The Pinoy Business Chronicle

Business news and analysis. Covering financial news, economic issues, stock market data, local business, business policy and more.

Philippines Economy News

BSP’s Diokno dismisses banking-sector risk from POGOs

bsps diokno dismisses banking sector risk from pogos 816x445 - BSP’s Diokno dismisses banking-sector risk from POGOs
Benjamin Diokno 120419 - BSP’s Diokno dismisses banking-sector risk from POGOs
BANGKO Sentral ng Pilipinas Governor Benjamin E. Diokno

BANGKO Sentral ng Pilipinas Governor Benjamin E. Diokno dismissed the risks to the banking system posed by online gaming firms, adding to his long-standing position that the Philippines can easily do without the industry.

Mr. Diokno, speaking at the first GBED (Gvernor Benjamin E. Diokno) Talks at the central bank Friday, said, “Of course there is a risk… that’s not going to upset the economy,” he told reporters.

Fitch Ratings said in a report that the property price hikes fueled by the online gaming sector, known as Philipine Offshore Gaming Operators (POGOs) may pose a risk to the banking industry because their demand for office space and residences for their workers are pushing property prices higher.

Fitch noted that speculative activity associated with the industry “could affect market stability if unchecked”.

Mr. Diokno said that the central bank is monitoring developments related to the sector and has so far not seen any major risk concerns from POGOs.

“We have a group here which is responsible for looking at the financial stability. At the moment they don’t see it as a major risk,” he said.

He also added that major risks to the banking industry are unlikely, as big banks “are conservative” and have provisioned appropriately for risks associated with the sector.

In October. Mr. Diokno told Reuters that he would prefer that POGOs exited the Philippine market, citing their minimal contribution to the tax base and the money-laundering risk that comes with the industry.

According to Lyn I. Javier, the BSP’s Managing Director for Policy and Specialized Supervision, the central bank has imposed guidelines for banks for assessing such risks.

“We set out credit risk management guidelines as early as 2014. So what’s important is that lending to these real estate companies (hosting) POGOs, are anchored on some credit underwriting,” she told reporters.

“We (also) use stress tests (on the) exposure of banks to the real estate industry and assess whether their capital can actually absorb potential losses to these exposures. We’re satisfied with the results of these stress tests,” she added.

In December, a report from real estate services firm Leechiu Property Consultants (LPC) said that POGOs have dethroned the information technology-business process management (IT-BPM) sector to become the single biggest users of office space.

In 2019, POGOs accounted for 44% or about 738,000 square meters (sq m) of Metro Manila office space, up sharply from 443,00 sq m in 2018.

In turn, the influx of Chinese nationals working in the sector translated to robust demand for residential space, particularly condominiums in key areas where POGOs operate — Makati City, Alabang, Quezon City and the so-called Bay Area. — Luz Wendy T. Noble

Leave a Reply

Theme by Anders Norén