Phl banks ready for Asean financial integration – BSP

The Bangko Sentral ng Pilipinas (BSP) said the local banking industry remained strong but should gear up for the impending financial integration within the Association of Southeast Asian Nations (Asean).

BSP Governor Amando Tetangco Jr. said in his speech during the Philippine International Banking Convention 2015 the banking industry needs to do more to prepare for competition under the Asean economic community.

“We are clearly in a position of strength as an industry and, individually our banks have been enlarging their domestic footprint – constructing brick and mortar branches outside of the greater metropolis, creating other banking offices, which are scaled-down bank operations, and capitalizing on e-banking technology,” he said.

According to Tetangco, the Philippine banking industry remains to be in a position of strength as total resources of universal and commercial banks grew by 11.6 percent between 2010 and June 2015, while their non-performing loans (NPL) ratio remained low at 1.9 percent in July.

He added the industry’s capital adequacy ratio (CAR) stood at 15.1 percent with stress test results confirming there is enough capital buffer in the event of extreme shocks.

He said financial technology has positively transformed our banking industry as over the counter withdrawals now run in parallel to online banking services where the speed of transactions is limited only by bandwidth.

Tetangco explained ATMs are no longer just cash-dispensing machines since the networks offer a full range of consumer and corporate banking services. The widespread use of e-money means that payment systems can clear and settle most retail transactions without cash physically moving from wallet to wallet.

While the biggest of the Asean banks can indeed penetrate smaller jurisdictions, Tetancgo explained the diversity of Asean suggests there are niche markets that could be realized, different needs that could be explored and pockets of expertise that could be harnessed.

“And as you can appreciate, this distinctiveness of Asean is the pressing motivation why our banks are currently focused on fortifying their domestic franchise in a variety of modes. We can, however, only surmise that this insular perspective will not be the norm for long,” he said.

According to Tetangco, banks across the 10 jurisdictions will have a role to play in the Asean and the peculiar diversity of Asean would ensure the gains from regional banking integration will not only accrue to the biggest of banks in the region.

“That said, competition creates fluidity and the possibility of external shocks is a constant. As we scan the horizon, the waters may appear to be relatively calm for us now, but there are shifts in the currents,” Tetangco said.