Soft remittances to persist – BSP

 Due to de-risking, low oil prices

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said soft remittance flows from overseas Filipinos could persist this year amid various de-risking activities by foreign banks and weak oil prices.

BSP Deputy Governor Diwa Guinigundo said de-risking activities coupled with the soft oil prices would likely continue to affect the normal flow of remittances.

“We are seeing the continuing narrative of de-risking, upsetting the otherwise normal flow of remittances. What exacerbates this is the continued weak oil prices dampening the propensity of Saudi Arabia, United Arab Emirates and other oil producing markets to provide jobs to our overseas workers,” he said.

Guinigundo said the Arab Monetary Fund, the International Monetary Fund (IMF) and The World Bank have documented various cases of de-risking in the Middle East jurisdictions.

“De-risking” refers to financial institutions exiting relationships with and closing the accounts of clients considered high risk. There is an observed trend toward de-risking of money service businesses and correspondent banks resulting in account closures in the US, the United Kingdom and Australia due to rising anti-money laundering and combatting the financing of terrorism scrutiny.

As early as 2014, the BSP has raised concerns on the adverse impact of de-risking with relevant international institutions including the Financial Action Task Force (FATF), Alliance for Financial Inclusion, the Global Partnership for Financial Inclusion of the G20, the US Department of Treasury, the Financial Stability Board, and the World Bank.

Latest data from the central bank showed cash remittances contracted 5.4 percent to $2.13 billion in July from $2.25 billion in the same month last year. This pulled down the growth in cash remittances to three percent in the first seven months, lower than the full-year target set by the BSP.

Cash remittances amounted to $15.32 billion from January to July, $449 million higher than the $14.87 billion recorded in the same period last year.

Data showed the amount of cash sent home by Filipinos from the Middle East grew 14.8 percent to $4.3 billion in the first seven months from $3.75 billion in the same period last year.

Remittances from Filipinos in Saudi Arabia fell 10.8 percent to $1.51 billion from $1.7 billion while remittances from the UAE inched up only by 1.9 percent to $1.18 billion from $1.16 billion.

Cash remittances from Filipinos in Qatar remained strong growing by 57.2 percent to $578.84 million from $368.33 million while those from Kuwait surged 58.9 percent to $516.32 million from $324.98 million.

On the other hand, cash remittance from Europe dropped 8.5 percent to $2.2 billion in the first seven months from $2.41 billion in the same period last year.

Remittances from the United Kingdom fell seven percent to $805.8 million from $886.77 million followed by Italy with a 19.1 percent decline to $140.06 million from $173.05 million and Greece with a 25.9 percent plunge to $131.43 million from $177.46 million.

The amount of cash sent home by Filipinos from Germany increased 7.8 percent to $420.09 million from $389.72 million.