combined share of 76.9%.

Meanwhile, the US continued to be the main destination of outflows, receiving 79.2% of total remittances. – Rappler.com

MANILA, Philippines – Listed property developer MRC Allied Incorporated is venturing into the energy business, targeting to develop at least 1,000 megawatts (MW) of power generating capacity in the next 5 years.

To achieve the target, the company, which is 51.9% owned by Menlo Capital Corporation, is determined to put up at least 200 MW of capacity every year until 2020.  

All in all, the cost to achieve the 1,000-MW target is estimated to reach anywhere from P80 billion to P100 billion, said MRC Allied's newly appointed president Gladys Nalda.

"We are currently pursuing a new thrust. We plan to develop at least 1,000 megawatts of clean and renewable energy by 2022," said Nalda, former vice president for legal and corporate affairs of state-owned PNOC Renewables Corporation and legal counsel of the Department of Energy.

Half of the planned 1,000 MW would be renewable energy, while the other half would be a mix of various renewable energy technologies and could include liquefied natural gas, said Nalda. 

Not all power projects would be built from scratch as MRC Allied is open to acquiring or partnering with existing renewable energy developers, particularly those power projects that failed to secure incentives from the government via the Feed-in-Tariff (FIT) scheme.

"There's an opportunity for us to acquire existing renewable energy plants, specifically those that are already connected to the grid [which] will provide us with immediate returns," she said.

The company will raise funds to finance these capital-intensive power projects. (READ: Renewable energy is healthy energy)

"To achieve this goal, we will endeavor to raise funds either on our own or with strategic partners. We will aggressively explore all available options to raise capital and finance our RE projects," Nalda said. She, however, refused to divulge identities of prospective investors.

For 2017, MRC Allied has an aggregate of 160-MW solar capacity in the pipeline.

These are the 60-MW solar plant in Naga City, Cebu and the 100-MW solar power project inside the Clark Green City in Tarlac. Both are still in the pre-development stage.

Menlo Renewable Energy Corporation, a 100% subsidiary of MRC Allied, will handle these solar projects.

Menlo Renewable's solar power project in Cebu will cost P3 billion.

For the solar project in Tarlac, Menlo Renewable has partnered with the Bases Conversion and Development Authority (BCDA) and Sunray Power Incorporated. The project cost is estimated at P5 billion.

Project commissioning for the two solar power projects is expected to happen two years from now.

Once operational, Nalda said these two projects could initially contribute at least P619 million in revenue.  

For this year, the company plans to issue preferred shares worth P1 billion for its funding requirements, in addition to an earlier plan to conduct private placement also worth P1 billion.

Dolphin Fire Group, an investment house owned by Menlo Capital Corporation, has a stake in Rappler. MRC Allied director Bernard Rabanzo is one of the largest shareholders in Dolphin Fire. – Rappler.com

PARIS, France – The aircraft industry descends on Paris for the world's biggest airshow Monday, June 19, which sees bitter rivals Boeing and Airbus battle for contracts as newcomers snap at the heels of the two giants.

Single-aisle planes for short and medium distances are the hottest ticket in the world's civil aviation industry, with airline demand for models in the Airbus A320 family giving the European company an edge, for now, over its American opponent, which is racing to return in force to the mid-range segment.

But the duopoly is not without challengers: Competition is looming, notably from Russia and China who have each been test-flying their own mid-range models.

Boeing, meanwhile, is to showcase the 737 Max 9 model as its anti-Airbus weapon in a market segment where squeezing a few more seats into a narrow-body cabin while eking out increased fuel efficiency over greater ranges is key.

Airbus's biggest-capacity member of the mid-range family, the brand new A321neo, is able to fit in 236 seats in an all-economy class version. Low-cost airlines are eyeing the aircraft to break profitably into transatlantic routes.

Coming up next from Boeing is the 737 Max 10 which is to match that capacity, while also being lighter and cheaper, the plane maker has said. Test flights have been completed and Boeing is now talking to customers about placing orders.

"This airplane would give airlines increased capacity and the lowest seat costs ever for a single-aisle airplane," said Randy Tinseth, vice president for Boeing Commercial Airplanes.

"Simply put, the 737 MAX 10X would be the most profitable single-aisle airplane the industry has ever seen," he wrote in a blog entry.

Airbus will also showcase its new long-haul model A350-1000 and Boeing its 787-10 Dreamliner while Ukraine's Antonov will present its 132 D.

