The Bangko Sentral ng Pilipinas (BSP) has vowed to protect the local banking industry by ensuring a level playing field once the country decides to integrate its financial system with that of its Southeast Asian neighbors.
BSP Governor Amando M. Tetangco Jr. said the region’s policymakers had agreed that reciprocity would be the main tenet of the Association of Southeast Asian Nations (Asean) Integrated Banking Framework (Abif), which is scheduled for 2020.
He said that under the Abif, major banks from the region’s 10 member countries would be classified as Qualified Asean Banks (QAB), which are institutions that have the authority to expand their reach in other markets.
But even after a bank becomes a qualified QAB, its operations in individual countries will still need the approval of respective regulators.
“If a foreign bank wants to operate in the Philippines, its operations will still have to be approved by the BSP,” Tetangco said.
“Basically, you only open up to markets that open up to us,” he said.
Tetangco said any country that puts limits on the operations of Philippine banks will see the same limitations imposed on its own banks.
Likewise, the integration of the local financial system into a larger and more competitive Asean community, Tetangco said, would be done only when the country’s banks are ready.
“There have been agreements in principle. One of the agreements was that you commit when you’re ready. Some will be ready earlier than others. They can go ahead and the others will just follow,” Tetangco said.
He said policymakers in the region would draft strict requirements for a bank to be qualified as a QAB, hinting that ownership limitations may be imposed on banks that have investors from outside Southeast Asia.
The Abif is part of Asean’s aspiration of creating a unified economic community in the region, similar to the European Union.
In line with the integration, countries in Asean will allow tariff-free trade of goods with other members by 2015. Bond and equity markets will also be integrated to improve the depth of the region’s financial markets.
Nestor Tan, president of the country’s largest bank BDO Unibank Inc., has been one of the most vocal critics of the BSP’s willingness to open up the country’s banking system.
Tan has said the integration was more of a threat than an opportunity for local banks.
He said local banks, even the largest ones, would be no match for the financial heft of larger banks in countries like Singapore and Malaysia.