Philippines, Malaysia ink banking pact

Part of Asean integration framework 

MANILA, Philippines - The central banks of the Philippines and Malaysia have signed an agreement aimed at greater financial integration and economic development among members of the Association of Southeast Asian Nations.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said both the BSP and the Bank Negara Malaysia have agreed on the guidelines regarding the entry of qualified ASEAN banks between the Philippines and Malaysia under the ASEAN Banking Integration Framework (ABIF).

“By signing this agreement, the BSP manifests its commitment to support greater regional financial integration and economic development through the ABIF,” Tetangco said.

Tetangco and Bank Negara Governor Zeti Akhtar Aziz signed the Heads of Agreement (HOA) in Kuala Lumpur yesterday.

The agreement is in line with strengthening intra-regional trade and investments under the ABIF.

The pact between the BSP and Bank Negara is one of the first bilateral agreements to be signed under ABIF and marks a milestone within the broader ASEAN community.

The agreement outlines market access and operational flexibilities that may be accorded to qualified ASEAN banks from each jurisdiction into the other.

However, these financial institutions will operate under the prevailing laws and regulations in the Philippines and Malaysia, respectively.

“Being among the first ASEAN economies to do so only further highlight the importance we place upon the ABIF as a regional initiative and as the future of our region,” Tetangco said.

The agreement allows up to three qualified ASEAN banks from each jurisdiction to operate in the other country.

These financial institutions will enter the host jurisdiction only in the form of a subsidiary of the parent bank in the home jurisdiction in line with the principle of reciprocity.

As banks from Malaysia enter the Philippines, these institutions will then be regulated under applicable BSP regulations and within the legal framework defined under Republic Act No. 10641.

Qualified ASEAN banks are strong and well-managed banks headquartered in the region and majority owned by ASEAN nationals.

Banks that apply for qualified ASEAN banks status must be endorsed by the home country regulator to and may be accepted by the host country regulator based on their bilateral agreement.

ABIF is designed to realize the vision of “One ASEAN Community”, using these banks as the vehicle for maximizing the vast trade and investment potential of ASEAN.

The BSP has so far allowed six more foreign banks to set up shop in the Philippines after President Aquino signed RA 10641 in July last year amending the foreign banks law by removing the limit of foreign banks in the country earlier set at only 10.