While new civilian aircraft orders will probably fall short of the $130 billion the Paris show clocked up last time – mostly thanks to booming orders for Boeing and Airbus – the industry is still optimistic about sustained long-term growth.

Airbus said earlier this month it expects the market for large passenger planes to more than double in the next 20 years driven by growth from Asian markets.

The planemaker predicts the need for 35,000 new planes worth $5.3 trillion over the next two decades, an increase from last year's estimates.

The biennial Paris Airshow, which runs to June 25, is expected to attract 150,000 industry professionals from 2,370 companies.

There will also be some 200,000 regular visitors, many of whom will come especially for spectacular displays of supersonic military hardware as fast combat planes break the sound barrier. One star performer will be Lockheed Martin's F-35A new generation fighter jet. – Rappler.com

MANILA, Philippines – DoubleDragon Properties Corporation has partnered with Ascott Limited to build a 5-star luxury serviced apartment in Pasay City, targeted to be operational by 2020.

DoubleDragon, a joint venture between a firm of Edgar "Injap" Sia II and Tony Tan Caktiong's company, told the local bourse on Monday, June 19 that this luxury serviced apartment will serve as the third phase of its flagship project, DD Meridian Park, located at the Bay Area, corner Macapagal Avenue and EDSA Extension, Pasay City, Metro Manila.

Named as Ascott-DD Meridian Park Manila, this development will sit on a 5,567 square meter lot within the 4.8 hectare complex of DoubleDragon and is set to have over 300 units.

"The location of the upcoming Ascott-DD Meridian Park Manila is very ideal for the project given its close proximity to the Manila Domestic and International Airport, Department of Foreign Affairs, Mall of Asia and the Entertainment City," DoubleDragon chief information officer Joselito Barrera Jr. said in the disclosure.

DoubleDragon said the construction of Ascott-DD Meridian Park Manila is set to break ground by end-2017.

Its subsidiary, DD-Meridian Park Development Corporation, signed an agreement with Ascott on Monday, June 19 for the 5-star serviced apartment. 

Ascott is a member of CapitaLand, one of Asia's largest real estate companies. Headquartered and listed in Singapore, it owns and manages a global portfolio worth more than S$78 billion as of March 31, 2017.

The 4.8-hectare DD Meridian Park will consist of 8 towers that is expected to have about 230,000 square meters of leasable space.

The first phase with 4 towers named DoubleDragon Plaza is set to be completed by the last quarter of 2017; while the second phase, DoubleDragon Center-East and DoubleDragon Center-West, is expected to be done by end-2018.

The development of Ascott-DD Meridian Park Manila is expected to further enhance the profile of the entire development and "meaningfully contribute to the recurring revenues of DoubleDragon," Barrera said.

In 2016, DoubleDragon saw its net income more than double to P1.47 billion, after its recurring revenue almost tripled.

It marked a major milestone for DoubleDragon after it breached its P1-billion net income target for 2016, which it committed when it went public 3 years ago.

By 2020, the company aims to reach P4.8 billion in net income upon the completion of its goal of a one-million-square-meter leasable portfolio. – Rappler.com

MANILA, Philippines – Asia Brewery, the beverage arm of the Lucio Tan-led LT Group Incorporated (LT Group), will capitalize on its partnership with Heineken International by producing two of the latter's most popular beers in the country.

Asia Brewery signed a deal last year with Heineken International to form AB Heineken Philippines Incorporated. The deal allows it to distribute and brew Heineken brands, notably Tiger beer and Heineken itself, in the country.

"The partnership just started and it looks promising. We want to be a decent-sized player growing profitability. Right now we're still importing the beers but we will be brewing soon," said LT Group president Michael Tan following the company's annual stockholders' meeting on Tuesday, June 20.

"We'll start producing Tiger beer first this year and then later move on to producing Heineken locally which we are trying for this year also," he added.

The move is part of the firm's plans to establish itself in the premium beer space which it sees as ripe to enter. It is also a way for the company to boost its presence in the local beer market where it has a 5% share based on its own estimates.

While Tiger beer is positioned in the mass market, Asia Brewery currently has 3 brands it describes as premium – Heineken, its own Brew Kettle, and Asahi.

"We'd like to cater to different segments of the market. So far, our existing portfolio is in the mass market so we would like to make it more premium," Tan said.

