BSP reforms assist PH banks performance

Bangko Sentral ng Pilipinas (Central Bank of the Philippines). Wikipedia photo

MANILA – The reforms recently implemented by the Bangko Sentral ng Pilipinas (BSP) may help local banks in competing with other banks in the region once the ASEAN integration takes place.

“The … financial sector reforms are intended to strengthen the domestic banking system and also help our banks grow into regionally competitive and economically viable players,” according to BSP Governor Amando M. Tetangco, Jr.

The member countries of ASEAN have started an integrated economic community by the end of 2015, while the ASEAN Banking Integration Framework (ABIF) will be completed by 2020.

“We have continuously taken steps to liberalize the banking system, strengthen the capital base of banks under the Basel III framework, increase minimum capital requirements, improve credit risk management, and pursued macro prudential reforms such as the implementation of real estate stress test limit along with the host of other prudential reforms generally to prepare (banks) for regional competition and economic integration,” Tetangco noted.

The ABIF will pave way for more an increase in financial services, decrease the cost of financial intermediation, and strengthen capital markets. This will benefit the local banks more given that the county face tougher competitions because the Philippines has lesser assets compared with other ASEAN lenders.

In July 2014, the Philippines became more open to foreign players, especially with the new rules and regulations released by the Central Bank such as the RA 10641 that allowed entry of more foreign banks. This will make the local banks more competitive and better equipped in handling foreign investments direct to the country.