October 18th, 2022
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) strongly opposes proposals for the Bangko Sentral ng Pilipinas (BSP) to adjust the current credit card interest rate caps of 2% per month, as BSP Governor Felipe Medalla recently announced efforts to review the ceilings given higher BSP policy rates.
“It’s just going to pad bank profits. Why we would want to adjust 27% per-annum interest rates upward as if that’s not high enough is beyond me,” Salceda said.
Salceda cited that, based on disclosures to the Philippine Stock Exchange, the largest banks in the country have become significantly more profitable compared to last year’s numbers.
“The biggest banks in the country have increased profits by 12 to 72 percent. Higher credit card interest rates will merely boost those profits while hurting the middle class,” Salceda added.
“So, I urge Governor Medalla and the Monetary Board to reconsider its efforts to review and possibly increase the rates,” Salceda said.
Salceda made the remarks following statements from Medalla that “of course, given the higher interest rates it’s obvious that we have to adjust the cap.”
“I have to disagree with my friend Governor Medalla here. It’s not obvious to me why we should raise credit card interest rate caps. We would want to do that if inflation were because of very high money supply in the economy. That’s when we would want to limit credit growth.”
“Inflation isn’t a liquidity problem right now. Liquidity growth is actually slowing down. From 7.0% in July to 6.8% in August. So, given our inflation rate, there isn’t any real liquidity growth. There isn’t too much money in the Philippines.”
“Far from it, inflation is imported. And given the BSP’s own declared policy goals to make payments cashless, an upward shift in credit card caps is hardly encouraging.”
Salceda also said that higher credit card interest rate caps will probably bring the Philippine rates to among the highest in ASEAN.
“In Thailand, the cap is 18% per annum. It’s 17.5% in Malaysia. It’s 28% in Singapore. And Indonesia has the same cap as we do. Our current average interest rates on credit cards is already for subprime customers in the US. Why inflict pain on ourselves?”
Salceda says his committee will review any move by the BSP to raise credit card interest rate caps invoking monetary policy.
“Monetary policy is the sphere of the Committee on Ways and Means, based on our mandate. While we respect the independence of the Central Bank to make decisions, those decisions are not free from Congressional accountability.”
“The BSP Charter mentions reporting to Congress at least 14 times, including a quarterly report explaining the decisions it makes. We’ll assert that Congressional function if needed. I urge the BSP to be more circumspect about this decision on credit card interest rate caps.”