05 September 2016




SENATOR CHIZ ESCUDERO (CHIZ): Chair would like to acknowledge the presence of Senator Drilon, one of the authors of the bills that we will be taking up this morning. Moving forward, Chair would like to acknowledge the presence of Deputy Governors namely as well, good morning! Moving forward, let's take up item one in the agenda, Amendment of the New Central Bank Act, namely Senate Bill No. 16 authored by Senator Drilon; Senate Bill No. 859 authored by Senator Recto; and Senate Bill No. 1027 authored by the Chairperson. May I ask Senator Drilon if you intend make some opening statement in your respective bill.

SENATOR FRANKLIN DRILON (FD): No opening statement, your honor.

CHIZ: Thank you Senator Drilon. Governor Tetangco would like to make the presentation.

BSP GOVERNOR AMANDO TETANGCO JR (AT): Thank you, Mr. Chairman. The honorable Senators, Senator Francis Escudero, the chairman of the Senate committee on banks, financial institutions and currencies; Senate President Pro-Tempore Drilon, Senator Win Gatchalian, coalition government, ladies and gentlemen, good morning.

Mr. Chairman, first of all, on behalf of the monetary board, I thank the committee for holding this hearing. And for this opportunity to provide our position and express our support to the legislative proposals amending the BSP Charter RA 7653 and the existing Bank Deposits Secrecy Laws, namely, Republic Act Numbers 1405 and 4262. The proposed measures seek to strengthen the BSP in the performance of its mandate and trusted to it by the 1987 Constitution. The BSP wishes to convey its unwavering support of the passage of Senate Bill No. 1027 sponsored by the Honorable Chairman Senator Escudero that seeks to amend the BSP Charter by giving the BSP greater operation and flexibility and more financial resources to better serve our people and our country.

In order to keep pace with the demands of changing economic environment, the BSP needs to be more effective and dynamic as a central monetary authority. The RA 7653 or the Central Bank Charter enable the BSP to maintain monetary stability, safeguard our financial system and strengthen our economy amidst the strengths over the last two decades. However, since the restructuring of the Central Bank into the BSP in 1993 the environment operating has change. For one, we experience financial crisis. The Asian financial crisis and the global financial crisis over the last twenty-three years, our economy has grown by eight times in nominal terms. The resources of the banking system have expanded by multiple of 12 and the BSP's own balance sheet has also grown by a factor of eight. In addition, the financial and goods markets have become more interconnected globally. Moreover, technology has evolved significantly resulting in the financial consumer demanding new ways of delivery of financial services, which requires new supervisory skills and improve consumer protections standards. Indeed, the developments in the last two decades have caused in the increase the complexity and scale of the responsibilities of the BSP.

There is a clearly a strong need to revisit RA 7653. The BSP's proposals fall under three distinct and interrelated categories: monetary stability, financial stability and corporate viability. Mr. Chairman, allow me to quickly run clear into the main proposed amendments. Monetary stability will reserve the purchasing power of the peso and its convertibility to goods and assets both here and abroad. In this respect, we seek the restoration of the Central Bank's authority to issue its own securities consistent with the practice of monetary authorities worldwide. We aim for the removal of the outdated constraints in the growth of the monetary aggregates and credit as the guiding principles and operations strictures of monetary policy implementation. We ask for the reinstatement of the Central Bank's authority to obtain information for the non-bank private sector consistent with the practice of monetary authorities all over the world. The Senate can be assured that the BSP is sensitive to local practices hence; we remain committed to the protection of the deposits secrecy in the implementation of this amendment. With respect to financial stability, we wish to enhance the ability of our people with the excess funds to save with confidence while those need of funding can borrow at a cost of commensurate the risk and income generating profile.

The Bangko Sentral puts forward the formal recognition of the financial stability in the Central Bank statutory mandate as well as formally providing oversight settlement system of the country. It should be noted that both are common hallmarks of modern central banks. We also seek legal protection for BSP officials and staff in the performance of official duties similar to that provided to the officers and employees of the Philippine Deposit Insurance Corporation. We also request for the enhancement of the BSP supervisory authority by expanding the list of entities, it supervises and to expand its authority over the banking system. Lastly, we present to the Senate the case for ensuring the corporate viability of the BSP. We seek for an increase in its capitalization by Php150-B. The economy expanded, the financial system supervises has grown many times over where the BSP's capitalization has remained constant in the last 23 years. To better manage the risk that chases in its operations we seek the authority to establish adequate loss allowances and create reserve buffers. In recognition that funds deployed by BSP are public in nature, we ask for restoration of our tax exempts status and the treatment of unsecured BSP claims as preferred credit similar to that enjoyed by Philippine Deposit Insurance Corporation.

Mr. Chairman, we wish to convey to you that the BSP wants strengthen can be even more responsive in meeting the challenges to the economy and the financial system over the coming decades. Even stronger, the BSP can help more efficiently create the space for the Philippine economy to continue flourishing despite the many challenges it will face. On the separate vain, we also seek your support for the proposed amendments to the Bank Deposit Secrecy Act but this is item number two in the agenda for today's hearing. A number one saving-sound practices involved deposit account transactions. Those practices can be established and preceded against only bank supervisor granted only to look into those accounts. As a safeguard, the inquiry in the deposit accounts shall only be made by banks examination. I'll end my here Mr. Chairman and thank you for your strong support and once again, good morning.

CHIZ: Thank you, Mr. Governor. Before we proceed, Chair would like to direct the committee secretary to communicate with the Department of Finance and Department of Budget and Management with respect to the additional capitalization requirement of the Central Bank and to get their comments only on that point. Senator Drilon, would you like to make an intervention.

FD: Just initially on the comment made by the Chairman. Thank you, Mr. Chairman. I'd like to raise the question on that point and we go to other points later. The proposal requires an automatic appropriation in case there is need to further increase the capita. From the way I understand it, Mr. Governor, the amendment, first will increase the capitalization from 50 to 200 and the next amendment in that regard will require the payment in cash and government securities upon the effectively of this act. The first question I raised to the Chair and also to the Governor is this mean that this automatically appropriate today, assuming we pass it today. The second point is after five years there is supposed to be a review and if there is again a need for new capital infusion the proposal is to automatically that appropriated. I have my doubts the second one. So, can we have your comments on this initially Mr. Chairman may I ask the Bangko Sentral.

AT: Thank you, Mr. Chairman, our proposal is for the capitalization the addition capitalization of Php150-B to be given to the BSP in one lump-sum. Now, the form by which this amount is going to be given can be discussed is possible that in addition of capitalization can be given in the form of government securities.

FD: My question I guess is Mr. Chairman, this is an automatic appropriation? That would require certification by the National Treasury. Is this an appropriation that would require special certification to the National Treasury or this is an obligation which can was defined in or must be included in the General Appropriations Act. I'm just asking a question.

AT: The proposal of the bill special appropriation, Mr. Chair.

FD: With the special appropriation. So Mr. Chairman, I address technical committee wherein a special appropriation require a certification from the National Treasury. Because if we just say increase in capitalization the actual payment should be an appropriation, so you are saying because it must automatically appropriate therefore it is in effect we are appropriating from the national funds the sum of whatever is necessary in order to pay for the subscription. That's the first question I raised through the Mr. Chair and also the Governor. The second point is future subscription also is automatically appropriated. That's what is provided for here.

AT: Our proposal Mr. Chairman is for a review to be conducted every five years. And this review will be conducted by the Secretary of Finance, Secretary of Budget and Management and the Monetary Board to establish whether or not the BSP would need additional capital at that time. Now our proposal again if there is in need a demonstration or reason that additional capital will be needed by the BSP then we will also ask for automatic appropriation to cover that particular amount. Now, let me just explain Mr. Chairman, another part of the amendments calls for the establishment of a reserved fund. The reserved fund will be put-up from the profits that the BSP may earn in the future. In case, there is a need for recapitalization then the amount that will require would first be taken from the reserved fund. If the amount in the reserved fund is available and the fund is sufficient then our proposal is for the government to appropriate the balance.

FD: First, we do not question the need for a mechanism wherein the additional capital would be necessary and the recommendation from the Secretary of Finance and Monetary Board, etcetera that is not, you know, I accept that as a valid position. My question I guess revolves around the need for an appropriation in the General Appropriations Act as against the proposal to automatically appropriate from the general funds. I have my doubts about that but I am willing to be corrected by technical study on this including the matter of the capitalization is needed to be first drawn from the supposed fund where profits will be deposited. I am just concerned about questions that can be raised on the automatic appropriation to increase the capitalization.

CHIZ: Point very well taken Senator Drilon and we will look into it. I guess the concern, Mr. Governor, if it is automatically appropriated will be considered as off-budget type item and don't even have to pass through Congress anymore and won't even pass through the scrutiny of Congress anymore. On your end, I understand the concerned too, matagal na kayong pinangakuan ng pondo sinabi isa, dalawa, tatlong taon hindi naman nabigay ng gobyerno sa loob ng isa, dalawa, tatlong taon. So you also want to be sure that indeed an increase of capitalization will be fully subscribed by the government. And relatively predictable time frame. We will address both concerns. Senator Drilon, Governor Tetangco will find common ground. If I can proceed, unless Senator Drilon has additional point on this matter.

FD: None on that point, Mr. Chairman.

CHIZ: May I ask some of our invited guests particularly from the Bankers Association of the Philippines. Who can I address, if you have any comments or you have seen already the various versions of the amendments to the Central Bank Act. Yes, Mr. Virtucio.


CHIZ: Good morning, Sir.

CV: Good morning, Mr. Chairman, honorable members of the Senate, Governor Tetangco and our colleagues from Central Bank. As a general statement, let me just start with if I may that the Bankers Association expresses its support of BSP's policy, bank secrecy of deposits and their recommendations as well.

