MANILA, Philippines–Southeast Asian regulators have signed a definitive deal that will pave the way for the liberalization of the region’s banking industry, making money flow easier across borders.
This comes as the region works for tighter integration, with the aim of tying each member countries’ economic prosperity to its neighbors.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the Association of Southeast Asian Nations (Asean) Banking Integration Framework (ABIF) was approved by central bank governors in Kuala Lumpur this month.
The next step, he said, is for countries to start bilateral talks with neighbors to agree on more detailed terms over the operations of their banks.
“The framework allows Asean banks to operate in other member countries,” Tetangco told reporters this week.
Tetangco said preliminary discussions between the Philippines and some of its Asean neighbors have already begun.
Despite the approval of the region-wide deal, the bilateral talks are still needed because not all Asean countries are ready for banking integration, he said.
Some Asean members “are more advanced,” Tetangco explained.
ABIF rules will enable individual countries to open up their industries as soon as they are ready. One of the few binding provisions of the deal is that all Asean members must play host to at least one bank from elsewhere in the region by 2018.
Reciprocity is also a key issue of the bilateral talks.
Tetangco said member countries should agree to open their industries to each other’s respective banks.
Also, the multilateral framework states that all banks that want their reach to stretch across national borders must comply with international regulations on capitalization, governance, and financial reform. This will help ensure the stability of the region’s financial system.
Last year, Congress approved the liberalization of the local banking sector, allowing for the entry of more foreign lenders. A Japanese bank and another from South Korea have been allowed to put up branches in the Philippines that can serve as beachheads for their future expansion.