Donica S.

Roo
CFN 111-2G


BSP intensifies monitoring of salary loans
by Lee C. Chipongian
June 15, 2014

Banks increasing salary loan portfolio has triggered the central banks internal
monitoring system, prompting regulatory officials to intensity its watch on salary
loans.
As of end-April, based on the BSPs bank lending report and as categorized
under household consumption, salary loans are lumped together as other
loans. During this period, other loans or other consumer loans amounted to
P37.424 billion, up 35 percent from the same period in 2013 of P27.709 billion.
The intensified monitoring by the Bangko Sentral ng Pilipinas (BSP) does not
only involved supervised banks but also its regulated non-banking financial
institutions that are under focus at the moment. Non-banks include non-stock
savings and loan associations, financing companies, credit card companies, and
credit-granting entities.
The BSP said they are observing a large and growing number of banks and non-
bank institutions competing for the salary loan business, and since the banks
have bulk of the market, the numbers are being monitored. However, there are
also the informal lenders and to the BSPs concern, these are not captured by
their financial system statistics.
In a statement late Friday, the BSP announced that the Monetary Board
approved a new circular redefining what salary loans are and at the same,
changed the way banks and non-banks report these transactions to have a more
accurate measure. The circular, said the BSP, was in reaction to the rising trend
in salary loans in terms of volume and number of accounts.
The central bank reiterated that this is just one of its pro-active policies to
enhance supervision by collecting the correct data, which is consistent with its
thrust of improving financial consumer protection.
In a separate event, BSP Governor Amando M. Tetangco Jr. said they are very
keen on ensuring that consumer rights are being protected. This is something
we take seriously in the BSP, he said.
In enhancing data capture, the central bank focuses on issues of potential over-
indebtedness that need to be addressed at an early stage. This is still a work in
progress and will include the actual practices, macro-economic environment, and
interplay among the lending institutions, government agencies, private entities
and the borrowers.
The BSP is currently reviewing additional regulatory and policy framework on
salary loans to ensure that the banks and non-banks exposures are managed
well and a safe credit underwriting practices are being observed.
Banks should no longer see consumer protection as a nice to have CSR or
advocacy, said Tetangco. (We) will be rating banks in terms of the systems and
procedures they have for consumer protection.
Based on the new circular, salary loans are now defined as unsecured loans,
granted to individuals on the basis of regular salary, pension or other fixed
compensation. The repayment of these loans would come from future
remunerations, either through salary deduction, debit from the borrowers deposit
account, over-the-counter payment or other type of payment arrangement agreed
upon by the borrower and lender.
Under the new Circular, salary loans will now be separately reported under the
loans to individuals for consumption purposes or LICP sub-category. Previously,
only credit card and auto loans have separate line items under LICP.

http://www.mb.com.ph/bsp-intensifies-monitoring-of-salary-loans/

KINDS OF MONEY

Commodity Money: The universal equivalent is also a commodity itself such as
cows, salt, gold, and silver So, it is a good that has an intrinsic value and a use
value besides its role of universal equivalent or money.
Goldsmiths: (early versions of safes) they keep your gold in their volts and give
you a piece of paper that says they owe you a certain amount of gold. Thus the
expression I owe you IOU.

Convertible Token Money: People started to use cheaper metals or pieces of
papers that could be exchanged not for their intrinsic value but for the value that
is printed on them.

So the piece of paper or the metallic coin is not worth much (no intrinsic value),
but its used as money because it is backed by commodity money (gold or
silver) at a fixed exchange rate. Token money is exchanged with the issuer of the
currency (goldsmiths). This system is referred to as the gold standard. 2

Inconvertible Token Money: it is not backed by any commodity, and is not
exchanged with the issuer of the currency. Instead it can be converted into
commodities at a flexible exchange rate, and not with the issuer but with anybody
who happens to have that commodity in the market. This system marks the
beginning of Fiat Money.

Fiat Money: In 1971, the US went off the gold standard, and the US dollar was no
longer convertible into gold. Fiat money exists because of the governments
power

Checks: a piece of paper that promises to pay a certain amount of fiat money
that is not backed by any commodity.

E-money (different from credit): You use it as a check, so you can only spend up
to the level that you have deposited in your bank account (ATM cards).

Credit cards: You use it and you promises to pay after a certain time period