Bank chiefs divided on need for capital controls
MANILA, Philippines - Two officials from different local banks yesterday voiced differing views on capital controls, after the International Monetary Fund earlier this week said such can be one of the tools a country can use against volatility in the markets.
"The worst thing is to put capital controls. The economy is actually progressing and we are not having any kind of problem right now with respect to capital," Victor B. Valdepenas, president and chief operating officer of the Union Bank of the Philippines, told reporters on Wednesday.
"My view is that this is a very opportunistic time to let capital flow freely," he added.
But Asia United Bank president Abraham Co said capital controls may be needed to weed out speculative flows to the country.
"Capital control in a certain way has to be done. We want the investors but we don't want the speculative [ones]," Co said.
"We dont want them taking advantage of us," he added.
The Philippines, along with other emerging markets, have become prime destinations for capital flows as countries in the West have been coping with slowing economies.
IMF, in a paper published earlier this week, said capital controls may be used by countries in some instances as some funds may pose risks to economies due to their volatile nature.
In a reaction to this, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. was quoted by news reports saying the central bank will focus on macroprudential tools in managing foreign investments.
Foreign direct investments to the Philippines hit a net inflow of $1.038 billion as of August, while short-term foreign portfolio investments or hot money amounted to a net inflow of $2.664 billion as of October.