Competitive environment to benefit consumers
By Paolo G. Montecillo |Philippine Daily Inquirer
12:30 am | Monday, July 7th, 2014
Several key reforms are lined up for the local banking industry this year, promising to strengthen local lenders while at the same time promoting a more competitive environment that will benefit consumers.
The Bangko Sentral ng Pilipinas (BSP), the financial sector’s chief regulator, said industry players should brace for the latest wave of reforms that would force them to further improve their operations.
“There are a lot of things happening so we have to manage these changes,” said BSP Deputy Governor Nestor Espenilla, who heads the regulator’s bank supervision sector.
First on the list is the expected entry of deep-pocketed banks from overseas in the country, which would come by the end of this month when new legislation liberalizing foreign participation in the local industry takes effect.
A bill that would allow foreign firms to own 100 percent of local banks hurdled Congress earlier this year and is now awaiting President Aquino’s signature. “By the end of July, it will either be signed or it will lapse into law,” Espenilla said.
Once approved by Malacañang, the BSP has 90 days to come up with the implementing rules and regulations for the law. “We’re ready for that,” the BSP official said.
Another key reform is a list of changes to the credit risk management systems prescribed by the BSP for local banks. Last April, the BSP said these new rules would transform their credit-risk management practice from one that relied heavily on collateral to one that depended mainly on indicators of the viability of a business such as cash flow.
“Credit should not be all about collateral. Collateral is important but it should not be the main driver of credit extension,” Espenilla said in a previous interview.
Also in the pipeline are new rules on Domestic Systemically Important Banks (DSIB) or institutions that are deemed too big to fail. These new regulations would force large banks to put up more than the usual amount of money as buffer for possible losses, in line with international regulations that seek to curb excessive risk-taking by large lenders.
Espenilla said these new rules have already been approved, but implementation is being delayed in light of the other more pressing reforms.
These major reforms come on the heels of the recent implementation of stricter Basel III capital rules that dictate the level of capital banks have to set aside to account for write-offs.
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