"There's more disposable income right now so people would want to trade up. The premium segment is quite small and dominated by imported beers but even that is small, around less than 1%," he added.

The premium segment is described as beers priced between P40 and P50 at groceries. Asia Brewery figures the segment is still relatively within reach of majority of the populace, especially with the economy at an upturn.

"It's a pyramid – the volumes are small but the margins are higher. I think for the particular segment beer, it would be easier because the competition is not as fierce. The strong beers are in the lower segment," Tan noted.

LT to upgrade breweries, Eton, PNB

Tan also said the company is "spending probably more than P600 million to upgrade its breweries to be able to produce the beers" but declined to give the exact figures.

Asia Brewery has two breweries – one in Cabuyao, Laguna, and one in El Salvador, Misamis Oriental.

Together, they can produce 4 million hectoliters, but only 25%-30% of capacity or just 1 million hectoliters is currently being produced. A hectoliter is equivalent to 100 liters.

The investments will be spent on retooling the production line in these facilities to produce both Tiger and Heineken.

The investment is part of the LT Group's larger plan to spend around P10 billion this year, P3 billion more than the P7 billion it spent in 2016.

Around P5 billion of the P10 billion will go to the group's real estate arm, Eton Properties. Eton has partnered with Ayala Land for a 35-hectare mixed-use township along C5.

Another P2 billion to P3 billion is earmarked for the group's banking arm, Philippine National Bank (PNB), to upgrade its IT and electronic systems. The bank is focusing on developing its digital strategy, which comes amid the recent system glitches of its rivals.

LT Group recorded an attributable net income of P9.39 billion in 2016, 42% more than the P6.6 billion in 2015.

PNB registered the largest share of the income with P3.42 billion or 36%, followed by the group's tobacco arm Philip Morris Fortune Tobacco Corporation with P2.58 billion or 27%.

Asia Brewery contributed 19% of the group's income at P1.75 billion, while Tanduay contributed P908 billion or 10%.

The remainder came from Eton at P388 billion or 4% and Victorias Milling Company with P142 million or 2%.– Rappler.com 

MANILA, Philippines—The peso once again broke the psychological barrier of 50 to 1 US dollar, closing at its lowest level in two months amid hawkish comments by the US Federal Reserve (Fed).

The peso lost 19 centavos to close at 50.1 to $1 on Tuesday, June 20, from Monday’s 49.91 to $1. It opened weaker at 49.99 and hit 49.97 before losing to close at an intra-day low of 50.1.

Tuesday’s close represents the lowest level the peso has been at since it closed at 50.08 to $1 on April 7 this year.

In addition, trading volume was heavy at $1.15 billion Tuesday from $572.6 million on Monday in a sign that Bangko Sentral ng Pilipinas (BSP) entered the market.

Outgoing BSP Governor Amando Tetangco Jr attributed the weakness to the US Fed’s hawkish stance since raising its interest rate last week.

“It is a reaction to external developments particularly the hawkish statements of Fed officials overnight. So all regional currencies have responded the same way. We are just moving with other regional currencies,” Tetangco said on Tuesday.

The US Fed raised interest rates by another 25 basis points on June 15 while maintaining its outlook for one more hike for this year despite weak inflation in the US economy. (READ: How a Fed rate hike impacts the Philippine economy)

This was the second time this year that the Federal Reserve raised rates as part of its shift to tighten monetary policy.

Watching inflation

Security Bank said in its Daily Market Edge report that the US dollar resumed its ascent after New York Federal  Reserve president William Dudley reiterated the hawkish stance of  US Fed chair Janet Yellen last week.

Dudley said that while US inflation is low, it should rebound alongside wages as the labor market continues to improve.

His comments follow data released by the US Labor Department last week that showed that US core inflation fell to 1.7% in May from 2.3% in January.

“We still prefer to own US dollar as we anticipate a hawkish front from the Fed speakers this week,” Security Bank said.

Tetangco meanwhile reiterated that the central bank maintains a market-determined rate and does not support a certain trend in the foreign exchange rate.

“The BSP policy is [keeping a flexible exchange rate]. We want to minimize sharp fluctuation and volatility,” he said. –  Rappler.com

MANILA, Philippines – Philippine Airlines (PAL) will buy 7 planes from Canada's Bombardier as part of an effort to regain its dominance of the growing air travel market, the carrier said Tuesday, June 20.

