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Arroyo calls for lower interest ratesby RJ PanisDespite the slashing of key interest rates in the past six years, President Gloria Macapagal-Arroyo called for a lessening of lending rates among local banks last Friday. This, according to Arroyo, is for the good of the "small and large depositors." She added, "businessmen, especially those with a high debt exposure and interest rate expenses, need this (rate reduction) to pay their debts and strengthen their enterprises." Among the first to follow suit was the Central bank, lowering its overnight borrowing rate to 7.25% and the lending rate to 9.25% also last Friday. However, not all have heeded Arroyo's call. The president noted how unfortunate this circumstance is since these banks are not sticking to the "gentleman's agreement" they have forged with the Central Bank of the Philippines (CBP) and the Bankers Association of the Philippines (BAP). Members of the BAP have an agreement to charge no more than five percent over the 91-day Treasury bill rate. Arroyo did not point out which banks have violated this deal; she reiterated though that private banks should follow what the state-owned banks have done. Meanwhile, the Monetary Board - Bangko Sentral ng Pilipinas' policy-making body - is considering to impose fines and sanctions on banks found overcharging their clients. Trade and Industry Secretary Manuel Roxas II also has identified the banks charging the rates exceeding the 5% points over the Treasury bill rate on clients in real estate, manufacturing and exports. These include: Union Bank of the Philippines (UBP), Rizal Commercial Banking Corp. (RCBC), Philippine National Bank (PNB), Security Bank Corporation (SBC) and United Coconut Planters Bank (UCPB) for loans to the real estate sector; HSBC, Development Bank of the Philippines (DBP), Banco de Oro Universal Bank (BDO), China Banking Corp., Equitable PCI Bank, SBC, UBP, PNB and UCPB for loans to manufacturers; Allied Banking Corp., RCBC, Equitable PCIB, and SBC for loans to exporters. The banks mentioned were singled out through a survey in the real estate manufacturing and export sectors from September to December last year, revealed Roxas. The survey showed the banks were charging 16 to 17 percent ,as opposed to the Treasury bill in December of 8.862% stating that banks should charge no more than 13.862% to their clients. This would mean that a loan of 100 million pesos would also entail an extra four to five million pesos from borrowers. "We could penalize them, similar to what we did to the foreign exchange (dealers) that were found to be misreporting their foreign exchange transactions," a BSP official said. Sanctions applicable to erring banks range from imposing a fine of up to 30,000 pesos a day for every irregular transaction, suspending a bank's license for foreign exchange, derivatives and trust operations, or being barred from availing themselves of emergency loans and other BSP credit facilities for liquidity assistance. However, BSP Governor Rafael Buenaventura noted that no law prohibits banks from determining their own lending and deposit rates since most lenders are guided by competition. He said, "there is nothing we can do but we will exercise strong moral suasion." Most banks though brought their lending rates down a day after the BSP and the government first announced this call. A daily informal survey of the BSP showed this change. Still, BSP knows there is great disparity between what the banks report to what they actually charge clients. With reports from Clarissa S. Batino, Gil C. Cabacungan Jr. and AFP.
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