Earlier restrictions on the entry of foreign banks, as well as current land- ownership restrictions to foreign entities, may not be the only reasons foreign lenders have shown reluctance in exploring the Philippine market.
In the latest issue of Oxford Business Group’s (OBG) The Report: The Philippines 2015, OBG said foreign banks also find it difficult to compete given the surprising strength of the local banking system.
This strength, according to OBG, even has the potential to stand out against banking systems in peer countries by the time the financial integration under the Asean takes place.
“Although Philippine banks have largely been sheltered by restrictions placed on foreign banks, there is another reason that many foreign banks have withdrawn: it simply is not that easy to compete with the country’s local banks,” the OBG said.
“Indeed, by the time regional integration comes to pass, Philippine banks may be more competitive across Southeast Asia than many are expecting,” the OBG added.
The Bangko Sentral ng Pilipinas earlier said that while Asean banks are definitely larger in asset size, local banks have the edge over penetration and market familiarity in the upcoming regional integration.
Latest data from the central bank showed that the local banking system has a total of 10,456 branches as of the end of the first quarter this year.
These are largely composed of universal and commercial banks with 5,901 branches, while thrift banks have 1,927 branches and rural and cooperative banks have 2,628 branches nationwide.