Sources revealed yesterday that in the coming meeting of Philippine officials with CalPers, the suspension order against BSP Gov. Rafael Buenaventura has been added as part of the agenda because CalPers wanted an explanation of how the order would affect policy decisions in the banking sector.
CalPers is the biggest investment fund in the US. Although its Philippine investments are relatively small compared to other funds, its rating and evaluation is widely used by other investment funds when deciding whether to invest in the Philippines or not.
The Philippines is in CalPer’s list only on a provisional basis and Philippine officials have been trying to convince the fund to retain the country in its investment portfolio to avoid the stigma of being dropped as an undesirable destination of investments.
Sources said that CalPers itself revised the agenda for its October meeting with Philippine officials to include a discussion of the Court of Appeals ruling against Buenaventura.
A delegation of Philippine finance and monetary officials together with some representatives from the business community will meet on Oct. 30 with CalPers and its consultants to discuss the concerns raised by the fund.
According to the source, the international community is seriously concerned over the court order because of its precedent-setting implications on the BSP’s capacity to supervise banks and its power to step into problematic financial institutions.
A member of the delegation told reporters that CalPers wanted to specifically discuss Buenaventura’s imminent suspension and similar concerns were raised by other international groups when the Philippines sent a delegation on an international roadshow last month.
Credit rating agencies were particularly wary over the court order against the BSP, including Moody’s, the Japan Credit Rating Agency, Japan Rating and Investments and other rating agencies.
"For the international community, this is a serious concern because they see the court decision as a threat to the BSP’s regulatory and supervisory mandate," the source said. "It’s not even about Buenaventura, it’s about what the BSP can and cannot do."
According to the source, Philippine officials have had to explain that there was due process at work in the country and the decision was not final or executory. "But we have to stop there since we do not want to bad-mouth the judiciary in the attempt to assure them that this decision would not hamper the BSP," the source explained.
"That said, there really is a fundamental weakness in the BSP mandate that should be addressed by the legislature," the source said.
The BSP has been trying to convince Congress to pass a legislative reform that would provide the BSP with immunity from suits in the exercise of its mandate to supervise banks, especially problematic institutions that require intervention. The immunity, however, is feared by Congress as a potentially problematic protection to be given to the BSP. But the source said it was not impossible to impose check and balances to ensure that the protection would not be abused.