CHIZ: On the Central Bank Act Amendment, Sir.

CV: On the amendment, if I may have a couple of general statement. We plead for, we agree in general that fully in general that the Central Bank RA 7653 should be amended and we plead for reasonableness in the promulgation of the amendment thereof particularly relates to regulation and to the proposed virtual immunity that the proposed amendment would provide to the regulators. We also would like to suggest that such amendments promote check and balance between the positions of banking industries and the regulators and we would be happy to suggest specific proposals as when we go into technical committee meetings, Mr. Chairman. Thank you.

CHIZ: That would be more than welcome, Sir. Thank you very much but do you have a formal position paper that you will be submitting today or at future time.

CV: We will be submitting a position paper some future time soon, Mr. Chairman.

CHIZ: We will come up with the matrix comparing the various bills on this subject matter that you can compare as best as we can, we will reconcile all three versions of this bill and I guess that's your position paper can come in.

CV: Yes Mr. Chairman, will do.

CHIZ: Thank you very much, Sir. Can I now get the statements if any of Mr. Pasia from Rural Bank Association of the Philippines, Sir again item number one. 'Yung amendments po sa Central Bank or BSP Charter.


CHIZ: Same Sir, we will be furnishing with the matrix of the three bills. Kindly refer to it when you submit your comments before ofcourse a written position paper. Even for one page saying you are in favor of it or not or what are your concerns are.

AP: Opo.

CHIZ: Thank you very much. Ms. Felix or Mr. Yambao, from the Chamber of Thrift Banks. Ms. Felix, Good Morning Ma'am.

CHAMBER OF THRIFT BANKS EXECUTIVE DIRECTOR SUZANNE FELIX (SF): Senator Drilon, Senator Escudero, Senator Gatchalian, Governor Tetangco, Governors Espenilla and Guinigundo. Thank you for inviting us to this hearing. With regard to the proposed amendments of Central Bank Act, the Chamber of Thrift Banks affirms its support to the bills in general and we agree with most of the provisions of proposed measures. CTB appreciates that there is a need to respond to contemporary challenges by amending the present BSP Charter in order that the BSP remains its effective its conduct of monetary policy and supervision of financial institutions and enable it to build a robust system and ensure the financial stability of system. We submitted something late Friday, Mr. Chairman, in a matrix form we just cited one suggestion there with regard to the authority to approve of transfer of heirs because the existing the threshold is 20% and proposed amendment is lower it to 10%. There is a suggestion from the members to maintain the 20% threshold. But other than that, we are supportive of the measures, Mr. Chairman.

CHIZ: Noted Ma'am. Thank you very much. Senator Drilon?

FD: In general or?

CHIZ: In general. In general, it's still item number one pa rin po tayo sa amendments.

FD: Yes, there are a few questions I would like to raise, some clarificatory. For example, on Section 2 of the bill, the bill seeks to expand the coverage of the regulatory powers of the BSP to money business services, credit granting businesses, and payment system of operators. This would include money changers? That's for the record.

AT: That would include money changers.

FD: We have no problems with that. Now, credit granting facilities, who are the payment system operators?

AT: That would be the Megalink, the RTGS – the Real-time Gross Settlements Systems, the electronic money issuers.

FD: Would you have supervision presently over companies like PhilRem?

AT: It's not clear in the law Mr. Chairman. The regulation in as far as entities like that we are concerned, the BSP only requires registration. But the BSP does not have supervisory power.

FD: You mean you cannot subject to regular annual examination?

AT: We are not, Mr. Senator.

FD: Office like PhilRem? Would an amendment such as these catch transactions like RCBC transactions which were recently the subject of public debates?

AT: There will be a mechanism to try and prevent or catch transactions of that nature, Mr. Chairman.

FD: For the record, which government entity is now supervising money service businesses, or is it SEC?

AT: I think there's no other entity at this point, Mr. Senator. The BSP actually is looking into the money service businesses only in as far as their compliance with the Anti-Money Laundering Law provision is concerned.

FD: And you're looking for that as part of the Anti-Money Laundering Council?

AT: There's an existing regulation, Mr. Chairman that this should be registered with the BSP, and the basis for that is the AMLA and we can track the creation and the establishment of money service businesses.

FD: Do you have supervision over such money changers for example to the same extent that you have supervision over the banks?

AT: We do not, Mr. Senator, and that is precisely what we want to address.

FD: So, who supervises at this point? Wala? They just get registered and they just do their own thing?

AT: They register with the local government unit, there's no regulatory authority that oversees the operations of these firms.

FD: I could fully endorse that supervision by the Bangko Sentral of these entities Mr. Chairman. I also wish to highlight that I would support the provision on the liability of the BSP personnel meaning that you should enjoy that presumption of the regularity of performance of functions, and you should not be civilly liable for acts done in the performance of your duties unless there is a clear showing of bad faith or gross ignorance or malice. This is actually jurisprudence on public officers and I see the need for that extension of protection to our Bangko Sentral personnel. Now, this one is a little catchy, it is a matter of inquiry to the exemption of the Bangko Sentral on the coverage of bank secrecy and allowing them inquire into bank deposits in the course of examination. Can you amplify on this, Mr. Governor?

AT: Mr. Senator, the idea is for the BSP to be able to look into the accounts or into bank accounts during the course of an examination. If there are conditions and the most important condition is if there is reasonable ground to believe that fraud lawful activity or irregularity has been committed, or being committed in the bank. And this would basically mean that it is not an umbrella authority for the BSP examination team to look into the bank accounts of individuals or corporations which are clients of the bank.

FD: And this is an authority to look into the accounts in the course of the annual examination? Or can it be done any time?

AT: It can be done any time, Mr. Chairman for as long as there's an authority from the monetary board for a special examination to be conducted by these supervision and examination sector of the BSP. And as you may be aware, the required number of votes to have a special examination authorized is five. So, it's a super majority as far (inaudible).

FD: Which is what? Two-thirds?

AT: Five out of seven, Mr. Chairman. More than two-thirds.

FD: Not three-fourths though? Anyway, it's a peculiar (inaudible).

AT: Because for the other decisions Mr. Chairman, simple majority would be sufficient. In this case, there's a higher bar.

FD: Higher than?

AT: Higher than ordinary decisions.

FD: Now, are we saying therefore that the judgment of the court which is what is now the standard under the Bank Secrecy Law or under the Anti-Money Laundering Act, will now be exercised by the monetary board? I guess that's the bottom-line issue. In other words, presently as the present state of things, you get an authority of the court. In this particular case, that authority – correct me if I am wrong, Mr. Governor – that authority is now exercised by the monetary board through a super majority vote or five out of seven votes, is that the interpretation? That instead of the court exercising that authority, the monetary board will be the one to exercise that authority, and whether or not it's related to any particular suspicious transaction.

AT: That would be the meaning Mr. Chairman, Mr. Senator. But it is an authority that can be exercised by the BSP under very clear conditions. If the committee may recall, this authority of the old central bank was actually in the old BSP charter, RA 265, and then when the central bank was restructured in 1993 and became the Bangko Sentral ng Pilipinas, this was removed. So, what we're asking Mr. Chairman is for these authorities simply to be restored as part of the authority of the BSP.

FD: Yes, that is the historical fact but after that there was the Anti-Money Laundering Act which now required judicial determination of exemptions in effect from the Bank Secrecy Deposit Law so this is what I'm pointing out to the committee Mr. Chairman that the discretion or determination that is now lodged with the courts in the examination of bank accounts and within limitations that are imposed by the present law for the courts to exercise the discretion is now transferred to the monetary board, and such limitation would appear not to be applicable. I mean just to set the parameters of what the Central Bank would like to do or would like to have, subject of course to our decision as a committee, for a such unbridled authority should be located in a non-judicial entity.

AT: Can I just make a comment Mr. Chairman, Mr. Senator? In the case of the AMLA, the way I understand it is that the authority to locate the bank accounts actually happens after the violations have been committed. In other words, there's a predicate crime that has been identified, an investigation has been conducted, and then the AMLC goes to the court for a look through – approval of a look through of the accounts. Now, the case of our proposal, this is really meant to be preventive. So, earlier Mr. Chairman, Mr. Senator, you asked whether the case – the famous case could have been prevented, I think there would've been a better chance of detecting that at an early stage if the BSP had two things. One, supervisory powers over money service business and two, the authority to look into the accounts. And number two, is that if it's the BSP that will be given this authority, the process will be quicker, more timely, and expeditious. So, it's preventive and a more expeditious action.

FD: Will the prohibitions against the publication of such findings will also be applicable as it is applicable in the secrecy of bank deposits law?

AT: It will be applicable, Mr. Chairman.

FD: Meaning, you cannot publish the source?

AT: We cannot publish. In fact, we are proposing that there will be a confidentiality clause and appropriate sanctions provided for the law, for any breach.

CHIZ: Separate from the immunity provisions provided for in the amendments.

AT: Yes, we would like to have this provision also in the proposed amendment to allow the BSP to require private entities to submit information to the BSP, and that can be taken up maybe later as the chair would wish.

CHIZ: Magse-segue din ho siguro tayo doon Governor with the permission of Senator Drilon. But can I ask, ilan pa ho bang bansa sa mundo o karamihan ba may secrecy of bank deposits pa?

AT: I think there are only two at this point Mr. Chairman and we are one of them.

CHIZ: Two countries? The other one is?

AT: Lebanon.

CHIZ: Lebanon? So, wala nang ibang bansa sa mundo ang may secrecy of bank deposits?

AT: Siguro 'yung North Korea.

CHIZ: May banko ho ba doon?

CV: Meron ho, mayroong banko doon, pero nasa Macau.

