Still enough room for foreign banks – BSP

MANILA, Philippines - The Philippines has more than enough room to accommodate the entry of foreign banks, further intensifying the competition in the country’s banking industry.

Nestor Espenilla Jr., deputy governor at the Bangko Sentral ng Pilipinas (BSP), said the country could accommodate more foreign banks that currently account for less than 10 percent of the industry’s total resources.

“Yes there is room. The total assets of foreign banks combined are less than 10 percent of total,” he said.

Latest data from the central bank showed a double-digit 10.1 percent growth in the total resources of Philippine banks to P12.52 trillion in the first quarter of the year from P11.37 trillion in the same period last year.

Foreign banks operating in the Philippines could take up as much as 40 percent of the total assets of the country’s banking industry.

 Former President Benigno Aquino signed Republic Act 10641 in July 2014 amending the foreign banks law by removing the limit of foreign banks in the country earlier set at only 10.

Foreign banks under the new law have also been allowed to own as much as 100 percent of any local bank, removing the previous cap of 60 percent.

The BSP has so far given eight foreign banks the green light to operate in the Philippines after the moratorium on the entry of foreign banks into the country was lifted.

The latest was the First Commercial Bank of Taiwan. This is the third Taiwan-based lender to enter the country since the limit on foreign ownership in banks was lifted two years ago.

The BSP also gave Seoul-based Woori Bank the green light to acquire a 51 percent stake in Wealth Development Bank owned by the Gaisano family through Vicsal Development Corp.

Other foreign banks that have established presence in the country include Sumitomo Mitsui of Japan, Shinhan Bank of South Korea, Cathay United Bank of Taiwan, the Industrial Bank of Korea, Yuanta Bank of Taiwan, and the United Overseas Bank Ltd. of Singapore.

Last January, Security Bank Corp. received P36.9 billion from The Bank of Tokyo Mitsubishi UFJ Ltd. (BTMU) in exchange for a 20 percent stake.

Aside from attracting more foreign direct investments (FDIs), Espenilla said the entry of more foreign banks in would further intensify the competition in the country’s banking sector.

“Foreign banks also help attract FDIs and bring in new ideas. Plus the competition makes local banks work harder,” he added.

The number of big banks went up to 41 in end March this year from 36 in end March last year with the entry of new foreign banks.

The 21 universal banks consisted of 12 private domestic banks, three government banks, and six foreign bank branches while the 20 commercial banks included five private domestic banks, two foreign bank subsidiaries, and 13 foreign bank branches

On the other hand, the number of thrift banks declined to 66 from 69 while the number of rural and cooperative banks decreased to 515 in end from 541 with the exit of weak players.