Lenders from around the region look to the Philippines for earning opportunities now that the sector has opened to full foreign competition and well ahead of a projected integration process whose tentative steps firm up and grow more purposeful every day.
According to the Bangko Sentral ng Pilipinas (BSP), quite a few have, in fact, formally submitted the intent to make their presence felt in the $270-billion economy whose local output, measured as the gross domestic product (GDP), has the potential to widen this year by as much as 8 percent.
Their ramped-up participation comes less than a year after all foreign competition restraints have been removed, such that seven Asian lenders are now in talks with the central bank to begin putting up branches in the country.
According to Nestor Espenilla Jr., BSP deputy governor for the supervision and examination sector, two of the Asian lenders already filed their intent to compete in the P10.1-trillion industry already shaping up as one of the fastest- growing in the region.
He also said two other Asian banks are readying their own proposals, while three others expected to follow suit, bringing the total count of interested foreign banks to seven.
While Espenilla would not disclose the specific Asia-based banks proposing to gain Philippine entry, he acknowledged none of the other multinational lenders such as those based in the euro zone or the United States look to put up operations in the country.
In July 2014 the stepped-up liberalization of foreign-bank entry was signed into law by President Aquino and lifted all restrictions in the business.
Central bank top honcho Amando M. Tetangco Jr. welcomed and lauded this development, saying the law has “clear economic benefits” to the country, especially in light of the anticipated Asean Banking Integration Framework positioning.
Tetangco also earlier said the liberalization should spur the exit of weak players through mergers and acquisitions in the country and should further encourage the entry of the much-sought foreign direct investments. These are investments invested in so-called bricks-and-mortar undertakings that not only generate tax revenues for the national coffers, but breed employment for quite a number of Filipinos as well.
The move to liberalize the banking system was also lauded by international credit watcher Fitch Ratings who said the interest of foreign investors in the Philippine banking system should help strengthen the operating efficiency of the various lenders and align the industry’s corporate governance with international best practices.
Then BSP Governor Gabriel S. Singson started breaking up the near total dominance of local shareholders in the equity structure of the various lenders in the country in the 1990s when on top of the four original foreign banks already operating in Manila, 10 more were added. The only foreign banks at that time only included the Bank of America, Standard Chartered Bank, Citibank and the then-Hongkong and Shanghai Banking Corp. now known simply as HSBC.