Philippine banks can compete under ASEAN integrated market in 2015
Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said Philippine banks can compete under a fully integrated ASEAN economy by 2015, but stressed the need for local banks to scale up.
Tetangco expressed his confidence on the local banks’ competitiveness in the region when the seamless ASEAN Economic Community (AEC) kicks off starting 2015 during the dinner Wednesday with business editors from the print media.
ASEAN, which groups the Philippines, Indonesia, Thailand, Malaysia, Singapore, Cambodia, Myanmar, Laos, Brunei Darussalam and Vietnam, are gearing toward a single market by 2015 to facilitate trade and investments.
“We can compete,” said Tetangco when asked to comment on some apprehensions by the local banking community of their competitiveness come 2015.
He, however, said that local banks must scale up their size and expand their reach as they are relatively small compared with other banks in the region, but in terms of competitiveness in their financial services the local banks are competitive enough.
Tetangco further said that ASEAN countries have reciprocity clause on a bilateral basis allaying fears that the local banking industry may be gobbled up by bigger ASEAN banks.
The country’s financial services sector is just among the Philippine industries that are faced with competitiveness issues when AEC kicks off two years from now.
Nestor Tan, President of the country’s largest bank BDO Unibank, Inc., admitted that Philippine banks are not yet ready for full ASEAN economic integration by 2015.
“We saw the advantages of economic integration that is the way. ASEAN integration is irreversible, but for banks we are not yet there,” Tan said. According to Tan, BDO, the country’s largest commercial bank, is just number 19 among ASEAN banks. In fact, the top three Philippine banks have just the size of Bangkok bank.
“For BDO, we may be big here, but if you open it up we are nobody,” he added.
Thus, while the banking sector is looking at its place in the AEC by 2015, it is also looking at initiatives analyzing the macro and micro factors that would be affected with the liberalization of the banking industry.
The strategy, he said, has to address the issues of volatility, financial impact and jobs creation.
“I don’t think our industries are prepared if we open up our markets for the Asean single market by 2015,” said Tan in last year’s forum on AEC in Makati.
He said even the country’s commercial banks face constitutional constraints of implementing the mutual-recognition clause of the AEC goal to hire Asean nationals in the Philippine industries. Under the Philippine Constitution, banks are not allowed to hire foreign nationals.
He said the government should establish protective-policy mechanisms on key areas for the Philippines that include food; financial services, including commercial banks and rural banks that fuel the economy; and the labor market with focus on the business-process outsourcing industry.