Financial Reform for Market Stability

Our economic history tells us that the Philippine financial sector is highly vulnerable to external shocks, as the 1997 Asian Financial Crisis showed. To shield us from a boom-and-bust cycle and ensure continuous long term economic growth, we need to achieve market stability in our financial sector.

Last Congress we passed the Lending Companies Act, which creates a regulatory framework for lending companies in order to avoid disastrous pyramiding scams such as that of the Multinational Telecommunications Investment, Inc. (Multitel) in 1998.

The Personal Equity Reform Act (PERA) and Credit Information System (CIS) almost got passed, both bills having been approved by the Senate. Similar versions of the bills were also passed in the House of Representatives, but the bills failed to get ratified in the bicameral conference. I have re-filed these bills in the Senate, and am positive it will be passed this time.

The PERA bill will supplement the existing government-sponsored pension scheme by setting up a privately funded retirement fund. It allows private individuals to set aside P50,000 a year, withdrawable when the contributor reaches the age of 55, and tax-exempt. It will encourage long-term saving and reduce our heavy reliance on the already overwhelmed publicly-funded retirement scheme. PERA targets Overseas Filipino Workers and small business owners, as they are not covered by the government's current pension programs.

The Credit Information System (CIS) will gather credit information from financial institutions such as banks, credit card companies, and government lending institutions. By making reliable credit information available to lenders, they can manage credit risks better and in effect, will lower the cost of credit and reduce the reliance on physical collateral. Its greatest benefit is making credit more available, especially to small yet responsible borrowers, as their good track record in paying their obligations will be made known to the financial institutions.

I have also re-filed the Pre-Need Code, which establishes rules to govern the operations of pre-need firms and provide protection to consumers; the amendment of the BSP charter, which empowers it to better oversee the banking system; and the Corporate Recovery Act, which seeks to improve insolvency procedures to make debt recovery process more efficient and gives insolvent companies a chance to recover from liquidation.

I have also revised my previous bill, the Revised Investment Company Act (RICA), into the Collective Investment Schemes Law (CISL). The CISL will establish a comprehensive regulatory framework for all forms of Collective Investment Schemes (CIS) and eliminate existing differences in regulating them. Through this bill, I hope to balance the interests of the investors by giving them more flexibility to expand their CIS businesses, but at the same time instituting mechanisms that will safeguard the public interest.

Aside from these measures, I have also introduced the Real Estate Investment Trust Act (REIT), which shall establish a legal and regulatory framework for real estate investment trusts. I shall discuss this bill in more detail in next week's column.

With continuous advances in knowledge and technology, the global financial market is often in a state of flux. Through this financial reform agenda, I hope to adapt the Philippine economy to the fast-paced demands of the global market.