SENATE probers want to know if Bangko Sentral ng Pilipinas (BSP) regulators could have alerted Philippine banks to hedge their exposure in Lehman Brothers—to a point of reducing their estimated P18.1 billion in losses from the collapse of the US investment bank.

“Is it possible that a more mindful BSP could have cautioned [exposed] local banks in advance to try to find ways to minimize their risks, or to buy more insurance against a possible default?” Sen. Loren Legarda asked on the eve of Monday’s Senate consultative meeting with banking and finance officials to discuss the global financial turbulence triggered by the meltdown of Wall Street giants.

She hastened to explain that “we are asking these questions not to find fault, or blame anyone, but simply to find ways to help local regulators and banks brace themselves ahead of more turmoil in the global financial markets.”

Sen. Edgardo Angara, chairman of the Committee on Banks, called BSP Governor Amando Tetangco Jr., Finance Secretary Margarito Teves, National Economic and Development Authority Director General Ralph Recto, as well as representatives of banking and financial institutions, to the emergency consultative meeting to explain the implications and the global financial crisis’ effects on the Philippine financial market and the Philippine economy.

“We must be able to assess the strength and the capability of our financial system. In order to cope with the challenges of a slowing global economy and escalating food and fuel prices, the government must strengthen its macroeconomic policies both by rationalizing fiscal incentives and curbing tax evasion,” Angara said.

In a statement over the weekend, Legarda, who chairs the Senate Committee on Economic Affairs, noted that US Federal Reserve chairman Ben Bernanke had admitted that US regulators allowed Lehman to file for bankruptcy since many of its counterparties have had the chance to hedge their exposure in anticipation of the investment bank’s possible collapse. Counterparties refer to the entities with contracts or agreements with Lehman.

“In a recent testimony before the US Senate [Committee on Banking, Housing and Urban Affairs], Mr. Bernanke said US regulators bailed out American International Group Inc. and The Bear Stearns Companies Inc. because the collapse of the two firms would have posed grave ‘systemic risks’ to the US and global financial markets,” Legarda said. “However, in Lehman’s case, Mr. Bernanke said the US investment bank was left to fend for itself and file for bankruptcy because the firm’s counterparties supposedly already had enough time to prepare for its possible financial ruin.”

Does this mean, she wondered aloud, that “more vigilant regulators could have forewarned local banks against Lehman’s possible collapse? That more circumspect supervisors could have pushed local banks early on to take extra precaution or hedges against the risks they faced with respect to their Lehman exposure?”

Legarda noted that while the $386 million (P18.1 billion) in losses incurred by six Philippine lenders as a result of Lehman’s collapse may seem minimal relative to the total assets of these banks, but still, she stressed, “any potential shock, big or small, faced by the banking system, is always of serious concern to all of us.”

It was earlier reported that Banco de Oro Unibank Inc. (BDO) had the largest exposure to Lehman at $134 million; followed by state-owned Development Bank of the Philippines at $90 million; Metropolitan Bank and Trust Co., $71 million; Rizal Commercial Banking Corp., $40 million; Standard Chartered’s Manila branch, $26 million; Bank of Commerce, $15 million; and United Coconut Planters Bank, $10 million.

Beating all others, BDO and Metrobank promptly made market disclosures on their exposure, and eased public fears by declaring the provisioning they had made to cover for potential losses.

Meanwhile, Sen. Francis Escudero also asked the BSP and the Commission on Audit to step in and clarify the real condition of the $1 billion “global investment fund” (GIF) of the Government Service and Insurance System. Escudero took the move even as GSIS assured fund members they have nothing to worry about the GIF, of which $600 million out of a total $1 billion, had already been actually invested thru ING Investment Management and Credit Agricole Asset Management.

Until its collapse, Lehman was the world’s fourth-largest largest investment bank, after The Goldman Sachs Group Inc., Merrill Lynch & Co. Inc. (which is being acquired by Bank of America Corp.) and Morgan Stanley. (Butch Fernandez)

‘The forgotten risk’

For many years, liquidity has not really been an issue for banks and many other market participants; due to low interest rates and an abundant supply of liquidity by major central banks, the liquidity market was a buyers’ market. Moreover, the risk sensitivity of investors was low, the credit spreads were low and there was little differentiation between the various rating classes.

Central bank agrees to collect GS sales tax

AFTER initially balking at the prospect, the Bangko Sentral ng Pilipinas (BSP) finally agreed to act as tax collector for the government in all sales of government securities (GS) to banks and financial institutions amounting to billions of pesos.

On eve of hearing, BSP’s role in warning banks reviewed

SENATE probers want to know if Bangko Sentral ng Pilipinas (BSP) regulators could have alerted Philippine banks to hedge their exposure in Lehman Brothers—to a point of reducing their estimated P18.1 billion in losses from the collapse of the US investment bank.

LBP OK’s P.6-B loan for shipper

THE Land Bank of the Philippines has signed a P600-million loan to PNOC Shipping and Transport Corp. (PSTC), the bank said in a statement over the weekend.