Banking sector shrank in ’11

The number of players in the country’s banking sector shrank further in the third quarter of 2011 following the closure of ill-managed small banks and the regulators’ push for consolidation within the industry.

The number of banking industry players in the country dropped to 730 as of end-September last year from 764 as of the same period in 2010.

Although regulators said the problematic banks composed just a small fraction of the banking sector, they stressed the importance of consolidation as it is seen to help improve overall strength of the banking industry.

To support its promotion for consolidation, the central bank grants regulatory relief to healthy banks that want to serve as white knights by acquiring financially troubled ones.

“The drop in the number of banks is consistent with the push for consolidation. Consolidation helps achieve higher capitalization and better risk management for banks, and these make better channels for monetary policy,” BSP Deputy Governor Diwa Guinigundo said Friday.

The BSP believes that having fewer but better capitalized banks is healthy for the entire industry.

But while the number of industry players declined, branch networks expanded as banks widened their reach.

Data from the BSP showed that the banking network in the country—head offices of banks plus their branches—totaled 8,965 as of end-September last year, up from 8,740 in the same period the previous year.

Moreover, the number of automated teller machines (ATMs) also grew, rising to 10,109 from 9,049 over the same period.

The central bank said the increase in the number of bank branches and ATMs should improve access to banking services, especially in the countryside.