LOCAL regulators have plunged headfirst into talks for bilateral deals that will allow more foreign banks to enter the country, even as Philippine lenders seem content to keep their investments in the domestic market.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor A. Espenilla Jr. said discussions were ongoing for a deal with one of the country’s neighbors to allow local banks to expand across their borders, and vice versa.
“We’re beginning dialogues for bilateral agreements,” he told reporters. Espenilla declined to identify the countries with which negotiations are taking place.
Last March, central bank chiefs of the Association of Southeast Asian Nations (Asean) signed a new framework agreement to advance the integration of the region’s banking sector.
Dubbed Asean Banking Integration Framework (ABIF), the deal is a major step toward liberalization of the region’s financial industry. Under the framework, all Asean members agreed to open up their domestic financial sectors to the entry of regional banks.
ABIF rules pave the way for countries to start bilateral talks with neighbors to agree on more detailed terms over the operations of their banks.
The more liberalized regime will go into effect in stages. Its most immediate goal is for at least two of 10 members to sign a bilateral deal that opens up their respective banking sectors.
By 2018, each member of the so-called Asean 5—namely Indonesia, Malaysia, the Philippines, Singapore and Thailand—should all have at least one bilateral deal with other countries in the region. The main goal under ABIF rules was that by 2020, all 10 member states would each have at least one bilateral deal with a neighboring country.
Espenilla said at the moment, Philippine banks are focused on growing their domestic businesses. “Right now, the Philippine market still has to be fully explored. Most big banks are trying to cover the market first before they go out,” he said.
He said even without ABIF, the Philippine market was already open to more foreign participation—a result of legislation last year that liberalized ownership rules.
Espenilla added that several Southeast Asian banks already had offices in the Philippines, namely, Malaysia’s Maybank, Thailand’s Bangkok Bank and Singapore’s United Overseas Bank (UOB). Securing bilateral deals would mainly pave the way for Philippine banks to branch out overseas.
“But at the end of the day, it’s a business decision. [Philippine banks] will go out not because we have a deal with other countries, but because it makes sense financially,” he said.