2 ASEAN banks want branches in PH

Two ASEAN banks are keen on locating branches in the country, part of the total eight foreign banks earlier announced by the Bangko Sentral ng Pilipinas (BSP) which have indicated interests to apply for local banking license.

“Since the enactment of Republic Act No. 10641 (the law allowing full entry of foreign banks in the Philippines), ten regional banks have entered the Philippines and eight more foreign banks – including two ASEAN banks – have expressed interest in establishing banking presence in the Philippines,” BSP Deputy Governor Chuchi G. Fonacier said on Friday.

According to Fonacier, 10 foreign banks have located in the Philippines since 2014 when foreign entry into the banking system was expanded. These are Japanese, Chinese, South Korean and Taiwanese banks.

The BSP is currently engaging these eight foreign banks who have shown interests and are in the inquiring phase but have yet to complete BSP requirements for application.

Before 2014, there were 16 foreign banks with existing operations in the country and another 13 more foreign banks with representative offices, mostly Singaporean financial institutions.

According to Fonacier, in 2015 foreign banks here have attracted foreign direct investments and facilitated financial transactions amounting to $15.7 billion between the Philippines and the US, Japan, China and Thailand.

“(Foreign banks) have contributed to the offering of a wider array of financial products and enhanced delivery of financial services by capitalizing on and enhancing existing banking technology and support systems for banks’ front, and backroom operations (resulting) in higher customer satisfaction,” she said.

Also as of end-2015, Fonacier said these banks have invested substantially in human resources, employing about 7,088 personnel and 98.2 percent or 6,959 are Filipinos.

Fonacier said the BSP as a participating central bank representing the Philippines in the ASEAN Banking Integration Framework (ABIF), have “sent a powerful statement in support of ASEAN’s financial integration agenda” with RA No. 10641. “Through this law, foreign banks were allowed to own up to 100 percent of the voting stock of an existing domestic bank,” she said.

Under the ABIF, the Philippines and other ASEAN members have to identify Qualified ASEAN Banks (QABs) and these banks will be accorded the status of cross-regional banks.

So far, the Philippines has ABIF agreements and negotiations with Bank Negara Malaysia, and still in discussions with Bank of Thailand and Otoritas Jasa Keuangan (OJK) or the Financial Services Authority of Indonesia.

“Under these ABIF agreements, Philippine QABs will be able to enter Malaysia, Indonesia and Thailand and enjoy the same rights and privileges of a local bank (and vice versa),” said Fonacier. “With the full roll out of ABIF in 2020, Philippine banks can establish presence in Singapore and the BCLMV countries (Brunei Darussalam, Cambodia, Lao PDR, Myanmar and Vietnam.”

Fonacier said the BSP is aware of the risks associated with banking integration, however they expect the benefits will be worth the perceived risks such as contagion and financial and macroeconomic instability.

“We are confident that the Philippines is ready for integration and is able to manage and deal with potential risks,” said Fonacier. She said local banks have the potential to compete in a regional setting as they are among the healthiest in the region. “Banks have strong balance sheet with adequate buffer for losses.”

The ABIF will set down the broad parameters for the establishment of QABs which is crucial part of regional banking integration. Based on ABIF rules, QABs are banks with global banking standards that follow strict operational guidelines as set by “bilateral agreements between home and host countries.”

The Philippines is one of the first ASEAN member states to pursue the ABIF initiatives which will be implemented by 2020. It has not yet formally identified which of the 42 local universal and commercial banks are QABs but credit rating agencies have assessed that the 10 biggest lenders will be named.