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BSP sets talks for PHL banks’ Asian entry

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by November 24, 2016 General
Finance

By Melissa Luz T. Lopez, Senior Reporter

Posted on November 25, 2016

THE BANGKO SENTRAL ng Pilipinas (BSP) will soon start bilateral talks with the central banks of Thailand and Indonesia with the entry of Philippine lenders high on the agenda in preparation for the full regional integration of Southeast Asia’s banking sector.

BSP Governor Amando M. Tetangco, Jr. said work is underway ahead of formal discussions with the Bank of Thailand and the Otoritas Jasa Keuangan (OJK) of Indonesia to facilitate the entry of Philippine banks to other member-states of the Association of Southeast Asian Nations (ASEAN).

These proposals come ahead of the ASEAN Banking Integration Framework (ABIF) eyed to go full swing by 2020.

“I am pleased to report that we are about to initiate formal discussions with the Bank of Thailand and with the OJK of Indonesia under the same ABIF guidelines,” Mr. Tetangco said in a speech before the Bankers Association of the Philippines on Monday.

On March 14, Mr. Tetangco signed an agreement with his counterpart Governor Zeti Akhtar Aziz of the Bank Negara Malaysia in Kuala Lumpur, the first bilateral deal forged by the Philippines under the ABIF.

Under the agreement, three qualified ASEAN banks (QABs) from one country can set up branches in the other, subject to the banking regulations of the host economy. These bank units will be treated as subsidiaries of the parent foreign bank.

QABs are identified as strong and well-managed banks based in Southeast Asia and are majority owned by ASEAN nationals. To qualify as a QAB, lenders must secure the endorsement of regulators from their home country and be accepted by offshore authorities in the economy where it wants to start operations in, as indicated in the bilateral deals.

Republic Act 10641 signed in 2014 allowed the full entry of foreign banks in the Philippines by lifting the previous cap of 10 foreign banks that can operate in the country at a given time, with a new foreign bank only able to enter the local scene if one of the accredited offshore lenders pulls out.

Nine new foreign banks have set up shop in the Philippines in the last two years since the law was passed. Of these, four are from Taiwan, three from South Korea, and one each from Singapore and Japan.

Prior to the new law, Thailand’s Bangkok Bank Public Co. Ltd. has been running a branch in Manila.

There are currently 41 universal and commercial banks operating in the Philippines.

Central bank officials expect more Asian banks to venture into the Philippines in light of a shared regional market.

RISKS
Mr. Tetangco said the key challenges to the local banking sector are the looming rate hike in the United States, uneven global growth prospects, and “disruptive” technology, although Philippine lenders are seen to withstand such headwinds.

“For the Philippines, strong domestic aggregate demand, particularly private consumption, has long shielded us from external shocks. Even during the Asian Financial Crisis, we were not as affected because we were not as open as others in the region. However, there is a need to explore ways of broadening the domestic economic base,” the central bank chief added.

Still, Mr. Tetangco said the Philippines remains armed with ample monetary and fiscal space to raise infrastructure spending that would support further expansion and develop local facilities.

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