Philippine banks compare favorably with the rest of the banks in the Asean no matter that they are among the smallest in the region.
Bangko Sentral ng Pilipinas (BSP) Managing Director for International Sub-sector Wilhelmina MaAalac acknowledged local lenders are small in size, saying that the three largest banks in the Philippines in terms of resources are only equivalent to the largest bank in either Malaysia, Singapore or Thailand.
If we look at the capital adequacy ratio [CAR], which shows how banks can actually absorb losses arising from its operations, we see that the banks in the Philippines in general compare favorably with the rest of the Asean banks, the central bank official said at a public forum on an integrated Asean on Friday.
In fact, she said, the CAR of banks in general in the Philippines are even higher than that required by the Bank for International Settlements.
The adequacy of capital among lenders in the country is also higher than that mandated by the BSP.
Philippine banks are saying, how can we compete? They foreign banks are big. It’s like pitching in the NBA games with so many tall players. This is one reason, why initially, the domestic banks were apprehensive about the impact of Asean integration. But you do not look only at the resources. We can look at some other banking indicators that can provide a better comparator among the banks in the region. In terms of CAR, we can say that the Philippines compares well with the rest of the banks in the Asean region. The bank’s nonperforming loans [NPLs] are also low, Manalac told the BusinessMirror.
We’ve done a 360-degree turnaround and now they are saying that we are ready for Asean integration, she added.
She said the monetary authorities anticipate the entry of still more foreign players into the local banking space.
To be able to survive in the heightened competition, domestic banks should position themselves well as not all foreign banks are interested in what they, the locals, are already working on.
They really have to find their niche market and work on that and then be competitive. You continue to operate even though these new businesses are coming in, she said.
With the foreign-bank ownership liberalization, the only limitation is that foreign banks should not exceed 40 percent of the total resources of the domestic banking system.
The foreign banks that were granted approval by the BSP to operate here were Sumitomo Mitsui Bank, Shinhan Bank, Cathay United Bank, Industrial Bank of Korea and Yuanta Bank.