CHIZ: But may I ask again, I think this will be one of the stickier issues sa amendments, may I ask the banking sector either from the BAP the RBAP or the CTB. May epekto pa po ba talaga 'yung secrecy na 'yung 'pag ni-repeal namin, worst case, i-repeal namin ang secrecy of bank deposits, magkaka-bank run po ba? Mag-aalisan po ba ang mga tao sa bangko dahil baka malaman na yung account nila, ganon po ba 'yun? Is there such a concern? Because if the Governor is correct that only two countries in the world have it, and it seems that banks in other countries and jurisdictions have thus far survived, even after it was lifted or probably nung simula pa. Noong una ho ba, Governor, meron sila?

AT: Yes, these countries had secrecy of bank deposits.

CHIZ: Most countries in the world had secrecy of bank deposits law.

AT: Many had in the past.

CHIZ: Tapos inalis din nila?

AT: Yes, the secrecy law was.

CHIZ: To your knowledge, was there any adverse effects to a banking sector when it was lifted in those jurisdictions? I'm sure with some meron, with others wala. But do you have data on this?

AT: Well, we conducted a survey of jurisdictions which have bank secrecy laws but provide exemptions to bank regulators and supervisors. But to answer your question Mr. Chairman, we are not aware of any adverse impact like in the form of bank runs in those countries but we can double check that.

CHIZ: Kindly give us that data, Sir. Sorry for interrupting.

AT: But you are right Mr. Chairman, because if only two or three countries in the world have bank secrecy laws then the concern really is not with respect to possible bank runs because these laws have been lifted in other countries. The concern really is for the possibility of dirty money or laundered money ending up in those jurisdictions that have very strict bank secrecy laws.

CHIZ: Thank you, Mr. Governor. Mr. Virtucio, sorry for the interruption. Please proceed, Sir.

CV: Just to reiterate, the bank associations support the position of the Bangko Sentral in the proposed measures regarding the Bank Secrecy Law. And I would like to echo the governor's comment about… and I think Mr. President, Senator Drilon also discussed the history… I think in the last decades, particularly the last ten years, there has been so many new developments in the financial world, good governance, and so and so forth. And the Philippines would like to be a respected member of that financial world so there is a persuasive argument that we should not be one of the two countries left. In fact, if I'm not mistaken Mr. Governor, Switzerland will remove all their secrecy by 2017 or is it 2018. And again to echo the Governor's comments, we don't expect any reactions like bank runs, it is more really like being a good world citizen in the financial world. Thank you.

CHIZ: Let me go a step further, Sir, in so far as the BAP is concerned. Because so far the bills filed seek to amend the bank secrecy law by relaxing it, opening it in so far as public officials are concerned, in so far as this provision and this charter is concerned, authorizing the BSP to look into certain accounts. So if at all the BAP will not have any objections if we altogether repeal RA 1405, no qualms and concerns whatsoever?

CV: We would support the positions of the Bangko Sentral in this measure, your honor. May I ask you Mr. Governor, would you be… inaamyendahan lang natin, ire-relax natin. Just out of curiosity, would the Bangko Sentral officially support a repeal of RA 1405?

AT: Our main concern, Mr. Chairman, with respect to the bank secrecy law is in terms of being able to ensure that existing regulations are being complied with, that's number one. And number two, to provide some form of deterrent from possible fraud and unlawful activity or irregularity and for this to be taken. I mean any course or action can be taken expeditiously.

CHIZ: Yes, Senator Gatchalian?

SENATOR SHERWIN GATCHALIAN (SG): Just a very quick elementary question, Sir. Alam naman ho natin na karamihan sa mga negosyante ho natin, ang kinakatakutan ho nila 'yung KFR (kidnap for ransom), 'yung kidnap for ransom na marami sa mga imbestigasyon lumalabas po na may mga leak nung kanilang bank accounts. Minsan ho kung magpapasweldo ho sila ay nalalaman kung kalian po magpapasweldo. Ano po ang assurance and mechanism ang pwede nating ibigay sa ating mga negosyante para hindi naman ho sila kabahan at magamit ito sa mga KFR at ganitong mga aktibidad?

CHIZ: Mr. Governor? Sasagutin ko 'yun kung ayaw niyong sagutin o gusto niyo imbitahin natin si Bato dito?

AT: Kahit ho kayo ay mayroong bank secrecy, meron ding KFR. Now, as I've mentioned earlier, the authority to look into bank accounts will be allowed under certain conditions. So, this would be quite specific in the law and in addition to that, there will be sanctions in case of breach of confidentiality. And thirdly, I think we should not forget that banks are by their nature discreet. Now, if you ask me how we can guarantee – that's difficult to answer because it could be the work of a bank employee and you don't police to that level, down to that level, Mr. Chairman.

CHIZ: We will now proceed to the other guests. Mr. Pasia, any concerns to the relaxation of the bank secrecy laws on the part of the Rural Bank Associations?

AP: Siguro po on the part of the Rural Bankers, wala naman ho siguro kaming problema dyan.

CHIZ: Wala naman hong naki-kidnap ho na?

AP: Wala ho, maliliit naman ho yung mga nasa country side po natin.

CHIZ: The Chamber of Thrift Banks, Ma'am?

SF: We express our support actually for that provision, granting the BSP that authority because it's based on specific transactions. That is I think the assurance here and not necessarily and it can only be done in the course of examination, only when they find something to be fraudulent. I think that was the assurance also given to us, the banks. They will look at specific transactions in the course of examination, so it's not really looking at depositors per se. So, we support that particular provision.

CHIZ: Not on item number one? Tama po?

FD: Just to clarify. We are talking here about the Central Bank vis–a-vis. Not the Bank Secrecy Law.

CHIZ: Yes, the Bank Secrecy.

FD: The Bank Secrecy Law.

CHIZ: Not yet.

FD: Not at this point. Just then, if it's the repeal of the entire bank secrecy law, that's a different matter different discussions.

CHIZ: Agree.

FD: With their all safeguards here in the Bangko Sentral as pointed out by Ms Felix. But when you talk about just repeal of the Bank Secrecy Law. And I will have questions like with the proposed Freedom of Information Bill to cover government bank so that anybody can inquire into the deposits. That's completely different discussions. Right now, my understanding limits the matter to the issue whether or not the Bangko Sentral given that authority to have the special examination to look into the accounts of a particular depositor or the accounts in the particular bank. Subject of course to these safeguards that presently exist.

CHIZ: Atty. Joven of the Department of Finance is here. May I asked, are you authorized by your department as far as item number 1 in the agenda is concerned? Attorney?

DEPARTMENT OF FINANCE REPRESENTATIVE ATTY. DENNIS JOVEN (DJ): Good morning, Mr Chair. I currently don't have specific authority to represent the Secretary of Finance regarding this matter. Although, I brought along all the compilation of all the previous stand on all the particular provisions of?

CHIZ: Do you have positions on Section 2 of all the Senate bills, I think on the matter. Particularly on funding. Kindly submit that in a week. Monday pa naman ngayon, 'di ba? Within the week, Sir.

DJ: Thank you, Mr. Chair.

CHIZ: Mr. Governor?

AT: Mr. Chairman, may I suggest that before the Department of Finance submits their positions with respect to different amendments for them to please kindly update their positions. There is a new leadership in the Department of Finance now.

CHIZ: Baka iba ang pananaw niya. Kindly note, Mr Joven. Atty. Joven, kindly take note of the suggestion of Governor Tetangco. Senator Gatchalian?

SG: Yes, Mr. Chair, I just want to go back to the other provisions that the BSP's requesting. One of it is the increase of supervision in some financial institutions. Mr. Governor, is that include internet banking?

AT: It will include, Mr Chairman, Mr Senator, internet banking. Actually, right now in the process of crafting proposed regulation to cover this kind of banking. Together with electronic banking and similar activities. This is a very new field. Therefore, central banks have not really- around the world has not really come up with specific regulations as far as electronic banking is concerned. But, there are principles that have been put forward by the Committee on Payments and Market Infrastructure of the bank for international settlements. So, we are trying to align with our proposed innovations along with those principles. This has been recently issued.

SG: Mr. Governor, I came across one time when I was Mayor of Valenzuela, we are trying to push internet banking. Unfortunately, because of the limitations with transacting only with government banks. Mayroon pong hindi kaya ng government bank to go into settlement. And I came this financial intermediary. Private ho ito.Nangongolekta ho siya. To make it simple.Nangongolekta siya. Siya ang nagbabayad at nangongolekta po sa local government. Dahil nga wala hong technology, connectivity between local government and let's say Landbank. So, ngayon pumapasok ho siya dito. Ang risk ho dito nangongolekta siya at siya ay nagbabayad. I think if I'm not mistaken, the name of the company is Dragonpay. I think, this is a sort of clearing credit cards for banks who are not technologically capable of settling. Dito ho sila pumapasok. I think there are now numerous types of settlement credit companies. Ito ba ho ay included po dito? Is it even legal or are they even regulated because they are accepting payments. Kami hindi po namin pinursue kasi what if tomorrow they shut down? Saan ho kami tatakbo?

AT: At this point Mr. Chairman, Mr. Senator. They are not regulated. In fact the BSP issued an advisory with respect to bit coin. Because, bitcoin then was becoming relatively popular. There were some bit coin companies that were being put up. So, we issued an advisory saying that this are not registered and supervised by the Central Bank. We really are in the lookout of people who transact this particular model or system or really in the look out if their investment is safe. So, part of the effort that we are doing now is to be able to regulate these types of entities that transact in this, particularly.

BSP DEPUTY GOVERNOR NESTER ESPENILLA (NE): Governor, have you heard of this company and this type of operation or company? Narinig ninyo na ho ba iyan? I know, hindi lang ho isa or dalawa. I forgot the name but they are operating. They are collecting money but the risk is really tremendous to those who are paying.

AT: We are aware of that, Mr. Senator, Mr. Chairman and if you want more information I can ask our Deputy Governor Espenilla to provide more information about that.

