Banks seen to improve as BSP eases rules

Consumers may expect better banking services following the lifting of restrictions on the establishment of new branches in Metro Manila.

The Bankers Association of the Philippines (BAP) said liberalized rules on branching would also make the industry stronger ahead of the opening up of the local industry to more foreign players, which would make the environment even more competitive, resulting in improvements aimed at attracting more clients.

“As more branches provide greater access, competition will force the banks to compete [by offering] better services that will benefit the customers,” BAP President Lorenzo Tan told the Inquirer this week.

Regulatory bank branching restrictions in Metro Manila expire July 1, allowing local lenders to compete more freely for business inside the nation’s capital.

This comes ahead of the opening up of banking services in the Southeast Asian region, which means the eventual entry of more foreign financial institutions that will compete head-to-head with local players.

The regulator earlier prohibited banks from opening too many branches in certain areas of Metro Manila.

The restrictions were imposed to avoid the overcrowding of banks in the metropolis. At the same time, the regulator hoped to encourage lenders to expand their networks in the provinces.

Having bigger networks will enable the local banking sector to at least maintain their dominance over the Philippine market as foreign banks try to gain a foothold.

The expansion of branch networks will also improve the banking sector’s deposit-taking operations, and allow them to use these funds to offer more  loans to businesses and households.

Bangko Sentral ng Pilipinas Assistant Governor Johnny Noe Ravalo said the lifting of restrictions was in line with the regulator’s policy of letting market forces dictate business decisions of banks.

“Branching is one of those decisions best left to the bank. The bank decides on how and where it chooses to serve its constituents. This is part of its business strategy,” Ravalo said in an interview.