PH bankers cautious about expanding in Asean market

LAPU-LAPU CITY, Cebu – While banking players in the Philippines have long considered investing or expanding in the Asean market, many, if not all, do not see significantly going in that direction yet.

This was in spite of the existing Asean Banking Integration Framework (ABIF) endorsed by Asean central bank governors in 2014, aimed at granting qualified Asean banks (QAB) greater access to other markets in the region and more flexibility in operating there.

“All other banks are considering investing and expanding, but we’re also being careful,” BDO Capital & Investment Corp. president Eduardo Francisco said in press briefing on the sidelines of the Asean Finance Ministers’ Investor Seminar in Lapu-Lapu City on Thursday.

According to the Asean, the ABIF recognizes that some countries are more ready than others to further open up their banking sector and that gaps in market access across member-states still persist. Hence, the thrust was to pursue bilateral reciprocal agreements.

On Thursday, the Bangko Sentral ng Pilipinas (BSP) concluded ABIF negotiations with Bank Negara Malaysia (BNM) and began talks with the Bank of Thailand (BoT) in Lapu-Lapu City.

BSP Governor Amando Tetangco and BNM Governor Muhammad bin Ibrahin signed the Declaration of Conclusion of Negotiations, an important step toward achieving the goal of the ABIF.

Tetangco and BoT Governor Veerathai Santiprabhob also signed a Letter of Intent, formalizing the intention of both parties to craft specific provisions that will govern the entry of QABs between the two countries.

The Asean sees the banking system as the most developed financial sector in many of its member-states, thus, making it a cornerstone of financial integration to support the Asean Economic Community (AEC).

In March 2015, Asean finance ministers signed the Asean Framework Agreement on Services, which contained the provision enabling the implementation of the ABIF.

Asked whether BDO was also looking at penetrating other Asean markets, Francisco said it was not only his institution that was thinking of doing so.

Francisco said local banks are trying to find their position, considering the fact that even the three biggest banks in the Philippines—BPI, BDO, and Metrobank—combined are still smaller compared to most commercial banks in Malaysia.

“Why would they deal with Filipino banks? They have Maybank and CIMB (in Malaysia),” he said.

While the ABIF definitely opens up the market, Francisco said they were not going there yet.

Specifically for BDO, however, the bank has opened several representative offices in Korea, London, Japan, Singapore and the US, which can be considered as a form of expansion as well, said Francisco.

“We always walk before we run. Our strategy is to first open rep offices, but it will depend on local regulations. It’s hard to get banking licenses,” he added.

Francisco stressed that there is interest among local players to expand in the Asean, but they are doing it cautiously.

Banking integration contributes to both economic growth and financial inclusion, the Asean said.

“An integrated banking sector means greater competition and improved quality of services, which in turn will spur more trade and investment in Asean. Small and medium enterprises and the unbanked will have better access to financing as the lending capacity of the Asean banks improves. Stronger regional banks can also utilize modern technology to reach out to a wider segment of the population,” it said in a report.

The integration, however, could also mean that risks to financial stability in one country can spill over more quickly to another.

Asean member-states, therefore, have committed to complement the implementation of ABIF with stronger regulatory and supervisory cooperation arrangements between the home and host countries, so there will be effective monitoring and supervision of QABs.