ASEAN banking integration: Phl banks need to step up – BSP

MANILA, Philippines - Philippine banks have been advised to strengthen their risk management efforts, put in place more good governance policies and focus on consumer protection in preparation for the regional economic integration, the Bangko Sentral ng Pilipinas said.

BSP Governor Amando M. Tetangco Jr. said late last week domestic banks would need to step up amid expected increased competition from the Association of Southeast Asian Nations’ banking integration framework, and the imminent reforms they will need to implement under the Basel 3 accord.

“From a realistic standpoint, there is only one thing that banks must do and that is to become better banks,” Tetangco said.

“Fortunately, becoming better banks is not an abstract concept for us, this frame of mind has been with us in the last two decades because it is at the heart of our reform agenda. To me, risk management, good governance and consumer protection will enable our banks to make their mark in this current financial landscape,” he further said.

Tetangco explained that becoming “bigger in balance sheet” is not the only thing banks should focus on. Lenders he said also should adopt effective risk management systems to be able to differentiate themselves with other banks.

“I believe that out banks have a fairly good chance of becoming a stand out in the critical area of risk management. This is a result of the deliberate program of our banking industry to set the bar higher and be accountable as such,” Tetangco said.

At the same time, leadership quality should also be among the banks’ top priorities as the board of directors and senior management officials should be able to apply good judgment on risk-return choices, the BSP chief said.

“As we have emphasized on many occasions, good governance dovetails into consumer protection,” Tetangco pointed out.

“As we begin to enforce the Consumer Protection Framework that the Monetary Board has approved, the interaction between governance and consumer protection will become seamless,” he added.

The Philippine banking sector has continued to be well-capitalized, stable, and profitable as of the first quarter, as supported by the various reforms instituted by the BSP.

Banks have increased their resources to P10.455 trillion as of March this year, reflecting their capacity to cover funding needs. Deposits went up to P7.7 trillion in the first quarter while bank loans amounted to P5 trillion in the same period.