PAL said it sealed the deal for 7 Q400 turboprops, worth $235 million at list prices, at the Paris Air Show.

The carrier aims to increase its fleet serving smaller islands in the archipelagic nation.

"We used to be the only carrier in the Philippines. We used to be the dominant domestic player," a statement quoted PAL president Jaime Bautista as saying in Paris.

However the rise of budget airlines starting in the late 1990s eroded PAL's market share. Upstart Cebu Pacific eventually overtook it to become the Philippines' largest carrier. (READ: Cebu Pacific to buy 7 Airbus jets for $812 million)

"The management of Philippine Airlines believes we should get back the market share we used to own," Bautista said.

The new 86-seat Q400s and other types of narrow-bodied aircraft would enable PAL to do that, he added.

The acquisition of the 7 Q400s would be on top of 5 Q400 planes worth $168 million which PAL ordered last December but which have not yet been delivered.

PAL, which has a fleet of 81 planes, already operates 5 Q400s and 4 smaller Q300 aircraft from Bombardier. These service airports that cannot handle wide-bodied planes. (READ: PAL to start flying nonstop to 7 Middle East destinations in March) – Rappler.com

My accountant reassured me that since we are "cooperating" with Bureau of Internal Revenue (BIR) examiners we have nothing to worry about. Is he correct? Can we not be audited again for the same year or for the prescribed years? What are the consequences of tax fraud?

He's incorrect. Even audited or prescribed years may still be subject to BIR audit if there is evidence of fraud.

The following are the consequences of tax evasion:

• Civil penalties resulting to the imposition of a 50% surcharge
• Criminal penalties resulting to imprisonment and/or imposition of a fine upon conviction by the judicial courts 
• Power of the BIR to assess and collect the tax is extended to 10 years from the date of discovery of the fraud case
• Fraud cases cannot be the subject of a compromise

I usually read in the papers about the BIR filing tax evasion cases against celebrities. Is it true that only big taxpayers and personalities may be charged with tax evasion? What are the sources of RATE cases?

No. Cases under the Run Against Tax Evaders (RATE) program may come from any or all of the following sources:

• Routine audit examination of tax return/s by the BIR
• Confidential information filed by informers
• Information obtained by the BIR from third parties
• Referrals from other government agencies 
• Newspaper reports

In our industry, it is common not to declare all revenues or to buy receipts to reduce taxable income. Honestly, I find this really unfair to those of us who are paying the right taxes. Where can I report tax evaders? Is it true that there's a reward for informers? How about for those paying the right taxes – is there no incentive?

If you know any individual or company not paying the right taxes, you may directly email BIR Commissioner Caesar Dulay at caesar.dulay@bir.gov.ph. Taxpayers may also contact the Customer Assistance Division (CAD), formerly the BIR Contact Center, for their tax queries and concerns using the following new numbers: 981-7003; 981-7020; 981-7030; 981-7040; 981-7046; or email their tax queries and concerns at contact_us@bir.gov.ph.

Yes, there is a reward for informers. An informer's reward is given to a person instrumental in the discovery of tax fraud. The reward is a sum equivalent to 10% of the surcharges, revenues, or fees recovered and/or fine or penalty imposed and collected, or P1,000,000.00 per case, whichever is lower.

Meanwhile, for those who are paying the right taxes, CSR Philippines in partnership with the BIR launched the Seal of Honesty (SOH) Certification Program which will grant the following incentives to certified taxpayers:

• Issuance of annual tax clearance, without prejudice to information not available at the time of issuance
• Last Priority Audit
• Other privileges to be determined by other government agencies

For inquiries and/or reservation to attend the exclusive roundtable discussion on how to apply for SOH, email us at info.sealofhonesty@gmail.com or call (+63) 2 3725727. – Rappler.com

Mon Abrea, popularly known as the Philippine Tax Whiz, is one of the 2016 Outstanding Persons of the World, a Move Awards 2016 Digital Mover, one of the 2015 The Outstanding Young Men of the Philippines (TOYM), an Asia CEO Young Leader of the Year, and founder of the Abrea Consulting Group and Center for Strategic Reforms of the Philippines (CSR Philippines). He currently serves as Adviser to the Commissioner of Internal Revenue of the Philippine government on tax administration reform in promoting inclusive growth. Follow Mon on Twitter (@askthetaxwhiz) or visit his Facebook page. You may also email him at consult@acg.ph.

