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Transcript
Capital Market Development Council The CMDC Its Purpose & Its Organization Role of Capital Markets in the Economy The Market Players & Enabling Environment The Present Situation CMDC’s Share & Working Agenda Concerns/Issues & Pressing Needs Legislative Wishlist & Recommendations The Road Ahead What is the CMDC Public-Private Sector Partnership • A common desire to develop capital market Original Council composed of: • DoF, CBP (BSP), SEC • Finex, BAP, IHAP, MkSE, MSE Current Council now also includes: • Insurance Commission • Phil. Life Insurance Association • Philippine Insurers and Reinsurers Association • Phil Federation of Pre-Need Plan Co. Inc. • Phil. Dealing System Group What Market Dev’t Means SHARED Responsibility Commitment Financial market is the forward- looking bridge between today and the future Providing Savers & Borrowers options to meet their needs Consumer Satisfaction Consumer Protection Role of Capital Market in Economic Recovery Chief venue for raising capital (long-term funds) by domestic enterprises with high potential for quality employment generation in competitive business areas. Main destination of domestic surplus funds (savings) seeking appropriate returns for acceptable risks. Capital markets deal in promises Debt Promise Equity Promise Contingent Promise Our Working Agenda MARKET: Attaining “competitive parity” DIVERSITY: Expanding financial choices available to the consumer EFFICIENCY: Improving the delivery of financial products and services Investor Protection: Providing protection to the investor #1 Competitive Parity Submarkets complement but compete with each other Banks Non-Banks • Commercial • Thrift • Rural • Invt Houses Ownership Overlaps Product Overlaps • Finance • Invt Companies • Insurance • Pre-Need • Dealers & Brokers • Etc. #2 Addressing Diversity Savers value liquidity but term funds are also necessary Banks 82 % • Housing needs Resources • Education for the kids • Retirement planning • Insurance & Hedging CASA 67 % Deposits • Expanding productive capacity #3 Balance of Incentives Taxation creates a friction cost but provides a social net Framework for Governance PUBLIC FINANCIAL MARKET Situationer: Recent Disincentives to Funds Inflow into the Capital Market Series of closures of financial intermediaries. Proliferation of financial scams and “Ponzi” schemes that led to losses and diversion of funds out of legitimate surviving financial intermediaries. Perception of increasing risks and declining expected returns. Financial difficulties of large pre-need companies. Looming problems of public pension institutions. Situation Keeps RP Market Size Small Relative to Neighbors DOMESTIC MARKET CAPITALIZATION 2002 2003 2004 end-Dec 2005 (in billion US$) Indonesia Jakarta Stock Exchange JSX 30.1 54.7 73 81 Malaysia Bursa Malaysia BM 122.9 161.0 182 181 Philippines Philippine Stock Exchange PSE 18.2 23.2 29 40 Thailand Stock Exchange of Thailand SET 45.4 119.0 115 124 In Billion $US 2004 182 181 200 150 100 2005 115 124 73 81 29 50 40 Indonesia Malaysia Philippines Thailand Need to Improve RP’s Low Domestic Savings Rate Source: ADB ASEAN Domestic Savings Rate, 2004 50 Gross Domestic Savings/GDP, in % Philippines 2005 Domestic Savings/GDP = 29% Indonesia 2004 Domestic Savings Rate/GDP = 25.3% Thailand 2004 Domestic Savings/GDP = 33.4% Malaysia 2004 Domestic Savings/GDP = 43.8% 40 30 20 10 0 Philippines Malaysia Indonesia Thailand Need for Faster Development of Domestic Debt Market Outstanding Domestic Bonds / GNP = 40% in the Philippines Bank Assets / GNP = 85% in the Phil. Equity / GNP = 69% in the Phil. Bonds Outstanding / GNP = 88% in EuroLand Bonds Outstanding / GNP = 151% in the U.S. Elements Needed for Capital Market Development Stable macroeconomic conditions Good corporate governance Sound legal, accounting infrastructure Limited tax distortions Efficient market operating infrastructure Conducive and effective supervision & regulation Skills & professional development Better Corporate Governance & Financial Transparency Demand higher standards of conduct from external auditors. Complementary: a program for improved financial literacy so that investors can impose proper market discipline. Stringent enforcement of mark-to-market regulations to improve financial transparency & promote more active secondary market trading. In partnership with ICD, promotes use of scorecard to measure corporate governance performance of publiclylisted firms. Conducive Regulatory Environment Establishment of a Financial Sector Forum (FSF) among the BSP, SEC, Insurance Commission, & PDIC to achieve a more level regulatory playing field. Objectives of Regulation: 1. Protect against systemic instability; 2. Prevent market misconduct, fraud, anticompetitive behavior; 3. Information assymetry; 4. Safety nets. 3-Tier Standard to Strengthen Financial System Tier 1 Self-governance Corporate Governance Accounting and Auditing Market Operating Environment Tier 2 Settlement system/Price discovery/Transaction cost/Liquidity Rating Agencies Financial Literacy Government Regulation Financial regulation & prudential supervision Legal reforms Tier 3 Capital Market’s share in the Task These much-needed measures are not solely the call of the capital market participants; to some extent, they rest with government institutions in charge of macroeconomic, sectoral, and social policies and programs. We in the capital market are eager to do our share in our own field as reflected in the Legislative initiatives herein. Legislative Wishlist Extension of SPAV Law Fair Credit Reporting Bill Amendments of BSP Charter AMLA Amendments Corporate Recovery Act Pre-need Bill Rationalization of Financial Sector Taxes PERA RICA Amendments to SRC Amendments to Insurance Code Amendments to the Corporate Code on the fit-and-proper rule Repeal/Clarification of “deposit substitutes” Consolidated Regulator Act Fire Code of the Philippines Establish policies Build legal and regulatory framework Build other financial sector infrastructure Macro stability Institutions Companies Central bank Bank Insurance Pension funds Fund management Banking and other financial supervision BSP Charter Consolidated Regulator Companies/enterprises Accounting and acturial professions Markets Capital Securities trading firms Investment fund management firms Payment systems Banks Micro and cooperative Specialized Commercial SPAV Political environment Legal and judicial environment AMLA CRA Transparency and disclosure Fair Credit Reporting Bill Property rights registries Share registries Contracting enforcement Property rights Lending/collateral Financial instruments Market conduct Wholesale and retail investment services Accounting and auditing Regulations Failure-resolution laws Insolvency Deposit insurance Restructuring agencies Research and rating agencies Develop institutions Central bank BSP CHARTER Contractual Savings Insurance Pensions Pre-Need Insurance Code RICA Develop financial instruments and markets Fixed-income instruments Equities Currencies Commodities Derivatives Other financial/instruments term (leasing) securitization housing loans agricultural credit supplier's credit guarantees Tax Reform PERA Upgrade skills Seminars for policymakers Training institutes Institutional development Capital markets/exchange Securities trading and fund management Exchanges Equities Fixed-income Government Municipal Private sector companies Commodities SRC Fire Code Lending Investors Act Benefit of Capital Market Development to the Real Economy Channels funds to most appropriate investments; Sets benchmark for risk-free yield curve; Provides access to local currency funding; Provides diversified and higher returns for domestic savings; Reprices financial assets continuously; Helps develop new hedging instruments; Attracts different types of investors; Ensures better financial reporting in both financial and real sectors of the economy. CMDC Remains Committed To be a pro-active public-private sector partnership that is the very core of CMDC To pursue its vision of market development premised on the Filipino consumer To be an active participant in the legislative process as an integral aspect of market development Thank you