CHIZ: Governor Deputy Espenilla, you are recognized, Sir.

NE: Yes, Mr. Chairman. The BSP currently has a supervisory authority over banks and other institutions specifically named under certain law. But, what we have observed, Mr Chairman is because of the innovations in finance particularly in payments and more so, for digital payments. There are new players that are coming into the financial system that are gaining a lot of fractions. They are not regulated by anyone today. They represent a significant risk not only for AML reasons but also for consumer protection issues. And the problem that we are facing today is that our banks are properly regulated by the BSP. But, in the market place they are competing for financial services against banks. So, in a situation where there are entities that are regulated and entities that are unregulated. That creates an unravel playing field that makes it more convenient for those entities to operate and in the process they tent to grab a market share. The totality of that, it potentially weakens each gap in our financial system. So, the proposal in our amendments, Mr. Chairman is also level the playing field. Put them in the proper regulatory environment so that the trust in the payment system will be maintained consistently. Thank you, Mr. Chairman.

SG: Mr. Chair, I just want to urge Central Bank or BSP to look into the status of the novelty. I just came across it. But, I know for a fact na marami pong mga merchants na nahihirapan pong mag-transact, let's say with a bank which is not technologically equipped. Dito ho sila pumapasok. But the representation really is hindi klaro. So, when we are going through the motion, we just found out that it's too much of a risk. To risk taxpayer's money that's why we didn't pursue it. I was just thinking out loud na baka mas marami pa hong pumapasok sa ganito. Maybe swift action is needed because as we speak, these guys are going around and transacting. We don't know baka one day, pumutok ho ito and a lot of people will be affected. Thank you, Mr. Chair.

CHIZ: All of this, Deputy Govenor are covered by the amendments to the charter of the BSP?

NE: Yes, Mr. Chairman. Because the proposal encompasses not just money service businesses but also payment system operators. So, this will fall under this kind if category, Mr. Chairman. I think, what Senator Gatchalian is also describing a situation where because of the gaps in our payment system, this kind of players is operating to fill those gaps. But today, the BSP is addressing this issue in a more fundamental way by our advocacy to established a national retail payment system which is basically we'll try to put in place in infrastructure that allow digital payment to the formal financial system involves banks and other regulated financial institutions, Mr. Chairman. So, this kind of proposal will actually strongly support that initiative that will take us into a more digital finance world, Mr. Chairman, which is where the world is going to today. And none of our laws today cover this kind of player. This is what the BSP is trying to do, Mr. Chairman.

CHIZ: Thank you, Senator Gatchalian. Is there another query from Senator Drilon? The Chair would like to recommend the secretary to immediately schedule a Technical Working Group after coming out with the matrix and turn it to the representatives from the BSP. Will you attend, governor? Sino ang papa-attend ninyo? Deputy Governor Gunigundo and Deputy Governor Aquino, former AMLC. May I ask from the BAP, who will attend the TWG meetings?

RESOURCE PERSON (RP): Mr. Chairman, it will be I, my colleague Arnel Almodel and Connie Justiniani, the Deputy Director.

CHIZ: Kindly take down their names. From DRBC. Sir, will you be interested in attending?

RP: Will send Atty. Purisima.

CHIZ: Atty. Purisima you are very welcome. Ms. Felix?

SF: Mr Yambao and I will participate in the TWG.

CHIZ: Duly noted. We are scheduling the TWG meeting. Paki-note na po, September 13, 19 and 26.

RP: Mr. Chairman?

CHIZ: Yes, Ma'am?

JUSTINIANI: Good morning, I'm from the Philippine Deposit Insurance Corporation.

FGE: Yes Ma'am, you have more powers than the BSP.

BANKERS ASSOCIATION OF THE PHILIPPINES DEPUTY DIRECTOR CONNIE JUSTINIANI (CJ): Which just took effect last June 11 in 2016. We would like to also be invited to attend the TWG.

CHIZ: Walang secrecy naman doon. Please, you are welcome to join and attend. Para ma-i-share ninyo ang powers ninyo sa kanila. Will just get the committee advice to our invitees with the bulletin board at 9:00 am. Thank you, proceeding to item number two in our agenda namely the bill of Senators Lacson, Senate President Pimentel and Senator De Lima. Senate Bill No. 47, 1105 and 1196 respectively. This is an amendment to the bank secrecy law which we have been touching on part a while ago. To summarize, Senator Lacson seek to exempt all public official employees; both elected and appointed from the coverage of the Bank Secrecy Deposits Act or RA No. 1405. Senator Pimentel, in addition to that, also would like to include other examples where secrecy may not be invoked. Senator De Lima concurs with the position of Senator Lacson but adds other similar provisions as well as Senator Pimentel. May I know if our guest has seen the three versions through the internet? May we start with the BAP.

CV: Thank you, Mr. Chairman. I'm sorry we don't have the chance to look into the draft bill through the internet.

CHIZ: It is posted in the internet at the senate website at www, Sir?

RP: Mr.Chair, wala pa pong comment doon sa mga members namin. Na-disseminate pa lang po.

CHIZ: Wala pa? Paki na lang po. Ms .Felix, Ma'am?

SF In general Mr. Chairman, we support the proposed measures.

CHIZ: Thank you very much. From Atty. Salido.

ANTI-MONEY LAUNDERING COUNCIL OFFICER-IN-CHARGE ATTY. VINCENT SALIDO (VS): Mr Chair, with the permission of course of Governor who is also the Chairman of the Anti-Money Laundering Council and the Insurance Commissioner, Atty. Duok. The AMLC fully supports the amendments proposed by the honorable members of the senate

CHIZ: In so far as the public officials are concerned?

VS: That's correct, Mr. Chair.

CHIZ: What about the other senators concern?

VS: We also fully support that, Mr. Chair.

CHIZ: Iyong version ni Senator Pimentel? For example, the version of Senate President Koko Pimentel: it will include settlement of estates, offer of abatement and compromise for taxpayer's liability. To enforce domestic law, pursuant to the countries bilateral and multilateral agreement. I guess this includes the one with Tatad and in case of congressional inquiries in aid of legislation.

VS: We also support that, Mr. Chair.

CHIZ: You also support that? Thank you. Mr. Governor, would you like to comment on this proposed amendment?

AT: Mr. Chairman, we support the relaxation of bank secrecy laws, 1405 and the two laws on foreign currency deposit accounts. And our support is basically motivated by what we discussed earlier. That they would want to be able to look into bank accounts to ensure the cause of the bank examination. To ensure that it complies with the regulation as well as there are usable grounds to believe that there is fraud or unlawful activity or irregularity that has been committed. And to that extent we support that Mr. Chairman. We still have to look at the details of the other bills and proposals. And we would submit our comments at the later stage.

CHIZ: There are two ways of doing it, in so far as government officials are concerned. One way is how Senator Lacson presented it, which is to remove from the coverage of 1405, government officials. The other way is to comply with the provisions of 1405 by requiring all public officials and employees to submit a waiver together with their SALN in favor of the AMLC, the BIR, and the Ombudsman to look into their deposits. Therefore, you don't have to amend 1405, you simply require all those required to file a SALN to submit a waiver together with his or her SALN. Hindi pa tayo pumasok sa away at gulong ire-repeal ba natin, wini-weaken ba natin ang 1405, we are in fact complying with 1405. Your thoughts, Sir or the thoughts of anyone, in so far as that approach is concerned? On government officials lang po. I presume everyone in front of me, except to my left, are filing a SALN right? Even the BSP, everyone right? I presume. Yes, Atty. Salido.

VS: Of course, we share with those two proposed amendments, in so far as the Anti-Money Laundering Law is concerned. We can already dispense with the conduct of a bank inquiry with those exceptions.

CHIZ: Either way, it's the same.

VS: It will be faster for us Mr. Chair to conduct our investigation.

FD: Mr. Chair, in so far as the BSP is concerned, their ability to conduct special examination, would that only cover government officials?

CHIZ: All 'yun.

FD: It would cover everybody. So it's not made, unless there's such a provision in his SALN or even in the amendment of the Anti-Money Laundering Act or this bank secrecy should not prevent us if we find it very tortious to allow special examination of bank accounts of everyone. Not only of government officials.

CHIZ: In connection with an inquiry and investigation being done by the Bangko Sentral, correct?

AT: Yes Sir.

CHIZ: Question, if we sole require such a waiver. Under our laws depending on your level, only certain offices will keep a copy of your SALN and therefore the waiver. So kami sa Senado, I think it's the Senate President, Office of the Senate President that has a copy and the Ombudsman? Do we give the Ombudsman a copy?

FD: No, I think it's only the head.

CHIZ: With congressmen it's with the speaker, probably. The copies and the waivers. With the Bangko Sentral, who keeps your SALN, Sir?

AT: For top officials, office of the President, Mr. Chair.

CHIZ: See, so if the AMLC would want to gain access to an account of a government official, it depends who. So, you might have to go to the Office of the President to get a copy because you need a copy, right? Or at the very least a copy or to the Senate President, so on and so forth. So, I guess if he will proceed using that avenue, there has to be a single repository of all these SALNs. Kasi baka mamaya may waiver ka nga hindi ka naman makakuha ng kopya edi ganon din 'yun.

FD: Mr. Chair, this just reminds me about the rule that the Supreme Court has adopted. I think you are aware of that?

CHIZ: Yes, they kept their SALNs to themselves. No, because I remember during the impeachment of Former Chief Justice Corona, we inquired, we asked for a copy of the SALN and the SALN's of all the members of the Supreme Court are with the Office of the Chief Justice.

FD: Yes.

CHIZ: And the court voted not to release it. So, even if there's a waiver that might be a spoiler unless again as I said we require.

FD: So, those who want to get exempted from that requirement should join the Supreme Court or the Judiciary?

