BSP concerned over impact of sale on banks

The Bangko Sentral ng Pilipinas (BSP) will be watching closely the reported sale of the Philippine Long Distance Telephone Corp. (PLDT).

In an interview, BSP Deputy Governor Amando Tetangco said monetary authorities are concerned over the impact of the sale on banks and non-bank financial institutions which have exposures to the Metro Pacific Group and the PLDT.

"If the ownership structure (of PLDT) will change, what will be the impact to the creditor banks?" Tetangco pointed out.

The telecommunications company is indebted to several banking institutions and the BSP fears that the sale might have an impact of the country’s banking system. Initial estimates show that PLDT has existing debts of over P21 billion.

Tetangco said there may be some legal implications on the existing contracts or agreements between the borrower (PLDT) and the lender (creditor banks).

"What will be the relationship between the creditor banks and the new owners? If there are any agreements between the banks and present owners, will the new owners honor these?" he said.

The BSP fears that major changes in the ownership structure could create major waves in the financial system. Monetary authorities want to ensure that the transaction will not hurt the domestic banking industry.

The transaction does not only involve PLDT but also Metro Pacific, Bonifacio Land Corp., and its mother unit, First Pacific Co. Ltd. (FPC). "The amount and the number of domestic banks could actually be bigger than initially reported," officials warned.

BSP Governor Rafael Buenaventura is now in Brisbane, Australia holding one-on-one discussions with representatives of the Financial Advisory Task Force (FATF). Buenaventura and Securities and Exchange Commission (SEC) Chairman Lilia Bautista are making another bid to get the country out of the FATF list of uncooperative countries.

Before he left, Buenaventura said they would try to make sure that the banks would not be put at a disadvantage by the anticipated sale.

"We want the owners and future owners of Metro Pacific (and PLDT) to explain the transactions to all the banks involved," he said.

Aside the banks, there will also be non-bank or investment institutions that will be involved in what could be the biggest corporate takeover this year.