THE CENTRAL BANK on Monday said Philippine banks have “minimal” exposure to Russia and Ukraine, as the war continues for a seventh week.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said cross-border deposit liabilities of Philippine banks to Russia and Ukraine amounted to less than 1% of the banking industry’s total deposit liabilities as of end-September last year.
“The cross-border financial exposure of Philippine banks to Russia and Ukraine is minimal. As of end-September 2021, Philippine banks have cross-border deposit liabilities to Russia and Ukraine amounting to only $672,200 and $969,200, respectively,” he said in a Viber message to reporters on Sunday evening.
Local lenders have no cross-border financial assets with Ukraine and Russia, the BSP chief added.
Mr. Diokno said two Philippine banks have P254.12 million in investments, through their trust departments, in two Russian banks — VTB Bank Public Joint Stock Co. and the Russian Agricultural Bank — as of December 2021.
“This represents less than 1% of (the two Philippine banks’) total assets under management,” he said.
Mr. Diokno also said inflows from both Russia and Ukraine account for less than 1% of the total cash remittances last year.
“Nevertheless, BSP is aware that the crisis could indirectly affect the flow of remittances of overseas Filipinos from the two warring countries,” Mr. Diokno said.
Central bank data showed that cash remittances from Russia and Ukraine in 2021 amounted to $2.261 million and $121,000, respectively. Both are relatively small compared with the $3.745 billion worth of inflows that come from Europe and the $31.417-billion total from all over the world in the same year.
The BSP chief also noted the country’s direct trade links with Russia and Ukraine are “negligible.” Exports to Russia only amounted to $120 million or 0.2% of the Philippines’ total exports in 2021, while exports to Ukraine reached $5 million.
“In brief, trade financing transactions of banks with Russian counterparts are inconsequential,” Mr. Diokno said.
He reiterated that the country will continue to see limited economic fallout from Russia’s invasion of Ukraine.
“The economic fallout from the Russia-Ukraine on the Philippine economy is limited for three reasons: first, the country’s geographic distance from the conflict area; second, the country’s limited economic and business links with both Russia and Ukraine; and third, its strong macroeconomic fundamentals,” Mr. Diokno said.
Reuters reported on Saturday that S&P lowered Russia’s foreign currency ratings to “selective default” on increased risks that Moscow will not be able and willing to honor its commitments to foreign debtholders.
Russia is facing more sanctions from Western economies over its invasion of Ukraine.
The BSP earlier acknowledged the war’s impact will spill over to the Philippine economy, mainly through rising inflation.
In its March 24 meeting, the BSP raised its inflation forecast for 2022 to 4.3%, which is already above the 2-4% target.
In March, headline inflation quickened to 4% from 3% in February, already reflecting the impact of the Russia-Ukraine war on global oil prices and commodity prices.
There have been global concerns over possible energy supply disruptions due to the crisis. Russia is one of the world’s major oil exporters, while Ukraine is a major global wheat exporter. — L.W.T.Noble with Reuters