WHILE the entry of more foreign banks into the Philippines would benefit the banking public, this development is also expected to stiffen the competition among financial institutions.
Maximo Rey Eleccion, past president of the Cebu Bankers Club (CBC), said the presence of foreign-owned banks here would promote efficiency and the best customer service but would also mean smaller margins or profits.
“For local banks to compete, we must rely on our strengths and competencies, our deposit or mass base as well as the edge that we know our customers, making it easier to tailor fit our product offerings to their needs,” Eleccion said in a text message to Cebu Daily News.
In a recent Inquirer report, Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said more foreign banks are eyeing to establish presence in the Philippines, including representative offices, because of the sound and stable banking system here.
Espenilla said eight Asian banks have expressed interest in putting up operations in the country, although they have yet to submit documentary requirements to be considered as officially applying for entry.
Eleccion, meanwhile, said they have long been anticipating the entry of more foreign banks here and that is why most local banks have started positioning themselves in the provinces.
He said that in Cebu, members of the CBC already have branches in the cities of Bogo, Danao, Carcar, Toledo, as well as the towns of Daanbantayan, Moalboal, Argao and Balamban.
According to data from the BSP, Cebu banks had a total of 2.38 million deposit accounts with deposit values amounting to more than P468.3 billion as of end-2016.
Of this number, 1.32 million accounts amounting to P326 billion and accounting for 69.6 percent of the total share were based in Cebu City.
BSP’s Espenilla said some foreign banks and financial institutions, which included non-Asians, have submitted documents to apply for representative offices.
“Representative offices are mainly focused on marketing. They are also important because representative offices are also useful in drawing in investments into the country,” Espenilla said.
The Central Bank chief said foreign lenders usually first test the domestic market through their representative offices, but may progress into a branch application if they see a really good market.
RA No. 10641
In 2014, then president Benigno Aquino III signed into law Republic Act (RA) No. 10641, which allowed the full entry of foreign banks.
Under RA 10641, foreign lenders can account for a maximum of 40 percent of the banking industry’s assets.
Asian banks in PH
So far, the BSP has allowed 10 Asian banks to fully operate in the country, including Japan’s Sumitomo Mitsui Banking Corp.; Singapore’s United Overseas Bank Ltd.; South Korea’s Shinhan Bank, Industrial Bank of Korea, and Woori Bank; as well as Taiwan’s Cathay United Bank, Chang Hwa Bank, First Commercial Bank, Hua Nan Bank, and Yuanta Commercial Bank Co. Ltd.
Opening PH economy
Cebu Business Club president Gordon Alan Joseph, for his part, said he is in favor of opening the Philippine economy to all investors in all industries, not just for finance.
“We cannot be an economy where businesses are reliant on government protection against competition,” he said.
He added that this kind of protectionism promotes complacent businesses that are inefficient and uncompetitive, which is detrimental to consumers and the country’s ability to attract foreign investment as well as compete in foreign markets.
Removing restrictions
Joseph pointed out that protectionism also does not lead to innovation, which the Philippines lacks at present.
Every two years, the government releases the foreign investment negative list (FINL), the list of sectors where foreign ownership or participation is limited.
This year, the government is set to remove the restriction on investment houses, allowing fully foreign-owned firms to operate here.
The Duterte administration’s economic managers earlier said they wanted to ease restrictions to foreigners in order to entice more investors, especially in the telecommunications sector.