Hi! I am Nina Lasala, former Treasurer of the Philppines. This blog is meant to be an open forum for investors, fellow finance professionals, and other interested parties to discuss the state of Philippine Debt Management.

Friday, February 25, 2005

Comments on PDTC Cost Calculation quoted in Feb. 25, 2005 Edition of Philippine Star

An article in the Business page of the Philippine Star quotes a PDTC official as stating "... that the cost would only be one 16th of one percent per annum as based on the estimated P1.6 trillion worth of securities that has been issued by the government, 50 percent of which are being traded, resulting in a cost of only P37.5 million per month." Moreover, he challenged our own calculations of the incremental cost.

In the first place, using his own figure, the correct calculation is

{[(1.6 T x 50%) x 1%] /16} / 12 = 41.6 M per month

The BTr is more than happy to discuss and debate the calculation. At this early stage, however, I am afraid the PDTC official is merely talking about transaction costs to the investor. You can refer to the IHAP position paper that I have previously posted where IHAP itself worried about the additional costs.

Being the National Treasurer, the perspective that I am using has to be broader. Government has to worry about any overall rise in the level of the Government Treasury yield curve as well as any steepening of the curve. With our country facing the challenge of containing the fiscal deficit, government and private sector has to be very careful in the implementation of any initiative with unproven benefits.

For the sake of argument, even using the PDTC official's own calculation, the exercise will cost the government an incremental Php 500 million per year that will translate into increased borrowing costs for the government as investors will seek to recover that.


Anonymous Anonymous said...

The rules on 3rd party custodianship will not affect all securities traded, but only those sold to non-bank investors. Of the 1.6 trillion debt issued, how much are actually owned by non-banks? I am sure the BSP has statistics on government securities held by all BSP regulated banks, since weekly reports are submitted. 1.6T minus the sum of proprietary positions in government securities held by BSP regulated banks is the subset of securities affected.

12:12 PM

Anonymous Sleepless in Manila said...

wait a minute, i thought the whole point of the 3rd party custody rules was to create a vibrant capital market. are you arguing therefore that the costs will only be bourne by the non-bank investor?

in other words, the poster above is saying that he wants to ensure that banks ALWAYS have a trading advantage. in addition, since they own PDTC, as per the Philstar article, they get to have their cake and eat it too????


2:55 PM

Anonymous Anonymous said...

i never saw this angle that sleepless is pointing out. now this poses the question...did philam join the FIE in order to be able to be on the winning side of this trading advantage?

what about other InSCOs? does that mean that we will all pay the cost and philam gets an undue advantage? where is the fairness in that?

6:00 PM

Anonymous Anonymous said...

lahat na ito pambayad lang sa jaguar ni ****....alam naman natin lahat yan eh...

12:02 PM

Anonymous Anonymous said...

Talking about levelling the playing field! Im agahst!

If this 3rd party custodian rule is implemented, it should be applied to all. Know I understand why the BAP is supporting this move.

Regardless of the incremental cost, any peso saved by the government is important. So Php 500 million in annual expense for this custodian rule IS A WASTE OF MONEY! How many classrooms can we build with this amount?!

6:49 PM

Blogger betterphil said...

I am flabbergasted with the comment that it will "ONLY COST 1/16 of a percent"! They do not have any conscience. And to think that most of these guys already have their Jaguars, MB's, BMW's, Volvo's, Expeditions, Lincoln Navigators at mamahalin pang iba! Insatiable greed - for money and power! Don't they ever learn? There will always be the law of Karma, the law of averages, the day of reckoning. Maybe we should pray harder for these kind of people? No logic, emotion or reasoning ever moves them already.

5:49 PM

Anonymous Anonymous said...

However the computations are arrived at and whatever the amount is, the point is before 392 and 428 there were no such costs! Even if it were just a few thousand pesos or hundred pesos, why does that additional cost have to be incurred?! An investor used to be able to transact without that added cost! We skimp and save on so many things and yet BSP would seem to have us accept that a few millions of pesos is ok to pay as an added cost for a transaction that used to cost almost nothing before.

9:34 AM

Anonymous Anonymous said...

To the fourth poster:


Sino kaya si ****? Sobra bang lakas ng dating at boses niya? Mahilig ba siya sa wine?(Hehehe)

But on to my real point, yung impression na nakukuha ko sa lahat ng posts dito ay naging golden parachute lang ito ng certain individuals. Wouldn't you all agree???

9:22 AM

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