Banks to weather higher rates

THE LOCAL banking sector is poised to ride on the positive effects of a higher interest rate environment, the chief of the Bankers Association of the Philippines (BAP) said.

“As long as rates go up gradually, it should be positive for the banking sector,” BAP President Nestor V. Tan told reporters in an interview when asked for his outlook on the industry amid rising interest rates.

Global markets are anticipating the US Federal Reserve to hike interest rates by at least two to three times this year after the regulator’s tightening move last March as it hiked rates by 25 basis points to between 0.50% and 0.75% following a similar move in December.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) has kept its policy stance steady since September 2014, to which benchmark rates currently ranging within 2.5-3.5% while the reserve requirement imposed on big banks remains at 20%.

BSP Governor Amando M. Tetangco, Jr. had said the central bank still has room to keep local interest rates unchanged despite inflation clocking in at 3.4% in March, faster than the 1.1% seen a year ago and picking up from February’s 3.3%. Inflation was well within the central bank’s 2- 4% target band.

KYC RULE

Meanwhile, asked if they have already taken steps towards the central bank’s electronic knowyour-customer (E-KYC) rules, Mr. Tan said: “I think it’s actually a positive step, a lot of the things that we do now is done through electronic means and done through agents, so we need to see how we can apply those two methods in the banking sector, E-KYC I think is just one step towards that.”

The KYC or “know- yourcustomer” rule requires financial institutions to establish the full identity of individuals looking to transact with them, which is usually done by requiring identification cards from a client. It also involves monitoring account activity in keeping with operational risk management and combatting dirty money transactions.

E- KYC procedures allow financial firms to use online channels like video calls and geocoding to verify a client’s identity.

“So I think I would say the BSP is very progressive in their thinking in looking at these things as an evolutionary improvement in the way we do things,” he added. •