Friday, 12 August 2022

PNB’s Veloso: “Public spending will help the economy”

5 min read

By Wick Veloso

In this CEO Perspectives piece, Philippine National Bank President and CEO Wick Veloso shares details of his bank’s initiatives for employees’ safety, the pandemic’s sweeping effects in the Philippine context, and what it will take for the economy to recover.

  • Telecommuting is the new normal of working for many
  • Positive household consumption shored up by the government’s efforts geared towards low-income groups will help with economic recovery
  • Past investments in digital technology have allowed banks to remain operational even amid strict quarantine measures

Nothing prepares us for a pandemic like this, but quick, decisive actions help. As key economies try to manage the outbreak, the top concern remains to be the safety of customers and employees. We understand the risk of having to work in this time of crisis, which is why we have implemented various initiatives to ensure our employees’ well-being.

Prioritising safety amid business continuity

For everyone’s protection, our employees work remotely and continue to serve customers. For many of my colleagues, telecommuting is our new normal. We have a dedicated skeleton workforce to ensure critical support functions are not disrupted. Our corporate offices and branches are constantly being sanitised. New norms of social distancing and preventive controls were likewise reinforced in the workplace. We also cancelled or postponed our sales and corporate gatherings.

Like many other banks in the country, Philippine National Bank (PNB) has been doing business continuity plan (BCP) simulations and regular stress-testing. As such, PNB is operating business-as-usual. At this time, we encourage our customers to transact in the safety of their homes through our digital banking channels. We have set up digital alternatives to face-to-face interactions to limit unnecessary exposure.

While we temporarily closed some of our branches, we have kept several open with shortened banking hours. We also have over 1,500 ATMs nationwide for the public’s cash withdrawal needs.

We continue to follow guidance from our regulators and the Philippine government. In support of the authorities’ measures, we have extended our payment period for loans and credit cards. We have also waived remittance fees in key geographic areas to support overseas Filipino workers and their families. Fees for fund transfer using InstaPay and PesoNet have likewise been waived throughout the duration of the enhanced community quarantine (ECQ).

We have deployed four trucks that serve as our “Bank on Wheels,” which allow customers to perform cash withdrawals, bills payments and fund transfers. This service is available daily, including weekends, in key locations around Metro Manila and nearby provinces where accessibility to cash is limited and where frontliners continue to work.

Assessing the impact of the pandemic

The COVID-19 pandemic’s impact has been apparent in the collapse of manufacturing. Hospitality, the gig economy, and other industries that are usually resilient against crises have also deteriorated.

The escalation in job losses globally would result in lost purchasing power and thus deflate demand. Hopefully, the fiscal stimulus packages and interest rate cuts adopted by several governments and central banks would enable a soft landing for major economies and skirt a crash-and-burn scenario.

All around the region, we see rising non-performing loans (NPL), easing loan demand, and to some extent, flatter interest margins. On a more positive note, we have a stronger banking system now than during the global financial crisis 11 years ago. Coming from a very low NPL base but equipped with a strong capital base amid heavy regulation, the system is better positioned to address current headwinds.

If the Philippines’ household consumption stays positive although below potential, shored up by the government’s continuous deployment of its 2020 budget and its fiscal stimulus package focused on vulnerable low-income groups, this is what will help the economy. Public spending is what is going to help the economy during this time.

Moving forward in the new normal

The pandemic is changing consumer behaviour. To succeed in the so-called new normal, what matters is our ability to arm our teams with available technologies and logistical support.

The fact that the top banks can provide basic services amid ECQ highlights the banks’ investments in digital technology. These capabilities continue to support the steady flow of credit and liquidity needed to keep the local economy humming. Our central bank also adjusted some basic regulations to maximise regulatory compliance based on digital bank technology.

There will be a lot of changes in the way we work and the services we provide. We will push for more digital products and services. Our offices and branches will have to be reconfigured for safe distancing. But there will be a lot that will not change too. For one, we will continue to take in deposits and channel funds to borrowers and businesses with productive investments.

Fiscal and monetary measures rolled out by different governments, including our own, are primarily meant to firm up downside macro risks, such as jobs and income losses from tourism fallout and supply shock. Fiscal cash transfers, supplemental budget spending on improving healthcare capacity and disease prevention, reserve ratio requirement cuts, emergency short-term liquidity facilities and other measures address assorted risks that can weaken the resilience of the economy and markets, if left unattended.

We believe this is not the same Philippine economy more than a decade ago when the 2009 global financial crisis hit. We have a well-capitalised and regulated banking system, per capita incomes in the middle-income emerging markets range, a larger middle class, sustainable growth and macro imbalances, and a strong reform environment that spurred greater market orientation and consolidation.

Wick Veloso is the President and CEO of Philippine National Bank.

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