CHIZ: There will be nine vacancies.

FD: (laughs) But seriously speaking that's an item that we have to look at Mr. Chair.

CHIZ: If we will proceed with it through that avenue unless we simply exempt them from that coverage in which case the AMLC, BIR, Ombudsman can very well do it altogether already. Kindly submit to us your formal position paper as AMLC na kayong lahat, Atty. Salido, as AMLC na lahat.

VS: Yes, Mr. Chair

CHIZ: So, isahan na lang po. How much time do you need, Sir, to include all the proposals. 'Yung mga estate-estate.

AT: About one week Mr. Chairman.

CHIZ: OK. After a week, we will also schedule a TWG on this matter, Sir, AMLC as a body already. Would you suggest any other group that we need to invite, other than our banking representatives, is there any other group that we need to invite?

DEPUTY OMBUDSMAN GERARD MOSQUERA (GM): Mr. Chair, can we also invite the Bureau of the Internal Revenue, in so far as the state?

CHIZ: Let's invite the BIR. The BIR is not part of AMLC, no? Other than the BIR? No, we'll invite you for the TWG of the amendments through Secrecy of Bank Deposits Act. Kung merong association ng mga retired congressmen at senators, mayors and governors. Kung meron man.

GM: Mr. Chair, the Office of the Ombudsman, if possible.

CHIZ: The Office of the Ombudsman as well is invited, the PDIC as well.

DS: The Department of Finance, Mr. Chairman?

CHIZ: Interesado ba kayo doon?

DS: Of course, Mr. Chairman.

CHIZ: Dumadami yung papakainin namin eh. The BIR already has been invited. Anyone else that we need to invite in so far as secrecy is concerned? Sherwin, is there in association si Tessie Ang See, if it's a concern? If KFR is a concern.

SG: Pero government lang ito. OK lang mag-kidnap, government.

CHIZ: (laughs) Yes actually but what association, organization?

FD: Mr. Chairman, (I) intend to invite also the private sector other than the banking sectors?

CHIZ: Yes, actually but what association or organization would that be?

FD: Well, that we are talking about the PCCI, the MAP. I'm just finding out from the Chairman whether or not there is merit in inviting the private sector other than the banking sector.

CHIZ: I think so, I think so, Sir and I would like it to be more inclusive.

FD: In that case, you might want to invite PCCI, the MAP, the Federation of Filipino-Chinese Chamber of Commerce and Industry.

CHIZ: (nods)

FD: Just to give their views.

AT: The stock exchange, Mr. Chairman, Philippine Stock Exchange.

FD: Yes, The Philippine Stock Exchange.

CHIZ: The Stock Exchange as well, so ordered, point well taken. Before we proceed to other matters the Chair would like to declare a brief recess so that those who have nothing to do with the bills and other matters can already proceed to their normal lives and go back to work. Shall I declare us a recess? Hearing suspended.

FD: May I request our guests to kindly go back to their respective seats, we will begin shortly. The hearing of the Philippine Banks and Financial Intermediary is hereby resumed. Chair would still like to thank and recognize the presence of Senate President Pro-Tempore Drilon and Senator Gatchalian. Proceeding now to other matters, mainly items one and two of other matters, the bill of Senator Recto Senate Bill No. 263, and the bill of Senator Poe, Senate Bill No. 342 which seek to amend Republic Act No. 3844. And in the case of Senator Recto, provide for a higher requirement on 3844. Bearing in mind, and Chair would like to note and make of record that last June the President signed and effectively enacted into law, Republic Act No.10878 which also sought to amend R.A. No. 3844 in relation to some of the points raised in these two bills. So at this junction may I ask Ms. Borromeo, Ma'am? You will be the one to speak, to kindly speak on the proposed measures namely, again for the record, Senate Bill No. 263 and Senate Bill No. 342. Ma'am, you may proceed.

LANDBANK OIC-EVP CECILA BORROMEO (CB): Thank you, Mr. Chair. Good morning to Senator Gatchalian and Senator Drilon. The proposed provision and the allocation of maximum of 20% of the bank's total loan portfolio for all non-agri programs and projects will effectively allocate 80% of the total loan portfolio of the bank to agriculture. While the bank has been providing loans to the agricultural sector, it is deemed that there is still a lot of borrowers from the sector which still do not passed the bank's acceptance criteria. As such the bank has developed special lending programs to farmer borrowers who do not pass the bank's accreditation criteria in lending standards. These programs include the Sikat Saka Program which we implement jointly with the Department of Agriculture and the credit assistance program for program beneficiary's development which we implement in partnership with the Department of the Agrarian Reform. Likewise, the agrarian production credit program.

CHIZ: Ma'am, with your permission I would just like to acknowledge the presence of Senator Dick Gordon. Good morning, Sir. You may proceed, Ma'am.

CB: Good morning Senator Gordon. Moreover, Mr. Chair, as provided under BSP Circular No. 855, Series of 2014 which is basically the guidelines and sound credit risk management practices. The banks are directed to employ portfolio diversification strategies as part of its credit risk management system and the Land Bank adheres to these principles. To comply with this, the bank has diversified its known portfolio to various industries with the agricultural sector capturing the biggest share of 17%. Land Bank has also consistently comply with Basel Pillar II and BSP rules and regulations and credit concentration through regular monitoring risk assessment and implementation of risk mitigation measures such that no particular industry has more than 30% loan exposure to total loan portfolio. So, we continue to diversify our loan portfolio to various industries especially those that are in-line with the National Economic Development Agenda of the country.

If I can proceed, Mr. Chair, to our comments on Senate Bill No. 342. We would also like to note that some provisions of the proposed bills have similarity with RA No. 10878 entitled An Act Strengthening and Institutionalizing Direct Credit Support of the Land Bank of the Philippines to Agrarian Reform Beneficiaries; Small farmers and Fisher folks. This lapse into law on the 17th July 2016. The proposed bill, the proposed provision in Senate Bill No. 342, that would replace the name of the Land Bank of the Philippines to the Agricultural Bank of the Philippines would entail substantial cost on the part of the Land Bank. The bank needs to extend substantially and media for advertising and other activities to ensure the promotion of the bank's new name for easy recall of its clients and the public as a whole. Recently, the bank has a new tag line which we help you grow and we undertook renovation activities to push up our branches and ATM networks. And the other provision of this proposed bill and the allocation of 10% of our regular loan portfolio, the proposed creation by the bank of a separate special window for socialized credit to the agrarian reform beneficiaries in small farmers and fishers which shall be given an allocation of 10% of our total regular loan portfolio is already being addressed under the credit expansion of Land Bank, in coordination with the previously mentioned programs that we are implementing jointly with the Department of Agriculture and the Department of the Agrarian Reform.

These programs are funded and guaranteed by the National Government and these programs cater to farmer borrowers who do not yet squarely passed the lending criteria of the bank. Further, while the Land Bank is a government entity created with a social mandate it is also a banking institution regulated by the Bangko Sentral ng Pilipinas in as such the bank strictly adheres to existing credit policies and directives set by the BSP. To ensure our financial and operational viability and sustainability, the Land Bank effectively manages our loan portfolio by employing risk base standards and controls as well as prudential measures to reduce or mitigate credit risk exposures. And the proposal under the bill that the loans under the socialized credit window shall have an interest rate equivalent to not more than 75% of the bank's prevailing rates to loans to cooperatives and provided that these conduits shall have an interest rate of not more than 5 percentage points and the interest expend shall exclude crop insurance premiums and guarantee fees.

May we inform the Committee, Mr. Chair, that the pricing policy by the bank is risk based which is also in line with the overall credit risk strategies prescribed under BSP Circular No. 855, Series of 2014. As such the resulting interest rate is determined basically according to the credit rating of the borrowers and the proposed socialized rate which is 75% of the bank's prevailing rate for loans to co-ops, we suggest that as an alternative that the general pricing of the bank be adopted but in interest rebates say one to two percent per annum shall be given to borrowers depending under their payment performance.

With these we hope to achieve the following: 1) To provide an incentive and the borrowers to improve the project management and loan repayment performance, 2) To provide an incentive for them to improve their credit rating so that they will qualify for a lower interest rate, and lastly, to subscribe to the policy of the market driven rate for rural credit as espouse by the Agricultural Credit Policy or ACPC and agency attached under the Department of Agriculture. This will also somehow encourage, the private commercial banks to lend to agriculture and small farmers and fishers. And lastly, Mr. Chair, we would like to note that RA 10878 did not include foundations with lending authorities and all other means that will be deemed qualified by the bank as qualified borrowers under the specialized social credits facility. Thank you, Mr. Chair.

CHIZ: Ma'am, can you submit to us a more detailed explanation as to why 10% will be equivalent to as you said how much, 80%?

CB: The 20% cut being proposed by the bill of Senator Recto for non-agricultural related loans.

CHIZ: From what, from the current level of?

CB: What we have now is 17%, Mr. Chair, for agri. The non-agri would be 83, if under the proposed Senate Bill No. 263, the non-agri will have to be 20%.

CHIZ: The non agri is 20.

CB: And the agri would be 80%.

CHIZ: Agri is 80?

CB: That's correct, Mr. Chair.

CHIZ: And in the bill of Senator Grace its 5% in the existing law, in the existing version of the law that lapse into law and it will be, she wants to make it 10%.

CB: In Senator Poe's bill, the share of the agri loans will be 10%.

CHIZ: As against the existing 5%.

CB: That's correct Mr. Chair.

FD: Existing actual is?

CB: 17%, Senator.

CHIZ: So compliant naman kayo doon if ever 'di ba?

CB: Yes, Mr. Chair.