Bookmark this page to watch the hearing at 9:30AM

MANILA, Philippines – The Senate Committee on Banks, Financial Institutions and Currencies will conduct a public hearing on the system glitches that affected customers of the Bank of Philippine Islands (BPI) and BDO Unibank.

On June 7, many BPI clients discovered unauthorized transactions in their accounts, which the bank quickly attributed to a system glitch. BPI said the problem would be fixed within the day.  (READ: BPI clients frustrated over service concerns, money woes due to glitch)

BPI shut down its electronic channels, including ATMs, while it fixed the problem. It restored the system past 9 pm on Thursday, June 8. 

On the other hand, BDO Unibank said June 16, that it received reports of "potentially compromised" automated teller machines (ATMs) after some cardholders claimed to have lost money in their accounts.

Watch the hearing live on Rappler. – Rappler.com

MANILA, Philippines – The Bank of the Philippine Islands (BPI) assured a Senate panel on Wednesday, June 21, that its recent system glitch was “100%” not a case of hacking. (Read: BPI system glitch causes mispostings on client accounts)

At a Senate inquiry on the technical glitches at the BPI and BDO Unibank on Wednesday, BPI executives took turns explaining that their cybersecurity systems were in place, and that there was nothing “aberrant” across multiple cybersecurity fronts. 

"Your honor, [we are] 100% definite it is not a hack," BPI executive vice president for enterprise services Ramon Jocson said at the Senate probe into the bank's system glitch that caused unauthorized transactions in many of its clients' accounts.

Jocson also said that BPI consulted its two third-party service providers, FireEye Mandiant and IBM, which did not find hacking concerns relating to the glitch.

FireEye Mandiant, a cybersecurity vendor, uses tools to “look out for any noise" while IBM  manages BPI’s cybersecurity operations.

Jocson was responding to questions from Senator Francis Escudero, chairman of the committee on banks, financial institutions and currencies, which conducted the inquiry.

BPI President and CEO Cezar Consing told the Senate panel that about 1.5 million of BPI's 8 million clients were affected by the glitch.

Programmer's error

During the hearing, Consing said the glitch was due to human error – a programmer had inputted bank transaction data under the wrong dates.

This human-caused “internal data processing error” led to account balances being updated using transactions from another date (April 27 to May 2) instead of June 6, the day when the incorrect account balance postings began. 

In response to Senate Minority Leader Franklin Drilon, Consing said that the concerned programmer had a “lapse in judgment" and had no malicious intent, especially as the person “had nothing to gain at all” from such an error.  

Jocson said it was "pinpointed that this person was to blame" and that the programmer "owned up to committing the mistake."

BPI executives did not name the programmer but referred to the person as "she" during the course of the inquiry. She had been with BPI for 3 years, and was at the “top of her programming class.”

Jocson said the error was the product of the programmer's “zeal to do things faster.”

Asked what sanctions the programmer faced, BPI executives said their internal investigation was still ongoing.

"Until this [investigation] is concluded, said person has been reassigned to another area, and all her access rights to our system had been taken out," Jocson said.

BPI executives revealed during the inquiry that their cybersecurity operation center tracks “20,000 events per second.”

A person logging in to their online banking system, transactions through a teller – these are counted as some of the events that the system counts. The operation center uses tools to identify “aberrant behavior” in these events. BPI said that no such behavior was detected relating to the incident. 

A breach or a hack, BPI told the Senate panel, would have an effect on the data traffic within their systems that they would have seen or noticed. It said no such aberrations were seen in the traffic that would have pointed to a cybersecurity concern. – Rappler.com

MANILA, Philippines – Two of the country's biggest banks assured the public there is no need to worry despite the glitches and scam that hit them recently, affecting customers.

Representatives of the Bank of the Philippine Islands (BPI) and BDO Unibank said this on Wednesday, June 21, during a hearing of the Senate committee on banks, financial institutions, and currencies.

They also said preventive measures have been put in place to prevent a repeat of these incidents. 

BPI president and chief executive officer Cezar Consing maintained there was no hacking involved when the bank's system had to be shut down for at least 26 hours in June. The problem was caused by one of their programmers' "error in judgment." (READ: BPI system glitch causes mispostings on client accounts)

"We regret the error and we are working to ensure that there'll be no repeat of this unfortunate incident. We informed the regulators that there was no breach of data privacy. I can assure you, we will continue to do everything we can to gain our standing with our regulators, clients, the public, and you, lawmakers," Consing said.

