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.

Tuesday, March 15, 2005

Opposition to BSP circulars cost Treasury exec her job

This article is from the Philippine Daily Inquirer...Thank you for posting a link to my website and keeping the issues current.

Inquirer News Service

FORMER National Treasurer Norma Lasala, reportedly was sacked from her post after airing her strong opposition to the Bangko Sentral ng Pilipinas Circulars No. 392 and 428, which called for the creation and implementation of the Third Party Custodianship system.

The circulars went into effect on Jan. 3.

Lasala said investors would have to pay huge service fees to third-party custodians, most of which would be banks.

The investors would then recover the cost they incurred by demanding higher interest rates for Treasury bills and bonds the next time they buy government securities, thus jacking up interest rates, she said.

The former official of the Bureau of Treasury (BTr) has no qualms in expressing her strong views against the third-party custody system despite the support given by her bosses--former Finance Secretary Juanita Amatong and incumbent Finance Secretary Cesar Purisima--to the BSP's capital market reform program.

"The implementation of aforesaid circulars is being relentlessly pursued with absolute lack of disclosure to the proper authorities and to the public as to the detrimental consequences of such a move to the government," Lasala said in a message posted in an online blog, which she created purposely as a venue to debate the merits of the third-party custody system.

Lasala was replaced by Omar Cruz, a supporter of the third-party custody.

Proponents of Third Party Custodianship said that the present system would protect investors from the crooked practices of unscrupulous dealers. They cited the the Bancap scam of 1993, which almost brought down the financial market.

But treasury officials said the scam happened during the time when securities still come in paper forms.

According to Gerardo Francisco, BTr director, the fraudulent selling of T-bills and T-bonds will not likely happen because securities now come in electronic form.

The BTr's Registry of Scripless Securities, or ROSS, will be enough to ensure the protection of investors, because the transfer of securities are recorded in the accounts of government securities eligible dealers, or GSEDs, Francisco said.

"How can there be double selling when we are already in the electronic stage?" he said.

BTr officials and employees also said that those pushing for the passage of the third-party custody system hoped to engage in profiteering disguised as consumer protection.

Lasala said that the third-party custodians would also require a huge cost for reconfiguring the ROSS, a project for which the BTr would not have enough funds.

With third-party custodians, the ROSS has to be reconfigured because each custodian has to have an account within it, she said.

The ROSS will continue to record security transfers, but it is within the account of third-party custodians that the securities will be kept safe. The custodians will perform various investment activities on behalf of its investors.

But for Lasala and her allies in the BTr, third-party custody is nothing but a program crafted by opportunistic capitalists who will reap huge profits at the expense of a financially bleeding government and the public.

Lasala, who ended her term last Feb. 15, may be fighting a lost cause for now. But the former national treasurer said that leaving the BTr did not mean she lost the battle. Instead, by being out there, she would be fighting for her cause on a broader field of battle, and with arms provided by the people.

Michelle V. Remo

13 Comments:

Anonymous Anonymous said...

I am very happy there are people like Michelle Remo and Neil Cruz in Inquirer. I have almost given up hope on that newspaper. May Inquirer be as balanced as they claim to be and be more enligthened to allow more expressions from the grassroots to see print in their paper.

2:04 PM

 
Anonymous Anonymous said...

May I suggest that we reprint (by ourselves) the speech of Sen. Pimentel and give our friends, neighbors and anybody who can read a copy so that people can be made aware of the issue?

Let us move one step forward. Let us DO something about it.

2:07 PM

 
Anonymous Anonymous said...

You can read Sen. Nene Pimentel's speech at ABS-CBN's site
http://www.abs-cbnnews.com/NewsStory.aspx?section=NATIONAL&oid=70161

To the Daily Inquirer and hopefully the other newspapers too!

I hope you can find time to dig deeper into this story and publish it in the interest of the Filipino people! Please let us know what is really behind these circulars and the personalities that seems to benefit (in billions) without a sweat using "market reforms" as a cover. It seems like a legalized, plain highway robbery to me.

3:30 PM

 
Anonymous the Joker said...

the joker is to puzzled to laugh...

In addition to the observations of the annonymous poster immediately above me, not only the senate but all persons should review these financial reforms.

The objectives are laudable enough but the process is to difficult to swallow.

Reformers should not establish exchanges to create fair markets when they themselves build their businesses on material non-public information (like circulars). There is something immoral about acting on insider information.

Reformers should not be allowed to preach much less implement capital reform using a business model that itself is severely undercapitalized.

Reformers should not preach corporate governance when they are incapable of facing the market and properly clarifying legitimate issues.

Most of all, Senator Pimentel aptly raises the point of the BSP not having the power to create laws. Senators and congressmen need to obtain majority votes in elections to have that obligation. It is a wonder how people that apparently do not see the need to be elected can wield so much power.

As we have asked that these people be made responsible for their reform effots so should we be responsible and keep informed of this and all future issues so that we will never again get the wool pulled over our eyes.

4:09 PM

 
Anonymous Anonymous said...

Another investor has decided to pull-out all of their t-bills as a result of this third party custionianship directive.

If only our officials will realize that when capital leaves (in this case, in disgust) - it is difficult to persuade them to come back.

We don't feel the bad effects yet because we are in a foreign fund hot money bull-run. But when the party is over, we might only then wake-up to find wala na palang investor.

The damage has been done. I think it might be too late.

5:56 PM

 
Anonymous Anonymous said...

How can they claim that the Third Party Custodianship is a reform needed to boost our capital markets when in fact, just like the poster ahead of me states that another client has opted NOT to buy GS. My GS portfolio has shrunk to only 1/10 of what it used to be. Majority has opted to go to bank product (Time Deposit). The 1/10 who are still in GS have chosen to open an account with ROSS.

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