AFTER the merger of Philippine National Bank (PNB) with Allied Bank, both owned by the Lucio Tan Group of Companies, the pace of consolidation will likely slow down but not stop, the Bangko Sentral ng Pilipinas (BSP) said Friday.

In an e-mail to the press, BSP Governor Amando Tetangco Jr. said, “We may see a few more, although probably not as large as we have seen recently.”

The PNB-Allied merger created the fourth-largest lender by assets (P388 billion), only smaller than that held by market leader Metropolitan Bank and Trust Co. Next in line is Banco de Oro Universal Bank founded by Henry Sy Sr., and then by the Ayala-owned Bank of the Philippine Islands (BPI).

Tetangco also said he continues to anticipate that at some point, the number of big banks will be reduced to just five, which is becoming necessary, according to him, for Philippine banks to be able to compete ably in and influence directions, not just in the domestic economy but in the region’s economy, as well. Tetangco said the regulatory environment has been crafted as such to encourage banks to fuse the resources of the smaller players with those of the large lenders.

“What we have done is create the regulatory and policy environment that would encourage banks to improve their capital base, while allowing them to take on risks as long as they are able to show that they could adequately manage these, given their level of skill and capital,” he said.

The risk-based approach to bank capitalization mandates banks to provide capital equal to the level of risk they take or are present in the environment, in lieu of the traditional requirement that fixes capital to a rigidly set amount.

He acknowledged, however, that future bank mergers ultimately will be determined not by regulatory fiat but by market forces. “I believe mergers and acquisitions should largely be market-driven.... The number of market players would really be determined by how banks see economies of scale fitting into their business models within this new regulatory framework.”

Last year Banco de Oro acquired Equitable PCI Bank also via a share-swap transaction that catapulted the lender from fifth-largest to second biggest-lender.

BPI also acquired Far East Bank and Trust Co. in 2000 to become the country’s third-largest.

MADRID, Spain—If the Philippines wants to avoid the financial risks brought about by high capital inflows, the peso should be allowed to be more flexible and interventions must be muted, according to a new policy brief by the Tokyo-based Asian Development Bank Institute (ADBI).

AFTER the merger of Philippine National Bank (PNB) with Allied Bank, both owned by the Lucio Tan Group of Companies, the pace of consolidation will likely slow down but not stop, the Bangko Sentral ng Pilipinas (BSP) said Friday.

THE chairman of the Senate Committee on Banks and Financial Institutions has asked Congress to expedite approval of a bill granting supplementary powers to the Bangko Sentral ng Pilipinas (BSP) to boost enforcement of international best practices in banking supervision through amendments in the BSP charter.

UNION Bank of the Philippines reported a profit dive for the first three months of the year, but said it was the company’s “deliberate strategy to mitigate the downside implications of negative market environment.”