CHIZ: Deputy Governor Espenilla, they're complying with your regulations on diversification, on having a diversified portfolio, but from our point of view, Land Bank has a separate mandate the same with DBP. DBP is supposed to be concentrating on small and medium scale. Yet they're lending to the tycoons. Almost all of the big names, almost all of the big names, all borrowed from DBP. I agree that they should have leeway with respect to investing the bank's money so that there will be borrowable. But what about their mandate?

NE: Mr. Chairman, I think we are presented here in a way with a challenging situation, the two banks that you've mentioned, government banks, Land Bank and DBP (Development Bank of the Philippines). They are what is considered to be a policy banks. They were policy banks Mr. Chairman. They were created by the government, owned by the government to achieve certain policy purposes in the manner that was mentioned by the Chair. Yet at the same time, they are licensed as a universal and commercial bank. And that has certain implications Mr. Chairman, as a universal and commercial bank, is it also allowed to take money from the public by way of deposits. Like for example today Mr. Chairman, Land Bank's deposit of about Php1.3-T as of end March 2016. 30% of that is money from the private sector. The balance is coming from government. So as of UKB operating as such.


NE: Universal and Commercial Bank. It's a universal bank Mr. Chairman.


NE: Universal Bank. The other one is Commercial Bank.

CHIZ: UCB? Sabi niya UKB?

NE: Land Bank Mr. Chairman is a universal bank. It is bigger and has more authority, more powers than simple commercial bank Mr. Chairman.

CHIZ: Sir, UCB or UKB?

NE: UB. Land Bank is a UB. There are other banks that are just KBs. So

CHIZ: KB meaning?

NE: Commercial Bank Mr. Chair.

CHIZ: K ba ang commercial?

FD: Tagalog.

CHIZ: Hindi nga? Commercial siguro sa TV, oo. Why KB? I'm curious, why KB if it's a commercial bank? Kasi kayo na 'yung CB? Central Bank?

NE: Actually, that's a very probable answer, Mr. Chairman. CB is already the Central Bank. Sir, anyway, what I was pointing out Mr. Chairman, so being a universal bank with responsibilities to the public, it has to follow prudential rules. So that it doesn't get in to trouble as well because especially for big banks like Land Bank they can fail. So they have to be prudent as well in their operations because if they fail, the consequences can be also quite serious for the financial system. But having said that Mr. Chairman, I think there's a way of reconciling prudent management and the public policy purpose. So they are not necessarily contradictory to one another. Except that, we have to accept that if a certain banks are asked to perform public policy objectives that exposes them to more risk. And the consequence on that is they may lose some money hopefully not all the time and the result of that is periodically, they may need additional capital from the government.

CHIZ: So 5% to 10 % in the proposal of Sen. Grace, they are now at 17. So there's nothing wrong with that.

NE: If I may say Mr. Chairman, universal banking standpoint, it is prudent because as pointed out by the Land Bank representative, it represents a balance, a more balanced portfolio. Whether that needs a social or public policy, that's a different question, Mr. Chair.

CHIZ: Whether from 17 to 80, am I correct?

CB: The proposed bill…

CHIZ: From 17-80, would that fall within your definition of prudent?

NE: Mr. Chairman, I think if Land Bank…

CHIZ: From the UB perspective.

NE: Yes, Mr. Chairman. So as a UB, it will expose if you shift Land Bank to more concentration to agricultural lending that will definitely exposed them to more risk.

CHIZ: What would be a good ratio, outside. So may agriculture ka, ano pa 'yung iba?

NE: Commercial, lending to companies, commercial lending.

CHIZ: Commercial lending, ano pa 'yung iba?

NE: Trade finance.

FD: Agriculture and non-agriculture.

NE: Yes, Mr. Chair.

CHIZ: So what would be the biggest percentage that your regulations would allow for in so far as agri or non-agri is concerned? In this case, agri which would still fall under your definition of prudence.

NE: Actually Mr. Chairman, our regulations are what we call risk-based, it has nothing to say about what is the optimal mix between agri and non-agri. All that our regulations say today, if your business or your main operations are agriculture recognize that it has risk, for example risk to environment and climate and accordingly you have to control that risk by using insurance and other kinds of mechanisms. As a result of that, you lose more than what you would, I say diversified universal bank then the consequence is from time to time, they may have to go to government to replenish capital so that they will be able to continue to perform the public policy purpose.

CHIZ: But agriculture, agricultural loan covered by the crop insurance, would that minimize the risks? But you would require that too?

CB: Yes Mr. Chair, we require our small farmers, even the large agri-enterprises to get crop insurance and also to get a credit guarantee cover under the agricultural credit program – the AGFT.

CHIZ: What is that mean?

CB: The crop insurance, you will…

CHIZ: The credit guarantees cover.

CB: The credit cover will pay for the loan in case the farmer borrower cannot pay.

CHIZ: Kanino manggagaling po 'yun?

CB: Under the AGFP, the Agricultural Guarantee Fund Program.

CHIZ: Hindi kaya parang?

CB: There's a program Mr. Chair under the Dept. of Agriculture.

CHIZ: Who decides who is covered by that program?

CB: There's a governing board represented by representatives from the Department of Agriculture, Department of Agrarian Reform, the Agricultural Credit Policy and the Land Bank. So we accredit participative financial…

CHIZ: Is it under the ACPC or ACPC is a part of it?

CB: ACPC is a part of it Mr. Chair.

NE: Mr. Chairman, my understanding is that this was basically created by the executive branch and it was funded from the various revenue agencies particularly PAGCOR was I think some of the money that was...

CHIZ: 'Di maliit lang 'yun?

NE: But the fund today is how much?

CB: It's about Php4.2-B, but we can leverage it 10 times.

CHIZ: So up to Php42-B?

NE: Mr. Chairman, because one of the features of our regulations today is agricultural loan has the agricultural guarantee fund. It has a lower risk weight and that's important for banks that are availing the risk weight is lowered to 28%. So to be able to make that hold, the guarantee fund can guarantee up to three times of its amount.

CHIZ: But if you're covered by that guarantee fund that means you don't need any collateral anymore?

CB: Yes, Mr. Chair, we can lend without collateral. Actually, the guarantee, credit guarantee program under AGFP only guarantees unsecured agri loans.

CHIZ: So it's possible that the loan be completely unsecured, no collateral as long as AGFP will guarantee it?

CB: Yes, Mr. Chair, for rice and corn farmers.

CHIZ: And the process is how long? The process of securing a guarantee from AGFP is how long?

CB: Under the program we accredit financial institutions, like other banks and rural banks and thrift banks. Once they have the line, the loans that they enroll under the guarantee program will be automatically covered.

CHIZ: It's through the lending institution? So I guess Land Bank has a quota too?

CB: Yes, Mr. Chair.

CHIZ: Under that fund?

CB: Yes, Sir.

CHIZ: And you get to decide who it will cover?
CB: We have a policy Mr. Chair, we cover the Sikat-Saka Borrowers, these are members of irrigators associations and the loans are clean.

FD: Thank you Mr. Chair, just a few points. First, Deputy Governor Espenilla said that the Land Bank and the DBP were form by law as policy banks. Can you spread into the records what exact policies were supposed to have been pursued with the formation of these two government banks.

NE: Mr. Chairman, if we look at the charter of the Land Bank for example, Land Bank is primarily directed to provide credit to agricultural sector, farmers and cooperatives, Mr. Chairman. And if we look at the charter of the DBP, it's meant to provide lending to industry, Mr. Chairman to promote industrialization of our economy. So these were the original purposes of these two banks, Mr. Chairman.

FD: The Land Bank was supposed to handle the agricultural sector and DBP industrial sector?

NE: Yes, Mr. Chairman.

FD: What has happened over the years? Has this policy being pursued by the two banks in other words, in the rules were their operations give towards achieving these policies or was there, it was lost somewhere in the translation?

NE: Mr. Chairman perhaps the question is best answered by the institutions although from the BSP perspective, we look at the discharge of its mission as a function of its governing body.

FD: Would it be free to say that the composition or the composition of the loan portfolio would be an instrument to the achievement of this policy goes?

NE: Mr. Chairman, I think, the way I look at it Mr. Chairman, is that the challenge for this institutions in the past has been, they have this public policy responsibilities but the support for them had been limited. So the, in a way this important policy purposes are being co-subsidized with their increasingly commercial lending. That's what we see Mr. Chairman from a regulator standpoint. I don't know how they actually formally state that in their operations.

FD: Yes, may Ms. Borromeo can answer that question. The BSP said that basically the Land Bank of the Philippines by its charter was supposed to lead in the agricultural development through providing credit assistance and assistance to the sector as distinguish from the DBP which was task develop to industrial sector. You are now a sort of, as saying for the record that the loan portfolio of the Land Bank of the Philippines would principally be 17% for agriculture, 80% for industrial. Is it consistent with the policy mandate from developing, providing assistance to agricultural sector.

CB: Mr. Chair, Senator Drilon, based on our data, the Land Bank of the Philippines is still the biggest lender in the agricultural sector in the countryside, Sir. And while is it true that under our charter, we were basically created to provide timely and adequate financial support in all phases involved in the execution of the needed agrarian reform. We were also authorized under our general powers to grant short term and I am quoting Section 75 No. 5 of our charter, we were authorized to grant charter short term, medium and long term loans and advances against security of real estate and other acceptable assets for the establishment development or expansion of agricultural, industrial, home building or home financing projects and other productive enterprises. But as a matter of operational strategy Mr. Chair, the bank would support all the priorities of the national government including infrastructure that would enhance our transportation and power in communication as well as the establishment of schools and hospitals. Thank you, Mr. Chair.

FD: The fact however is that 83% of your loan portfolio is on non-agricultural loans?

CB: Yes, Senator.

FD: And you are asserting that even at 17%, you are the biggest lender in so far as the agricultural sector is concerned and in that sense you are saying that you are fulfilling our mandate?

CB: Yes, Senator.

CHIZ: Is that both in percentage and in terms you are the biggest?

