Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. on Wednesday asked local banks to strengthen their operations, amid intensifying competition posed by foreign banks.
Tetangco said while local banks were healthy, they should explore ways to strengthen their operations.
“Moody’s [Investors Service] singled out our banks from 2012 to 2014, giving them a positive outlook from among all the jurisdictions they rate,” Tetangco said in an e-mailed message.
“But in an increasingly integrated regional setup, there is wisdom for further beefing up, given current size of our banks and the system as a whole. Consolidation is just one way. Banks may also decide to individually raise more capital,” he said.
He said the opening of the banking industry to foreign banks would result in stiffer competition and that local banks should review their business models to see where they could have comparative advantage.
“As I have said in the past, even as we allowed foreign banks in, our local banks have the ‘home course advantage’ [in golf, it’s called home course, in basketball, home court]. There will continue to be a place for both the bigger UK/Bs [universal and commercial banks] and the smaller regional/rural banks. Our goal of financial inclusion is far from achieved,” Tetangco said.
Tetangco said banks should shape up in the way they do business and be smart about their chosen target markets, products and leveraging off technology.
Bangko Sentral has so far allowed six foreign banks to operate in the country, following the passage of Republic Act No. 10641, which liberalized the banking industry. These banks are the Singapore-based United Overseas Bank Ltd., Taiwan-based Yuanta Commercial Bank Co. Ltd., Industrial Bank of Korea, Shinhan Bank of Korea, Japan-based Sumitomo Mitsui Banking Corp. and Taiwan-based Cathay United Bank.
Data from Bangko Sentral showed that total resources of banks expanded by 9 percent in the first half to P11.2 trillion from a year ago.
“Despite the moderation in credit allocation particularly with the real estate sector, the BSP remains proactive in its surveillance and use of macro-prudential tools to mitigate the buildup of systemic risks,” Bangko Sentral said.
“Banks’ more upbeat stance towards loan and investment portfolio expansions proved beneficial as net profit grew by 8.1 percent to P68.9 billion year-on-year. This was supported by strong expansions in interest-based revenues [7.8 percent] and non-interest based income [11 percent],” it said.
Bangko Sentral said the country’s archipelagic landscape continued to provide challenges and opportunities in the provision of much-needed financial services particularly in remote rural areas.
“In response, the BSP continues to be responsive by building on its financial inclusion agenda through reforms in the provision of innovative financial products and services in the countryside,” it said.
As of end-June 2015, there were 638 operating banks with 9,890 branches in the country. Data showed that 268 banks were offering various e-banking services such as electronic wallet, cash/remittance products, Internet banking, phone banking, mobile banking and hybrid mobile/internet via BancNet-MegaLink switch banking service in the Philippines.
