FIVE MORE foreign banks are looking to set up shop in the Philippines, a senior central bank official said, following a trend seen since the local banking industry was opened up to more offshore players in 2014.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor A. Espenilla, Jr. said several Asian banks have expressed their interest to venture into the Philippine market. In particular, he said one bank has a pending application to operate in Manila. Another bank application is "in progress," one to submit requirements "soon," and two other lenders that have conveyed interest in doing business here, Mr. Espenilla said in a text message
The BSP regulates banks and other financial entities operating in the Philippines.
So far, the central bank has approved the entry of eight new lenders since the passage of Republic Act (RA) 10641 or an Act Allowing the Full Entry of Foreign Banks in the Philippines in July 2014, which opened up the sector to more offshore players.
The new law states that more foreign banks -- which should be publicly listed in their home country -- could operate in the Philippines by acquiring, purchasing or owning up to 100% of the voting stock of an existing bank.
New players could also invest in up to 100% of the voting stock of a new banking subsidiary incorporated under Philippine laws, while a third mode of entry would be through establishing branches with full banking authority.
Prior to these changes, only 10 foreign lenders could operate here, with a new entity allowed in only if one of the accredited banks pull out.
BSP Governor Amando M. Tetangco, Jr. has also said that more investors are likely to come to the Philippines with its sound macroeconomic fundamentals.
"Given the positive prospects of continued growth and manageable inflation, the entry of foreign investments is expected to increase further including investments in the banking sector which has actually been liberalized through the passage of RA 10641 and also the passage of the law allowing higher foreign participation in rural banks," Mr. Tetangco said in an earlier interview.
Mr. Espenilla earlier said that they now see foreign banks preferring partnerships over setting up a bank branch as their strategy to penetrate the Filipino market, as relying on an established local lender would give them access to a solid client base.
The foreign banks which got the BSP's nod to operate here under the new law are the Japan-based Sumitomo Mitsui Banking Corp., South Korea's Industrial Bank of Korea and Shinhan Bank, Taiwan-based Cathay United Bank and Yuanta Commercial Bank Co. Ltd, and the Singapore-based United Overseas Bank Ltd.
Earlier this year, Korea's Woori Bank got the green light to enter the local market by partnering with the Gaisano-led Wealth Development Bank Corp., a thrift lender which targets to serve both Korean tourists and expatriates.
Last June, Taiwan's First Commercial Bank also got the central bank's approval to set up a branch in Manila.
Mr. Espenilla added that they expect more Asian banks to venture into the Philippines in light of a shared regional market.
International credit raters have cited the country's sound and stable banking system as a credit strength, as lenders remained armed with enough capital buffers against any financial shocks and with more room to pursue consumer and corporate lending that can spur further growth.
Source: Business World Online