Guaranty and suretyship: what is the difference?

In the Trade and Investment Development Corporation of the Philippines also known as Philippine Export-Import Credit Agency v. Philippine Veterans Bank, GR 233850, July 1, 2019, penned by Associate Justice Alfredo Benjamin Caguioa, where the Supreme Court elaborately discussed the nature of guaranty and suretyship, viz.:

"Under a normal contract of guarantee, the guarantor binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. The guarantor who pays for a debtor, in turn, must be indemnified by the latter. However, the guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor and resorted to all the legal remedies against the debtor. This is what is otherwise known as the benefit of excussion. Conversely, if this benefit of excussion is waived, the guarantor can be directly compelled by the creditor to pay the entire debt even without the exhaustion of the debtor's properties.

"As explained in Spouses Ong v. Philippine Commercial International Bank (Spouses Ong), a surety is one who directly, equally, and absolutely binds himself/herself with the principal debtor for the payment of the debt: ... Thus, a creditor can go directly against the surety although the principal debtor is solvent and is able to pay or no prior demand is made on the principal debtor. A surety is directly, equally and absolutely bound with the principal debtor for the payment of the debt and is deemed as an original promissor and debtor from the beginning. ... As explained in Spouses Ong, one of the defining characteristics of a suretyship contract is that the benefit of excussion is not available to the surety as he is principally liable for the payment of the debt: ...

"There is a sea of difference in the rights and liabilities of a guarantor and a surety. A guarantor insures the solvency of the debtor while a surety is an insurer of the debt itself. A contract of guaranty gives rise to a subsidiary obligation on the part of the guarantor. It is only after the creditor has proceeded against the properties of the principal debtor and the debt remains unsatisfied that a guarantor can be held liable to answer for any unpaid amount. This is the principle of excussion. In a suretyship contract, however, the benefit of excussion is not available to the surety as he is principally liable for the payment of the debt. As the surety insures the debt itself, he obligates himself to pay the debt if the principal debtor will not pay, regardless of whether or not the latter is financially capable to fulfill his obligation."

Accordingly, a surety is distinguished from a guaranty in that a guarantor is the insurer of the solvency of the debtor and, thus, binds himself to pay if the principal is unable to pay. On the other hand, and in your case, a surety is the insurer of the debt and he/she obligates himself/herself to pay if the principal does not pay, regardless of whether or not the latter is financially capable to fulfill his obligation.

Thus, if you sign as a surety, you will be directly, equally, and absolutely liable to pay the debt of the debtor.

Source: Manila Times

Philippines central bank keeps rates on hold as inflation moderates

BSP keeps rates at 6.25%

Bangko Sentral ng Pilipinas (BSP) kept policy rates unchanged at 6.25%, in line with expectations of a pause. BSP has lifted policy rates aggressively over the past few months to deal with surging price pressures, but with headline inflation on the downtrend, Governor Felipe Medalla opted to refrain from tightening further.

Furthermore, the recently-released first quarter GDP report shows signs that growth momentum is fading, suggesting that the string of rate hikes are already taking their toll on the economy.

Headline inflation, which peaked at 8.7% year-on-year in January has since slowed to 6.6%YoY as of April, although core inflation remains elevated at 7.9%YoY. Meanwhile, BSP lowered its inflation forecast for 2023 and 2024 to 5.5% (6.0% previous) and 2.8% (2.9% previous) respectively.

Real policy rates likely to revert to positive territory this month

Bangko Sentral ng Pilipinas and PSA

Prudent pause

BSP opted to keep rates unchanged at 6.25% today but did leave the door open for potential action should data evolve in a manner that would require additional policy moves. The central bank did admit that risks to the inflation outlook are tilted to the upside, but it also believes that inflation will revert to target by the fourth quarter of 2023. BSP opted to carry out a “prudent pause”, retaining policy rates at restrictive levels to tackle elevated core inflation while also refraining from hiking rates given lower 2023 and 2024 inflation forecasts. We expect BSP to keep policy rates steady in the near term while standing ready to tighten further should inflation trends reverse.

Meanwhile, Medalla also hinted at the much-anticipated reduction in reserve requirements (RR) as early as the June policy meeting. We expect the BSP to maintain policy rates at 6.25% in the coming months while reducing RR by 200bps to 10% in June.

Source: ING

PH still lagging badly in digitalization

Users of the popular digital payment application GCash faced chaos earlier this week when the app suffered a major failure, making it inaccessible to most from Monday afternoon until about midday on Tuesday. The outage, which was not the first for GCash, simply highlights how, despite a great deal of rhetoric and policy work toward creating a more digitized, cashless society, the Philippines remains far from achieving the same sort of efficiency and convenience that is considered normal in some neighboring countries.

In Taiwan, for example, one of the most popular ways to conduct virtually any sort of ordinary transaction is with the EasyCard, a reloadable digital wallet in card form, similar to the Beep card used here, but with a far wider application. The EasyCard can be used for virtually anything, from paying for transit fares to reloading one's cellular phone, to making purchases at restaurants and shops of any size, even small markets and street vendors.

Mainland China, where both the number of consumers and the vast size of the country make creating and maintaining any kind of digital infrastructure incredibly challenging, has perhaps set the gold standard for cashless business, and has largely dispensed with physical cards as well; QR code-based apps such as Alipay, UnionPay and WeChat Pay are so widely used that in many places, vendors will actually refuse to accept cash. Nor do they need to accept it because the digital payment apps work so well.

These systems are not fundamentally different from those such as GCash and Maya available here, so why do they work so well, and have penetrated the consumer market to such a comprehensive extent that a cash transaction is considered an anachronistic oddity, while the Philippines struggles to do the same?

This could be the subject of an entire roundtable discussion, and that is something we might consider doing in the near future, but in the meantime, there are several problematic areas that would seem to be good places to start working on improvements.

The most obvious problem area is our digital infrastructure. That has been the focus of a great deal of effort on the part of the government and the relevant private sector players in recent years, and it is improving, but far too slowly to keep up with the aspirations for digitalization, or even just the normal growth of digital commerce. Even under normal circumstances, when there are no particular issues with the app of one's choice, it is not uncommon to wait for an extended period of time, or make several attempts before a digital wallet transaction is completed. Accelerating the rollout of new cellular towers and expanding internet coverage is a must, but is still mired in red tape and delays.

As for technical issues with the apps themselves, that might be an area requiring closer monitoring and regulation, but the fact that it is not clear whether it is or not highlights the lack of transparency and effective consumer communication in the industry. Neither GCash, its parent company Mynt, nor Globe Telecom has yet been forthcoming with an acceptable explanation of why an apparent security issue involving just two bank accounts caused the failure of the entire system, and what has been done to correct the issue and prevent it from happening again. A certain amount of business confidentiality and discretion is understandable, of course, but in a situation such as what happened this week, the public and the regulatory authorities who are responsible for safeguarding the public interest need to be assured that the services they depend on are safe and reliable.

And finally, those two problems, as well as inefficient registration procedures, slow the growth of digitalization by discouraging consumers and businesses from using it. Finding ways to increase demand needs to be done in parallel with improving infrastructure and transparency.

With calls for accountability over the latest fiasco involving GCash now coming from Congress, we urge the responsible parties — the Bangko Sentral ng Pilipinas, the Department of Information and Communications Technology, and the service providers — to work together to prioritize ways to ensure reliability and efficiency, even if that means slowing the pace of expansion. Without reliability and efficiency, none of the digitalization goals have any hope of being achieved, and that would be a grave disservice to the Filipino people.

Source: Business World