TUCP wants full disclosure of GSIS, SSS overseas investments

Following the bankruptcy of US investment giant Lehman Brothers, the Trade Union Congress of the Philippines (TUCP) slammed the Government Service Insurance System (GSIS) for lack of transparency on its overseas investments.

“GSIS pensioners and members are entitled to know how much of their money has actually been stashed overseas, and in what financial products the money has been invested,” TUCP secretary-general Ernesto Herrera said.

In a statement, Herrera said retired and active government employees and their dependents have a right to be informed as to how their hard-earned contributions are being managed here and overseas.

“And GSIS officials have a duty to fully disclose the manner by which the funds are being invested,” Herrera said.

Herrera noted the GSIS announced last year that it would invest up to $1 billion or P47 billion abroad under its new global investment program.

The former senator assailed the GSIS for treating the funds that it holds in trust “as if these are private funds for which they are not directly accountable.”

“Why is the GSIS being so secretive? Why can’t they just come clean and tell us where the money has been parked so that pensioners and members can sleep better at night?”

“Right now, the only thing we know about the $1 billion is that it is supposedly being managed by Credit Agricole Asset Management Ltd. and ING Investment Management, and that Citibank N.A. is the fund custodian,” Herrera said.

This means that New York-based Citibank has custody of the funds, but moves the money as instructed by managers at Paris-based Credit Agricole and Amsterdam-based ING, Herrera said.

The GSIS earlier claimed the money it has invested overseas has not been affected by the financial distress “because the funds have been oriented more toward Europe than the US.”

Lawmakers earlier also called into question the program’s wisdom, amid the worsening global financial crisis set off by the subprime mortgage meltdown in the US.

The crisis has taken its toll on at least seven large Philippine commercial banks that have so far reported $386 million (P18.1 billion) in losses on account of their exposures to Lehman Brothers Holdings Inc.

The 158-year-old US investment bank sought bankruptcy protection on Sept. 15 due to staggering losses brought about by spoiled investments in housing mortgages.

The investments failed as a result of surging foreclosures and plunging home prices in the US.

Sen. Loren Legarda, chairman of the Senate committee on economic affairs, said she might call a hearing to determine the possible investment exposure of government financial institutions (GFI) and local banks in the embattled Lehman Brothers and American International Group (AIG).

“Unless GFIs and local companies have considerable investment there, they may have nothing to worry about,” Legarda said.

Legarda noted the possible effects in the local scene over the present US economic turmoil.

She said the GSIS and the SSS – two big GFIs — have declared not having investments in either AIG or Lehman.

“This means that the members of the SSS and GSIS may have nothing to worry about and that they can rest assured that they would not be affected by recent developments in the US,” Legarda said.

Legarda also urged the Insurance Commission (IC) to examine thoroughly those who may have exposure but are not being forthright enough to declare it.

Quoting Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., Legarda noted a number of Filipino banks have limited exposure to Lehman which could be between $300 million to $500 million (P14.2 billion to P23.6 billion).

Senators Manuel Roxas II and Francis Escudero also urged the GSIS and SSS to disclose any and all investment exposure in troubled US financial firms.

“GSIS and SSS are not mere financial institutions, because they are mandated to protect the people’s interests. The value of their trust funds must be preserved. They must stay away from speculative investments,” Roxas said.

Escudero said the government should have a contingency plan and a buffer fund to cushion the financial impact of the US crisis into the country.

The Lehman Brothers folded up in the face of credit crisis and falling real state after 158 years of existence in the investment industry, raising fears of domino effects in Asia and Europe which are awesome to contemplate.

AIG, in turn, had to be rescued by Bank of America in a stock-swap deal.

“Precisely, this is what we want, that these GFIs who may have exposure at Lehman to be transparent,” Legarda said.

Sun Life is said to have at least $334 million par value of Lehman bond securities and approximately $15-million net value of Lehman’s derivative instruments.

Roxas stressed the government must provide a clear-cut plan on how it plans to deal with the threats to local jobs and incomes as an effect of the ongoing global financial crisis.–Christina Mendez, Philippine Star