Ramon Jocson, BPI executive president and head of the Enterprise Services Group, told the Senate panel that the programmer owned up to her mistake and was already transferred to another area.

Jocson also said the programmer, who belonged to the top of her class, has no links to syndicates or groups.

BPI's system glitch happened on June 6 and lasted until June 8. It affected 1.5 million of the bank's 8 million clients, with the bank suspending its online and electronic services for a total of 26 hours.

Senate Minority Leader Franklin Drilon also allayed the public's fears, saying the issue is now "under control."

"It's under control. There is no reason to worry. It's a glitch, human error, no malice. The important thing is the bank is able to respond," Drilon said in an interview outside the hearing.

BDO, for its part, reported that 7 of its automated teller machines (ATMs) had been "compromised" due to skimming, but assured the public there is no need to be alarmed.

"BDO adheres to principles of quality control. BDO assures the public that there is no cause for worry," said Edwin Romualdo Reyes, executive vice president and head of the Transaction Banking Group.

Senator Francis Escudero, committee chair, said the probe has so far shown that the two banks are not liable.

"Magkaka-liability lamang kapagka intentionally may ginawang mali or may ginawang mali sa kapabayaan o negligence. Kung talagang pagkakamali o honest mistake, 'ika nga, maski sa ordinaryong buhay natin, walang liability ang nagkamali lang talaga. Maliban na lang kung negligent 'yung pagkakamali or intentional," Escudero said.

(There would only be liability if there was an intentional wrongdoing or an error out of negligence. But if it was an honest mistake, just like in our ordinary lives, there is no liability unless it's out of negligence or intentional.)

Escudero said he would still study the possibility of holding a second hearing on the matter.

Steps taken

To prevent another massive error in the future, BPI said it has set up 4 mechanisms, including the creation of so-called "automatic circuit breakers" that would warn the bank of high-volume transactions. The bank would then be able to check the reason for such high volume. If nothing extraordinary is spotted, the bank would give a go signal for transactions to continue.

Second, the bank is setting up multiple "restore points" to expedite the recovery of its system should it experience problems.

During the glitch, BPI spent a long time fixing its system because it had to post back a total of 6 days worth of transactions in a single day.

"Ang importante with any complex system is you have the ability to recover. In the future, we will avoid reoccurrence. This gives us something to think about. What we need are more restore points. At least every step makaka-recover kami agad," BPI said.

(What is important in any complex system is the ability to recover. In the future, we will avoid a reoccurrence. This gives us something to think about. What we need are more restore points, so that in every step we could easily recover.)

The bank is also optimizing its "memo posting program process" to upgrade its deposit system. This means it doesn't have to shut down its online system while conducting batch runs at the end of the day.

"Kasi 'yung ginagawa namin, hindi ho namin na-optimize for two years, 'di namin nagalaw. (What we did, we were unable to optimize it for two years.) We're now in the process of upgrading our deposit system. So by the end of this year, deposit system will be 24/7. Meaning to say, we do not have to stop the online system habang tumatakbo kami ng batch runs (while we're doing batch runs)," BPI said.

Ultimately, to be informed of any discrepancies ahead of everyone else, the bank has moved its "branch reconciliation process," or the process of going to BPI branches to check on the availability of cash, to an earlier time, from their usual 8 am to 4 am.

This is because BPI found out about the glitch from its customers around 6:30 am of June 6, or nearly two hours before their scheduled branch visits. At the time, the public had already expressed grave concern over "lost money" and other "mispostings."

"Bakit 'di nahuli nang mas maaga? In fact, the warning flag came from our clients. We learned that around 6:30 [am]. There is a process that we do called reconciliation. Before the branches open at around 8 am, we take a look at the cash on hand, kailangan mag-deliver ng pera. Kailangan magbalanse ng ledger, kailangan we deliver cash, we fill up ATMs. We could have seen that earlier," the bank said.

BDO, for its part, is set to upgrade all its 3,700 ATMs nationwide by the end of the year to prevent new types of theft.

BDO, as ordered by the Bangko Sentral ng Pilipinas, is migrating its clients from the 50-year-old magnetic strip ATM cards to the EMV chip, which is more secure against skimming.

The bank has also set up its fraud team to anticipate cybercrime attempts or threats. – Rappler.com