Regulators have approved the entry of a fourth foreign bank into the Philippine market, in line with efforts to liberalize a sector long-dominated by locals.
State-owned Industrial Bank of Korea (IBK) was granted the authority to branch out in the Philippines late last month, the Bangko Sentral ng Pilipinas (BSP) said Thursday.
“The Monetary Board approved last April 30 the application of IBK to put up a branch in the Philippines,” BSP Deputy Governor Nestor A. Espenilla Jr. said in a statement to reporters.
Majority of the Philippine population lack access to formal banking services, indicating significant room for growth for both established and new players.
IBK is the fourth foreign bank to be given the go-signal to set up shop in the Philippines this year. This followed Congress’ liberalization of the banking sector, opening it up to more foreign players.
Shinhan Bank, South Korea’s industry leader, was also allowed to enter the domestic market earlier this year.
Apart from the two Korean banks, Taiwan’s Cathay United and Japan’s Sumitomo Mitsui also have the green light to enter the Philippines.
The aim is to make the local industry more competitive. The presence of more foreign banks also promises to facilitate the entry of more foreign investors as lenders bring their clients to the country.
Data released earlier this year showed only three in every 10 Filipinos have bank accounts, the most basic form of financial access, the BSP said.
At 29.1 percent of gross domestic product (GDP), credit in the Philippines is near the bottom of the pack in Asia.
Lending in China reached 219.5 percent of GDP in 2013. Singapore’s debt to GDP stands at 128.9 percent, while Malaysia’s is at a similarly high 123.9 percent.
Under the new law passed last year, foreign banks are allowed to corner as much as 40 percent of the sector’s total assets. Latest data showed their footprint was at 9.9 percent, Philippine real estate consulting firm Pinnacle said in a recent report.
Local policymakers cite increased cross-border lending, which could facilitate a higher level of investments in the country, as one of the driving forces for the liberalization.