FSCC to work on deepening market for corporate bonds

THE Financial Stability Coordination Council (FSCC) said it is preparing a work program that aims to further deepen the corporate bond market this year, the Bangko Sentral ng Pilipinas (BSP) said.

The FSCC, in a statement released by the BSP on Monday, described the financial markets as strong amid geopolitical risks last year, but deepening the bond market has yet to be achieved.

“Its work program for 2024, however, will be targeted, engaging the different constituents in the market. The Council’s longterm objective is for a much more diverse set of corporate borrowers to issue bonds, and for the risks to be actively priced while the bond remains outstanding,” the FSCC said.

This will help the economy move forward and become better positioned to attract investors, it added.

According to the FSCC, the current market is characterized by a “risk on” stance, which will likely boost economic activity.

The BSP noted that in the risk on - risk off (RORO) investment paradigm, the perception of market traders will be reflected in financial prices. A “risk on” sentiment shows market optimism and a perception of low risks ahead.

FSCC Chairman and BSP Governor Eli M. Remolona, Jr. said he expects an increase in the funding requirements of corporations during this “risk on” phase.

“The banking system has enough space to support the increased demand for funding. But this is also a great time for us to continue broadening the funding opportunities by having in place a viable and competitive corporate bond market,” he said.

He also said that an active bond market will benefit the financial sector by creating wider access to funding for all types of borrowers. It would also expand opportunities for investors of various risk appetites, thereby better managing risk.

“The FSCC is all about making the different components of the financial system work better with each other. We also need to communicate continuously with stakeholders, so that they can make informed decisions,” Mr. Remolona said.

“All these are collective responsibilities, but the FSCC is more than happy to be at the forefront of all these in pursuit of its responsibility of managing systemic risks,” he added.

The FSCC is an interagency body composed of representatives of the BSP, the Department of Finance, the Insurance Commission, the Philippine Deposit Insurance Corp., and the Securities and Exchange Commission.

In July 2021, Executive Order 144 authorized the FSCC to focus on assessing and implementing policies to prevent systemic risk factors or company- and industry-level events that have the potential to trigger severe instability within entire industries, or even the economy.

The FSCC convenes on a quarterly basis. The regularity of their meetings may be increased “when market conditions warrant.” —