CEBU, Philippines – Works, especially on the regulatory aspect, have already started to prepare the Philippines for financial integration, an official from the Department of Finance (DoF) said.
Finance Assistant Secretary Teresa Habitan cited the reforms being made by the Bangko Sentral ng Pilipinas (BSP) as one of the regulatory actions to prepare for financial integration.
“BSP has been instituting reforms in the capitalization of banks to ensure they will be able to compete,” Habitan said in an interview last week.
It was in October last year when the BSP ordered the hike in capital requirements for universal, commercial, thrift, rural and cooperative banks to further strengthen the country’s banking system. The minimum capital requirement could reach as much as P20 billion particularly for universal banks with more than 100 branches.
The rise in capital requirements, the BSP said, will ensure that banks stand on a strong capital base.
Not only banks are being mandated to have higher capitalization but insurance companies as well, Habitan said.
The Insurance Commission (IC) has imposed higher capital requirement for domestic insurers which are required to have a net worth of P250 million.
Habitan explained that raising the capital requirements for financial firms are aimed at making them competitive amid the economic integration.
“We want to see a healthy banking industry supported by equally stable and healthy insurance industry. That fuels business,” the DoF official said.
In an earlier interview with BPI President and CEO Cezar Consing, he said local banks still have time to prepare for regional integration of the financial system, noting that it will take time.
“I think we have a little bit of time because my suspicion is financial integration will come in stages. It will take a few years so it allows time for everybody to get ready,” Consing said.
Financial integration is one of the aspects being pushed in the creation of the Asean (Association of South East Asian Nations) Economic Community (AEC).
Consing, however, pointed out that integration will also mean tougher competition for local lenders.
Consing said the Philippines largest banks’ remain small when compared to other banks in the region. He cited that BPI, the country’s largest bank in terms of market capitalization, ranks 14th while BDO, the largest bank in asset terms, ranks 15th in Asean region.
The Asean Banking Integration Framework pushes for the uniformity of rules and regulations of Asean countries on the banking system so that banks in the region can operate as local banks and not as foreign.
Moreover, financial integration is also one pillar that is being pushed in the Cebu Action Plan, a development roadmap which the Philippines has initiated for the Asia-Pacific Economic Cooperation (Apec) region.
The four-pillar CAP is to be launched and approved next month in Cebu during the Finance Ministers Meeting here. The other three pillars marking the CAP include advancing fiscal transparency and policy reform, enhancing financial resiliency and accelerating infrastructure financing.