Foreign banks eyeing digital presence in Philippines

MANILA, Philippines — Several new and incumbent foreign banks have expressed interest to establish a new digital bank or convert their existing license to a digital bank in the Philippines, according to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno.

“We continue to receive expressions of interest from a number of foreign banks abroad in establishing a digital banking business in the Philippines. We are awaiting submission of complete documentation on their application so that BSP can start the assessment process,” Diokno said.

There are currently 29 foreign banks operating in the Philippines, including 12 Globally Systemically Important Banks (GSIBs). Most of the foreign bank branches and subsidiaries are from Taiwan (seven), South Korea (four) and Japan (three).

Five of the foreign banks with presence in the Philippines are from Europe and three are from the US.

“The BSP recognizes the steady growth of foreign banks and their ability to contribute to the country’s road to recovery. The entry of foreign banks in the country has benefitted both the economy and the banking system in various ways,” Diokno said.

These benefits, Diokno said, include the inflow of more foreign direct investments and employment opportunities and promotion of healthy competition in the banking industry resulting in greater market penetration and more efficient delivery of financial products and services, exchange of governance, risk management and business practice.

Foreign banks also helped introduce technology innovations that contribute to the overall operational efficiency of banks. Foreign banks account for seven percent or P1.4 trillion of the total assets of the Philippine banking system.

“This indicates that there is room for foreign bank branches and subsidiaries to expand their balance sheet and operations,” Diokno said.

Since the enactment of Republic Act 10641 in July 2014 that liberalized the entry of foreign banks, the loans of the industry grew by nearly 24 percent while deposits jumped 43 percent.

Likewise, investment activities of foreign banks significantly increased by P377.5 billion in end-April this year.

Diokno said foreign banks can be private sector partners in many Build Build Build projects as well as renewable energy, low carbon transport, sustainable water management, and sustainable waste management projects.

Likewise, foreign banks can facilitate the underwriting of green, social or sustainable bonds, or develop innovative sustainable finance instruments.

Lyn Javier, assistant governor of the Policy and Specialized Supervision Sub-Sector in the BSP, said the regulator has received expressions of interest from banks in Europe and   Asia, including the conversion of their existing licenses to a digital bank classification.

“I think the Philippines offers a very attractive opportunity for those in investment and we’re looking forward to having more GSIBs apply for branching presence in the in the country, particularly with the issuance of the digital banking framework,” Javier said.

The BSP has so far approved the digital bank license applications of Overseas Filipino Bank of state-run Land Bank of the Philippinas as well as Singapore-based Tonik Digital Bank and UNObank.