During the year, the Bangko Sentral ng Pilipinas issued several circulars to strengthen the banking system. Thrift banks were required to set aside 15% of their revenues as capital to cover operational risk, such as losses from calamities. It also allowed thrift banks to use their head office and branches for the presentation and sale of micro-insurance products. The Bureau of Internal Revenue (BIR) also implemented the Electronic Documentary Stamp Tax (eDST) system in June.

In March, then President Gloria M. Arroyo signed into law the revised rules and regulations governing the mandatory credit allocation for agriculture and agrarian reform credit to implement the provisions of Republic Act (R.A.) No. 10000 dated 23 February 2010. This will limit the alternative mode of compliance to investments in bonds issued by the DBP and the LBP that have been expressly declared as eligible by the Department of Agriculture (DA), or by an agency duly-authorized by the DA, the proceeds of which shall be used exclusively for on-lending to the agriculture and agrarian reform sector. In the second quarter, the Credit Information Corporation (CIC) was created under R.A. No. 9510 to act as a central registry or central repository of credit information, to be owned 60% by the National Government and 40% by qualified investors. The three banking associations (i.e. BAP, CTB and RBAP) committed to invest in this corporation via equity investments by their member banks. Isla Bank, as a member of the Chamber of Thrift Banks (CTB) invested P.153 Million as did other CTB member banks of our size.

The Bank initiated steps to obtain approval from the BSP to directly participate in the clearing house operations of the Philippine Clearing House, approval of which was granted in January, 2011.

 

2011 will see the implementation of several circulars issued by the BSP, one of which is the revised Check Clearing and Settlement Processes, as covered by BSP Circular No. 681, that took effect in January. The circular requires banks to return all insufficiently funded checks by 7:30 AM of the next clearing day. This means that check issuers could no longer fund their accounts for any deficiency.

Economic growth is projected to slow down this year as a result of several external factors that has occurred during the first quarter of 2011--- uprising in North Africa and the Middle East, particularly in Libya, Bahrain, Iran, Yemen and Morocco after protesters toppled the dictator in Egypt, the weak U.S. economy, debt problems in many European countries and the devastating earthquake and tsunami disasters which hit Japan in March and brought threats of a nuclear meltdown. On the local front, inflation is on the rise as a result of higher fuel prices (U.S. crude oil futures hitting 39-month high in March) and food costs. The BSP is expected to raise its key rates for overnight borrowing and overnight lending to keep inflation within manageable levels. Indeed, on March, 2011, the BSP raised its key rates by 25 basis points to 4.25% for overnight borrowing and 6.25% for overnight lending---its first move since July, 2009. More rate hikes are expected for the rest of 2011.

Once more, we would like to thank our Board of Directors, Stockholders, Management and Staff, and Bank Clients for their continuing support, without which, the achievements we have attained in 2010 would not have been possible.

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