Philippine Bank account holders have nothing to worry about the Lehmans brothers bankruptcy

Last I was able to watch Television news about the bankrupcy of the biggest insurance company in America eh AIG insurance. This institution has a lot of connections worlwide. Most of the banks in the philippines are tied up or avail their financial insurance services. When I heard about theit bankruptcy, I was very upset and afraid to hear that because I was one of the policy owners of the PhilAM life insurance company where I got my educational plan for my daughter but after a series of explinations, I am now confident that there will be nothing to worry about because the central bank on Wednesday assured the public that the Philippine banking system will be able to withstand the impact of the financial turmoil caused by failing investments companies in the United States.“There is no reason to panic. The banking system is sound and stable," Bangko Sentral ng Pilipinas Governor Amando M. Tetangco told reporters after a meeting of economic managers on Wednesday. Tetangco described the exposure of local banks in the troubled Lehman Brothers, which filed bankruptcy on Monday in the United States, to be “very small."“The exposure is estimated to be about 0.3 to 0.4 percent, so it’s less than one-half of one percent of the total assets of the banking system," he said. With the Philippine banking system estimated to be worth P5 trillion in total assets, the Lehman exposure is seen to be at around P15 billion. The country’s top two banks, Banco de Oro UniBank, Inc. (BDO) and Metropolitan Bank and Trust Co. (Metrobank) on Tuesday announced their respective exposures to Lehman investments. BDO said it has allocated P3.8 billion worth of provisions should the US investment bank fail to repay its debts, while Metrobank, which held $20.4 million worth of Lehman-issued bonds, has allocated $14 million. “I think these (disclosures) should be taken as a positive sign. It shows these banks have the resources to absorb a drop in the price of their investments in Lehman Brothers," Tetangco said. He also said the BSP was also not as concerned over Merrill Lynch’s condition since it has already found safe harbor when it was taken over by Bank of America (BA).At the very worst, the BSP expressed confidence that banks would only face a minimal reduction to their incomes with very little impact on their capital base even if their Lehman investments were declared completely worthless."We do not see this as a solvency issue, just a little erosion in the income of banks," said BSP deputy governor Nestor Espenilla who is also head of the central bank's Bank Supervision and Examination Sector.Espenilla added that the financial system had taken the lessons of the 1997 Asian financial crisis to heart when banks faced a serious capital crunch. "We have been telling banks to build up their capital base precisely so that they could survive this kind of event," Espenilla said. "First of all, not all banks are exposed to this and those that do have exposure are big banks that can easily handle it." "It would not seriously affect their capital base," he said. "But then, remember that these exposures are not likely to be uncollectible. At most, banks would probably have to absorb some discount but they would not be completely worthless." Other banks, meanwhile, such as China Bank, Union Bank, Philippine Savings Bank, Bank of the Philippine Islands and Security Bank have said that they don’t have exposures with Lehman Brothers.Likewise, pension funds Social Security System (SSS) and Government Service and Insurance Systems (GSIS) said they don’t have funds with the bankrupt American financial institution.Similarly, Sun Life Financial Philippines denied dealings with Lehman Brothers and said that it is their parent company, Sun Life Financial Inc. in Canada, which has dealings with the American financial firm.Financial analyst Francisco Liboro, in an interview with Mariz Umali in GMA’s Saksi, said exposures by Metrobank, BDO, and Rizal Commercial Banking Corporation (RCBC) to Lehman investments are too small to be compared to their respective capitals.The television report said Metrobank has a total capital fund of P74.5 billion, while BDO, has P60.5 billion and RCBC has more than P29 billion.“It's (The exposures are) still not enough to bring the banks down," Liboro said as he cautioned depositors against panicking since it might lead to a bank run.“A bank run, that can happen because people are afraid. That may even be more of a problem than the exposure to Lehman Brothers... because it’s the depositors that make up the bank," he said.Meanwhile, Philippine American Life and General Insurance Co. or Philamlife assured its policy-holders that its finances are in stable condition despite the financial turmoil being faced by American International Group (AIG), the firm’s parent company and the world’s largest insurer.According to Philamlife CEO Jose Cuisia Jr, 90 percent of their investments are in the Philippines.“We have separate investments from our parent company. We stand by our obligations to our policy holders," Cuisia said.In a document submitted to the Insurance Commission, Philamlife said its current asset is worth P100 billion. The document also said that the insurance firm has a net worth of P23 billion and paid up capital of P1.65 billion.Insurance Commission deputy commissioner Vida Chiong assured that Philamlife has enough financial resources to answer the company’s liability.