Local capital market needs further dev’t to remain competitive, says EPCIB prexy

The Philippines needs a developed and extensive capital market if it wants to remain competitive in the regional and global market, a top bank executive said.

In a forum, Equitable PCI Bank president and chief executive officer Rene J. Buenaventura said there is a positive correlation between the capital market and economic development.

"Our economy functions better and grows faster if our financial infrastructure is anchored not just on a healthy banking system but also on the presence of a deep and vibrant capital market," Buenaventura said.

The capital markets include the debt and securities market, equities or stock market, and the bond and commercial paper market.

A developed capital market promotes savings, investments and economic growth especially in a market-driven economy. Domestics savings are then tapped to fund the requirements of business, thus reducing the dependence on banks or non-bank financial institutions.

It was likewise pointed out that a developed and stable domestic capital market reduces exposure to foreign financing, thus reducing risks to higher servicing costs due to strong currency sourcing.

"The experience of the 1997 Asian financial crisis and its far-reaching impact is a classic case," Buenaventura said.

He admitted that the Philippine economy is dominated by banks when it goes to financing requirements of both the domestic and private sector. But that situation will only prove detrimental in the long term.

In fact, he said there are a lot of opportunities for banks to make business within a healthy capital market environment.

"Banks can become involved in the origination and distribution of capital market securities, as it has the network, infrastructure and resources required as catalysts and prime movers for capital market development," the bank executive said.

The Bangko Sentral ng Pilipinas (BSP) is also batting for development of the capital markets.

The BSP said that the Philippines must build a modern financial infrastructure with two strong pillars – a healthy banking system and a deep and efficient domestic capital market – to mobilize domestic savings to fund development.

It also stressed that developing the capital markets means assembling the component parts and making these work efficiently together.

The country needs a bond market to complement the equity market. Businesses need both debt and equity finance. Investors need both types of financial asset to achieve the right mix or risk-return profile, and the fixed-income exchange can provide the platform.

The BSP also urged the pasage into law of several bills supporting the development of capital markets.