Some bankers believed there will be slower and lesser lending activities among CTB with the new regulations such as the risk-to-asset Basle 2 compliance because of its hit on their bottomlines.

More prudence will be the order of business, said CTB First Vice President Ambassador Alfredo M. Yao following the series of lectures on the new regulations that CTBmember banks will be facing in the near term, which include compliance to Basle 2.

Yao, Philippine Business Bank chair, said banks and financial institutions will become more fastidious in their lending as the level of their loanable funds decreases arising from the adherence to series of regulations and reform measures aimed at strengthening banks’ operations.

Yao reluctantly admitted the new regulations such as the Basle 2 and the new international accounting standard of financial reporting (IAS) will put pressures on banks’ lending activities.

The strict compliance could take its toll on the CTB membership as the industry is headed for a consolidation, Bangko Sentral ng Pilpinas (BSP) Governor Amando M. Tetangco, Jr. said here Friday during the annual CTB convention.

Tetangco believed adherence to these regulations would mean lesser but financially stronger players in the industry.

CTB President Alfonso Salcedo, on the other hand, was more forthright in his views, saying that lending will continue because "it is the lifeline" of the business.

However, Salcedo believed the biggest hit will on the capital base of banks since under the Basle 2 environment, banks and financial institutions are required to put in more capital or set aside more reserves depending of their risk exposures.

This means the higher the risk, the bigger the loan provision.

The expected consolidation puts to the front the goal of Salcedo for the locations, which even big brothers — the commercial and universal banks — may not dare to enter because of unfamiliarity to the terrain.

To recall, Salcedo told reporters of his desire to see a growing number of service a specific financial requirement of borrower in a particular area of service.

"Theoretically, lending activities should not (be affected). The impact will not be on the lending activities because it is the topline revenue (source)," Salcedo said.

He backed the expectation of the BSP Governor that there will consolidations among CTB member banks happening within the next three years as the membership grapple with the Basle 2 regulation.

There could be downgrading in license to rural banks, there could be selloffs and they could be acquired or merged with other institutions or even big brothers like commercial and universal banks, Salcedo said.

This emerging concern on the Basle 2 compliance and its impact on the balance sheet could lead to mounting call for a deferment.

Salcedo admitted "it could lead to that" but qualified that any concerns and apprehensions by the membership could be aired during the CTB meetings with the regulators done twice a month.