CB: In terms Mr. Chair, our exposure to the agriculture and forestry and fishing sector is Php78.19-B.

CHIZ: So that is the biggest?

CB: We believe so, Mr. Chair.

CHIZ: Percentage are the biggest too?

CB: The percentage share, our percentage share is…

CHIZ: No, percentage nung 17% in relation to your loanable amount.

CB: No, I think there are smaller banks who have higher exposure as a percentage of their total loans to the agri sector.

CHIZ: Third question, is it the highest ever that the Land Bank is lend to the agriculture sector? 17%? Mahirap 'yung Php72-B because nagbabago 'yung amount.

CB: I cannot assume that this would be the highest percentage share of agri sector in the bank's portfolio, Mr. Chair. We can check on that. But the Php78-B is the highest so far.

CHIZ: Get back to us on that Ma'am.

FD: As a percentage of the total industry loan portfolio, what would be the percentage attributable to the Land Bank?

CB: We don't have that information right now, Senator.

FD: Because you claim this is the one of the biggest sector. So I was interested in finding out what percentage is that in the total agriculture banking sector. In other words, loans to agriculture sector in the entire banking industry. How much would Land Bank account for? Can you have that data too?

CB: We can present that.

FD: I guess again, in the Land Bank before and ex-officio board and I knew for a fact that there's always, you know, the effort to show that we are viable because of the profits we make is always a factor that competes with the policy on providing loans to agricultural sector because there is involved, etcetera. But anyway that's a matter that requires, I assume a long discussion. Just another point, I don't know who can answer this, is it true that the loan portfolio for example, may be I address it first to the Land Bank. Do you have loans to the LGU's as against the security of internal revenue allotments?

CB: Mr. Chair, Senator Drilon, yes we do extend loans to LGU's.

FD: What, is it any significant portion of your loan portfolio?

CB: About Php45-B that's about 10% of our total regular loan portfolio.

FD: So about 10% of your loan portfolio is devoted to loans of LGU?

CB: Yes, Senator.

FD: Of course there's no risk, zero risk loan, is that correct?

CB: Yes. Mr. Chair.

FD: You were saying again how much the absolute terms?

CB: Php45-B.

FD: Php45-B. Why did we engaged in this kind of loan activity. Because there are no risk involved? And therefore madali lang kumita? Bakit natin pinasa ito sa private sector? What is the policy achieved by extending loans versus the internal revenue allotment of the LGU? And why do you compete to the private sector in so far as that is concerned?

CB: The lending program of the Land Bank to the local government units is in line with our policy direction Mr. Chair, senator, to support the development agenda of the government including those of the LGU's. And from the LGU code was enacted in 1991, Land Bank I supposed, I think is the first bank who crafted a lending program for the LGU's knowing that there are safeguards in the law that will protect our investments.

FD: O siyempre, this is a profitable loan portfolio, there are no risks involved, because the security is in effect, right?

CB: Mr. Chair, Senator under the law there is no mechanism by which the lending bank, including Land Bank, can have access on the IRA automatically from the DBM because the law prohibits that. So there is also a risk. In fact, some of the LGUs that were adversely affected by typhoons requested for loan restructuring and we gave them that. But at the very start, we classified the LGUs such as those who can borrow and can handle a loan versus those who cannot afford a loan.

FD: OK. What is then, what do you call this, bad loans, in so far as those secured by LGUs are concerned?

CB: Well its 99% collection rate.

FD: It's 99% collection. Ibig sabihin talagang walang risk ito and all those explanations. Anyway, would anyone be able to tell us how much is the LGUs, the DBP loans portfolio which are devoted to LGUs? Because I do not know that this is consistent with the policy of supporting the industrial sector. Yes?

CB: We don't have data with all due respect Mr. Chair. But we can certainly provide the…

FD: What is your, do you have data on this?

CB: We have data of the LGUs.

FD: It's not available now?

CB: It's just that I don't have it now Mr. Chairman. We can submit it, Mr. Chairman.

FD: Because, from the way the discussions are taking place, there appears to be, there are no distinctions anymore between the DBP and the Land Bank. Meron pa ba? That's my question, is there really a difference, given what is actually happening. Mayroon bang pagkakaiba ang operations ng DBP at saka noong Land Bank?

CB: Mr. Chair, Senator, I think we have very similar undertakings. We have very similar loan portfolio. But what Land Bank has, that DBP doesn't have, would be the service to the supportive of the Agrarian Reform Program. They are not involved in the Agrarian Reform Program which Land Bank is very much into.

FD: But if there's anything, okay. You are saying that, if anything, we should absorb DBP? I mean Land Bank, should absorb DBP? Ganoon po ba? Is that a correct conclusion? Because you are saying, you are doing everything similar except in so far as your role in the Agrarian Reform Program which DBP does not have. But you know, from the way you describe your, that is a very significant portion anyway. So, are you saying therefore that we should absorb, Land Bank should absorb DBP?

CHIZ: You can invoke your right to remain silent,Ma'am.

FD: Or would you rather to take it on record? Anyway, thank you Mr. Chairman.

CHIZ: Thank you Senator Frank. Senator Sherwin? You are recognized. You may proceed.

SG: Mr. Chair, again I have some question. Miss Borromeo, yung 14% of your agri, is it loaned directly to the farmers or through the Thrift Banks and Rural Banks?

CB: Senator Gatchalian, our loan the agri, forestry and fishery sector which captures 17.5% of our portfolio is given in various forms. We have loans directly to small farmers and fishers.

SG: Direct ho 'yun?

CB: Meron ho kaming direct. Meron ho kaming through conduits, through their cooperatives, and other organizations, through our partnership with the Rural Banks and Thrift Banks, micro-finance institutions and also to large and medium agri players.

SG: Opo. What type of loans are these? Anong klaseng mga loans ho ito?

CB: Various types.

SG: Ano po 'yung pinaka-top three? Kung natatandaan nyo po?

CB: Top three would be still palay and corn, and agri business. The processing of agri products.Two, banana, and oil palm.

SG: When you say palay and corn, humihiram sila to buy inputs? Ganoon ba ho 'yun?

CB: That is correct, Senator.

SG: Opo. Do you have any idea right now ho, if you have any information as to, sa isang taon, ilan po ang nag-a-apply at ilan po ang pumapasa?

CB: 'Yung nag-a-apply we don't have that information now. But we can get that.

SG: But in your estimate po?

CB: We have been releasing loans to about 350,000 farmers every year. Every cropping season.

SG: So in terms of percentage, how many of those, obviously the ones who passed is 17%. But I just want to understand, ilan po 'yung hindi pumapasa? Ilan po 'yung nag-a-apply at hindi po sila pumapasa? In real terms, in absolute numbers?

CB: We don't have that information now senator.

SG: Pero is it, marami, I'm sure. Is it more than 50% ng nag-a-apply hindi ho pumapasa? Is that a safe estimate?

CB: The number of those who apply and cannot be given loans are small, who are relative to what we approve because we do a pro-active marketing based on our acceptance criteria we go and visit the cooperatives that we definitely know who can pass our criteria.

SG: How many of those who passed and do not passed? I mean for example lang sa cooperatives. I just want to get a good view on how many borrowers or potential borrowers do pass? And how many do not pass?

CB: As for farmers' cooperative are concerned, a lot of them actually come to us and get a loan especially those weaker ones because they know the standards of the bank which are more pro-active on the part of the bank to work after those stronger coops that we know passed our lending criteria.

SG: Doon po sa direct, sa direct na humihiram?

CB: Sa direct ho, we do that under the Sikat-Saka Program and APC, Agrarian Production Credit Program with the Department of Agriculture and the Department of Agrarian Reform. Again it's pro-active.

SG: How many po ang pumapasa at hindi pumapasa in that particular program?

CB: Doon ho kasi sa kung pumapasa, it all depends on the certification of the irrigator's association. If they certify their members to be of good standing then we lend to them.

SG: That's the only requirement?

CB: Yes.

SG: But do you have any estimate po how many?

CB: How many of their members comply?

SG: How many of the members comply and passed the requirement?

CB: I don't have that information right now, Senator but we can…

SG: But is it more than 50% of those who go to Land Bank to actually get some form of loan? Meron bang ganoon 50%?

CB: 'Yun nga ho, Senator. Actually, those who do not qualify do not even get to the point of going to the bank to request for a loan. Because of the level of the association, they already screen their members who do not pass the criteria.

SG: No. But my point Ms. Borromeo is to understand the requirements and kung ano po 'yung nagiging problem kung bakit hindi po sila pumapasa? Maybe that 17% portfolio function of stringent rules or maybe the market cannot absorb, agri-marker cannot absorb more of that loan. The absorption of the market is also relevant. Can the market really absorb? If you look at, itong statistics, 10% of our GDP comes from agri. That's about a Php1-T. You are only lending about 78. So medyo malayo. If you look at very simple terms lang ano, but, my concern is, can the market still absorb more loans? Baka 'yung mga farmers themselves cannot absorb. O hindi rin nila alam kung paano gawin. Wala silang capability. So we have to look at those angles. I don't know if you have those type of studies?

CB: Senator, actually during our discussions with the DA and the DAR, the absorptive capacity of the farmers and their organization is also an issue. Because as you rightfully mention, not all of them are ready to get formal credit because their management team is not yet matured. They don't have bookkeeping records which is very important.

SG: When you reverse the trend and make it 80% agri, can the market absorb 80%? Meron ba silang capability to do that? Do they have the borrower mentality and discipline to actually repay? I don't know nga, that is why I asked.

CB: Those are very valid concerns, Senator.

SG: Baka kapag tinaasan natin, babagsak naman sila wala rin kayong ginagawa ano.

CB: That's right. And probably most of the small farmers' credit is not the right intervention yet.

