OFW bank seen in place by Q3 2017

THE GOVERNMENT’S planned bank for overseas Filipino workers (OFWs), which was promised by President Rodrigo R. Duterte during his presidential campaign, is targeted to be operational by Sept. 1, 2017, pending the necessary regulatory approvals, officials said yesterday.

The Department of Finance (DoF) said in a statement yesterday that the Land Bank of the Philippines ( Landbank) is expected to set up by September next year the new lender which will be borne out of its acquisition of Philippine Postal Savings Bank (Postal Bank) as a subsidiary that will be 30% owned by OFWs.

“The acquisition of the Postal Bank will be completed by the third quarter of 2017, after all required procedures are completed and approvals are secured. The Landbank has sufficient resources to complete this transaction,” Finance Secretary Carlos G. Dominguez III said in the statement.

LandBank President Alex V. Buenaventura said that once 2017 rolls in, the bank will begin undertaking due diligence to start the process of converting Postal Bank into a LandBank subsidiary, together with the Commission on Audit and the Bangko Sentral ng Pilipinas.

Landbank will also draw up a purchase agreement and amend its articles and bylaws to formalize its acquisition of the Postal Bank, he added.

He said it would take eight months to accomplish the requirements that would convert the Postal Bank into a Landbank subsidiary.

Landbank needs to get clearances from the Governance Commission for Government Owned and Controlled Corporations ( GCG) and the Philippine Competition Commission (PCC), as well as approvals from the Bangko Sentral ng Pilipinas and its Monetary Board, as well as the Securities and Exchange Commission (SEC) for the OFW bank to be operational by Sept. 1, 2017.

“The OFW bank will be a listed company with an authorized capital of P3 billion and a subscribed capital of P2 billion, of which P1 billion is paid-up by the Landbank. Another P1 billion will be open for subscription to OFWs who can acquire them by buying shares in the bank,” Mr. Buenaventura said.

As the bank is being set up, Landbank will open a representative office in Saudi Arabia to cater to the banking needs of some 800,000 Filipino workers based in that country.

“The Landbank unit will be opened near the Philippine labor office or near a place where OFWs usually converge and meet,” Mr. Buenaventura said.

Mr. Buenaventura added that Landbank decided to open the unit in Riyadh because 40% of OFWs based in Saudi Arabia reside there.

Mr. Buenaventura said the Riyadh unit will initially offer financial education and investment counseling services to OFWs.

“We are going to do focus group discussions with representatives of our target markets to determine where and what services are needed, and what name and logo to adopt for the bank,” Mr. Buenaventura added.

Landbank was ranked as the country’s fourth largest commercial bank as of September this year with a total capital of P90.9 billion and assets amounting to P1.3 trillion.

PERA ADMINISTRATOR

In a related development, Landbank yesterday said it has no plans yet of becoming an administrator of the recently rolled out and long-delayed personal equity and retirement account (PERA), according to one of the bank’s officials.

“Not in the immediate future,” Landbank First Vice- President and Corporate Information Officer Antonio V. Hugo, Jr. said in a text message when asked if the bank has any plans in applying as a PERA administrator.

“We may need more time to prepare for the accreditation process,” he said.

The Bangko Sentral ng Pilipinas on Dec. 16 formally launched the investment tool, eight years after the PERA Law or Republic Act 9505 was passed in 2008, to which Landbank will serve as the cash custodian for the new savings scheme.

During the launch, the central bank announced PERA’s two administrators: Sy-led BDO Unibank, Inc. and Ayala-led Bank of the Philippine Islands.

Senator Edgardo J. Angara, who is the principal author of the PERA Law, said during the launch that the new investment tool has three main purposes: as a “voluntary savings program, widen the domestic capital — because it’s a very good mobilizer of savings — and [in the] long term it may serve as a model for pension reform.”

“The PERA will set a model... on long term steady retirement income and I think it will,” he said.

Contributions to PERA is on top of the mandatory contributions for workers through: the Government Service Insurance System (GSIS) for state employees; and the Social Security System (SSS) for employees in the private sector.

However, signing up for the PERA is voluntary, against the automatic salary deductions for GSIS and SSS premium payments.

Under the law, a Filipino can contribute up to a maximum of P100,000 yearly under the PERA, but the amount may be as much as P200,000 for overseas Filipino workers.

A qualified contributor may place money in five PERA accounts at once across five recognized investment products such as trust funds, mutual funds, insurance, pre- need, government bonds and listed equities, for the money to grow.

In turn, the individual can enjoy a 5% tax credit that can be deducted in his/ her annual tax liabilities to encourage saving up for the future.

The contributor may claim his or her income generated from PERA contributions once the individual reaches the age of 55 on a periodic or lump sum basis or has contributed to the investment product for at least five years.

Proceeds from PERA contributions would be tax-free up to the P100,000 cap, and may be reinvested unless withdrawn ahead of retirement.

Landbank saw an almost flat growth in its income as of September, but moved closer to its full-year target following steady expansion seen throughout the year.

The state-run bank reported a net income of P10.3 billion for the period, almost unchanged from last year’s P10.27-billion earnings but still bringing it closer to its P13.5-billion full-year income target.

The tally also exceeded the period’s target of P10.13 billion in earnings.

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