The Philippines is seen signing bilateral deals with neighboring countries next month, in line with the government’s commitment to help create a larger and deeper regional financial market and promote easier access for qualified Asean banks (QABs), the Bangko Sentral ng Pilipinas (BSP) announced on Tuesday.
BSP Governor Amando M. Tetangco Jr. said he is looking forward to signing a “high-level” agreement with at least two more countries in April, in accordance with the Asean Banking Integration Framework.
Tetangco earlier bared they are in discussions with their central bank counterparts in Thailand and Indonesia.
The agreements to be inked, according to the governor, will be similar to the Heads of Agreement (HOA) signed by the BSP and Bank Negara Malaysia—the Philippine central bank’s Malaysian counterpart—concerning the guidelines on the entry of QABs between the two countries.
The Philippines and Malaysia’s HOA was signed in March last year, containing provisions on market access and operational flexibilities among bank entrants, as well as agreements to operate under prevailing laws and regulations of the host country.
The country has been given recognition by one of the international credit-rating agencies as one of the most prepared for the Asean Banking and Financial Integration—particularly citing the legislative nod to lift the ban on the entry of financial institutions in the country.
Since the full liberalization of the local banking sector to foreign players in July 2014, the BSP has already granted nine foreign banks licenses to operate in the country.
Tetangco, however, reminded the banking community that, while Asean banks are looking to enter the Philippine banking system on the back of strong demand and sound macroeconomic developments, Philippine banks can also participate in banking in other jurisdictions.
“The strategic issue, therefore, is how you will now operate given that regional integration is upon us. Should you choose to be a Qualified Asean Bank, or a QAB, you have added opportunities in a bigger market but you have to deal with new aspects of competition, different market conditions and differences in capital requirements, among others,” Tetangco said.
“On the other hand, those who choose to ‘stay home’ so to speak, are not necessarily shielded from heightened competition. Indeed, banks need to have a good competitive strategy even if they are not immediately aspiring to be QABs,” he added.
The governor also assured the banking community that they are preparing for the realization of the regional banking integration, citing upgrades in their supervisory framework to align them with international standards, as well as building up capital requirements and encouraging mergers and consolidations.