SG: But do you have the study to educate us whether the absorptive capacity of the farmer is already there to help them, to assist them? Meron bang ganoon ho?

CB: The bank doesn't conduct that study on its own. But we rely heavily on the research of the Agricultural Credit Policy Council.

SG: Which is under the Department of Agriculture?

CB: The Department of Agriculture.

SG: Mr. Chair, I think to pursue this discussion, Mr. Chair, I think it's also important to invite the Department of Agriculture just to shed light on the absorptive capacity of the agri-industry itself. I mean pwede nating taasan. Pwedeng 100% of the loan portfolio of Land Bank, lend to agri, pero kaya ba ng agri? Yun ang dapat maintindihan ho natin.

CHIZ: The Committee Chair kindly invites the Department of Agriculture, representatives from ACPC, san pa ba? But ACPC is only a part of AGFP. Ano 'yun?

CB: Yes. The head of the ACPC is member of the governing board of the AGFP.

CHIZ: Who's the head of the AGFP?

CB: One of the undersecretaries of the Department of Agriculture.

CHIZ: So AGFP, representatives from the AGFP and the ACPC, who else? Also inform that the author of the measures, that they can also be perhaps here to engage our invited guests with respect to their proposal. Who else Ma'am you would suggest? May naisip pa po kayo?

CB: As far as the Agrarian Reform beneficiaries are concerned, maybe we should also invite other representatives from the Department of Agrarian Reform.

CHIZ: Let's get those representatives as well. Committee secretary is directed to invite representatives from the Department of Agrarian Reform. Any other points you would like to raise? Yes, Ms. Felix?

SF: For the record, the CTB and I guess are BAP, we affirm our support for the bill of Senator Recto proposing that the lending of Land Bank to non-agri be increased to 80% because then, this will solve the problem of the private banks ever since, wherein Land Bank and DBP have been competing with the private banks. I guess it's pretty obvious this is the reason behind that I guess. We believe that Land Bank should, you know, their mandate should be, foremost as far as since it is supposed to be a policy bank. Statistics also on the banks compliance with the Agri-Agro Law will show that not even, the Land Bank is saying they are the biggest lender for agri and this is their mandate, how come, or even the commercial banking sector and even the thrift banking sector for that matter, we are falling below our required 15% compliance for agri. For that matter, only our bank has more than complied with it at 33%. So to us, it's very important because this then shows the real picture as it is now in the banking industry. And this has been our concern for so many years already. Thank you.

CHIZ: (inaudible)

RP: 'Yun kasi hong exposure ho ng Rural Banking Industry sa buong financial industry is 1.7 na lang ho, percent. And yet, kami ho ang nasa pinakababa na nakaka-deliver sa countryside. So kung mas masusuportahan ho na mabibigyan kami na hindi naman naming kalaban ang mga government banks, sa tingin ho namin mas magiging profitable ang mga Rural Banks. Mabibigyan ho kami ng opportunity na hindi naman kalaban, ka-kompetensiya ang Land Bank po.

CHIZ: Question Sir, when you say "ka-kompetensiya", it means?

RESOURCE PERSON: Meron hong, may mga produkto ho kaming nakakapare-pareho.

CHIZ: But it means nga ho, mas mataas kayo kaysa sa kanila?

RP: Mas mataas ho ang, nakakapagpautang kami sa mga farmers kasi ho mas malapad ang aming coverage sa countryside po.

CHIZ: But interest wise, you are higher, lower?

RP: Mas mataas ho. Tingin ko mas mataas ho tayo ng konti. Opo. Pero kami ho ang nakaka-deliver sa baba.

CHIZ: I don't get it. So you support the increase to 80%?

RP: Yes. Para ho naman, sa tingin ho naming mas gaganda ang pagkakataon nung mga farmers natin kung lalakihan ho ng Land Bank ang exposure nila sa agrikultura po.

CHIZ: Which includes lending to Rural Banks? Is that the point you're driving at?

RP: Nagko-compete nga ho yung iba naming produkto.

CHIZ: If we will increase their exposure to agriculture to 80% and all the more they would compete with you?

SF: There are other products.

RP: May ibang, may iba.

CHIZ: Kino-compete-an kayo sa commercial?

SF: The commercial feature I guess.

CHIZ: So ayaw nyo sila mag-compete sa commercial sa inyo sa baba? Is that it?

RP: Sa ibang produkto po.

CHIZ: Commercial?

RP: Opo.

SG: Mr. Chair, let me just clarify, kanina nasabi po ni Ma'am Borromeo that they also go through you in some of the loans?

RP: Yung iba ho. Hindi namna lahat ho.

SG: This is through window type of operation? 'Yun po 'yung gusto niyong malakihan pa?

RP: Not necessarily. Hindi ho. 'Yung exposure ho nila sa agri, maganda ho kung mas mapapalakihan nila.

SG: How do you take advantage of that? Kung diretso naman sila sa farmers. So why is it good for you?

RP: 'Yung kanilang pag-exposure ho sa agri?

SG: Oho.

RP: Sa tingin ho naming mas lalakas ang peang iikot sa countryside. Hindi ho sa amin ha.

SG: Not as additional product for you?

RP: Hindi ho sa amin, ang nakakaaapekto din ho sa amin, kamukha ng ibang mga produkto ho na commercial, nakakain din ho ng Land Bank, na kung maaari namna ho, 'yung mga Rural Banks din naman ho ang makapagpautang nun.

CHIZ: Thank you very much. I would like to acknowledge the presence of Senator Zubiri. Next, to wind up, Mr. Virtucio.

CV: Thank you Mr. Chairman. Senator Zubiri, good morning Sir and honorable senators. We at the Bankers Association welcome this discourse on Agricultural and Agrarian Reform lending because we believe we have a bigger issue, much much bigger issue, much more important issue, it's called Republic Act 10000, this is basically the law that mandates all banks to allocate up to 20% of their net loanable funds within this sectors.

CHIZ: What law is this?

CV: Republic Act 10000.

CHIZ: Agri-Agra? Ang laking butas naman nung inilagay diyan.

CV: No. I said 25% of net loanable funds. That's 10% to agriculture and 10 to agra but there is a little (inaudible) there. The excess in agri-agra, the excess in agra could be put into agri. But the other way around doesn't work. Unfortunately, the absorptive capacity of the agra is, as we all understand, much more. This law was passed in the mid-70s. We believe the portion of the agricultural, the GDP was much higher that time. I think Senator Gatchalian had indicated earlier that now it's around 10%. This is really, we welcome the opportunity to present to this august body a position paper to repeal, if not, amend this Argi-Agra Law.

CHIZ: So correct me if I'm wrong, Agri-Agra allows the banks to buy you and invest to government securities to comply?

CV: Not necessarily, Sir.

CHIZ: With the provisions of this law?

CV: In 2009 they have amended, they restricted the compliance. Before they could buy Land Bank.

CHIZ: Sa ngayon wala na?

CV: Wala na po.

CHIZ: Oo. Isa ako sa mga bumoto dun. (laughs)

CV: The latest figure suggests that the compliance of the banks is about 13% on agriculture alone and 1% on agra. So that means all the banks are under penalty or penalized and we pay, the penalties used to go to the Bangko Sentral but now they only get 10% of it.

CHIZ: Sir, I'll schedule another meeting and call DA and Agrarian Reform. You know why? I think all of us should work together so that we could come up with actually a viable program that is workable for the banking industry, that's compliant with the regulations of the BSP and at the same time, policy-wise, we would be able to direct money in the sector that needs it the most, which is agriculture. Yes sir please.

CV: We checked the world and we practically go on the country that's doing it. Mandated by law. Very few countries have which have something similar are mandate not by law but certain institutions which specified, maybe like the Land Bank, DBP, would be mandated to perform in this country, not the commercial banks. And if I may add, profit banks capital are private (inaudible) taxation as well that we are getting into something more. So thank you for the opportunity to present in this august body.

CHIZ: We will try to identify programs sir that will be beneficial, not only beneficial but beneficial to all actually. Because if only we can prove that it works, perhaps even without law you will also come to it and invest on it as well. Hopefully, in the not so far future. We will schedule these two bills in the next hearing hopefully those who were identified will be able to attend and also the authors, what they have in mind. Senator Zubiri, you are recognized. You may proceed.

SENATOR MIGZ ZUBIRI (MZ): Thank you. Just a, actually I have just also filed an amendment today in the Bank Secrecy Law. So in the next hearing of the Bank Secrecy Law, I'd be able to tackle also my version of the bill. And I would just like to put on record as well because I'd like to make special mention Land Bank, I've been working with the Land Bank in the Senate, was it in the 16th Congress? 15th Congress. As chairman of the Cooperatives Committee, I was also the chairman of the Gawad Pitak, and I know for a fact that Land Bank has been working side-by-side with several cooperatives. And we congratulate them on that. As a matter of fact, all of the awardees are part of the Gawad Pitak Program. So at least, I'd like to stay that for the record. As Lakas Chairman of the Cooperatives Committee, I'm excited again to work with Land Bank and in fairness to them, they've been focusing really on the agri sector, the rural sector. As a matter of fact, they have a new campaign that will help you grow, "We Help You Grow" campaign. So on the record, I'd like to put that Mr. Chairman because in fairness to them, I know everybody here in the Senate and in the House sometimes when there are farmer groups that come to us, complain to us, we make our favorite whipping boy, the Land Bank, but as a matter of fact they are the only institution that these people go to, at least the majority of the farmers in the countryside. So I'd like to also commend them for their efforts. Mr. Chair, thank you.

CHIZ: Duly noted. Thank you Senator Zubiri. I'd like to thank and use this opportunity to thank everyone for attending this morning's hearing. And for being on time.Maraming salama po. Maraming salamat po sa oras ninyo ngayong umaga sa pagdalo. Sa muli, magandang umaga. Hearing is suspended.







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