BSP encourages competition, innovation in banking sector

The Bangko Sentral ng Pilipinas (BSP) intends to continue to foster an enabling ecosystem in the banking industry wherein competition and responsible innovations are encouraged to thrive.

“We believe that regulations should not stand in the way of market developments. At the BSP, we have strategically opened up the banking system to competition,” BSP Governor Nestor Espenilla Jr. said in a keynote address during the general membership meeting of the Management Association of the Philippines.

He said the BSP’s Monetary Board has allowed 12 foreign banks to open branches in the country since the industry was liberalized through Republic Act No. 10641 that was signed by former president Benigno Aquino III in July 2014.

These include Taiwan’s Hua Nan Commercial Bank Ltd., Cathay United Bank, Yuanta Bank, First Commercial Bank, and Chang Hwa Bank Commercial Bank Ltd.; Korea’s Shinhan Bank, the Industrial Bank of Korea, and Woori Bank; Sumitomo Mitsui of Japan; United Overseas Bank Ltd. of Singapore; CIMB Bank of Malaysia; and Beijing-based International and Commercial Bank of China.

Likewise, a total of 11 foreign banks have established liaison offices in the country including State Bank of India, Ogaki Kyoritsu Bank Ltd, Wells Fargo Bank, Korea Development Bank, Bank of Singapore Ltd., DBS Bank Ltd, Japan Bank for International Cooperation, Rothschild (Singapore) Ltd., The Bank of New York Mellon, Korea Eximbank, and UBS AG.

Espenilla said the regulator also has a flexible approach to financial innovation to encourage competition from new players, including financial technology or fintech companies.

“Leveraging on safe, innovative and affordable financial instruments and channels also drives business and industry growth, and serves as the gateway to greater financial inclusion,” he said.

According to Espenilla, the BSP seeks to continually build a regulatory environment for innovations to flourish, but is still mindful that risks to stability and integrity remain, while effectively managing cyber attacks, money laundering, and terrorism financing.

The BSP chief explained its regulatory approach is governed by three principles including regulation must be riskbased, proportionate and fair; there is active multi-stakeholder collaboration; and consumer protection must be upheld and innovation must work for the benefit of consumers.

“Our test and learn approach remains useful as we continue to deal with increasing digital innovations in the market. The BSP is also on constant surveillance mode for other fintech activities by emerging market players,” he said.

The BSP, according to Espenilla, is monitoring industry developments on crowd-funding and peer-to-peer lending, ready to take regulatory action when necessary.