MANILA, Philippines – Fitch Ratings said the entry of more foreign banks into the country will help support the growing trade and investment needs of the Philippines.

“We believe the entry of well-managed foreign banks expands the system’s capacity to fund growing trade and investment needs, and enables potential knowledge transfer in areas such as risk management, project finance and systems,” Fitch said in a report.

The Bangko Sentral ng Pilipinas (BSP) has given nine foreign banks the green light to establish their presence in the Philippines under Republic Act 10641 signed by former president Benigno Aquino III in July 2014.

The central bank is also assessing the applications of six more foreign banks.

Fitch said the BSP has further eased the overall banking sector barriers to entry, subject to approval.
The BSP is also looking at forging deals with the Bank of Thailand and Otoritas Jesa Keuangan of Indonesia in a bid to ease the entry of more foreign banks ahead of the integration of the Association of South East Asian Nations (ASEAN) in 2020.

The BSP has forged an agreement with Bank Negara Malaysia in March 2016 to allow three qualified ASEAN banks from one country to set up branches in the other.

The agreement came ahead of the 2020 rollout of the ASEAN Banking Integration Framework.
“This adds to legislation introduced in 2014 which liberalized the entry of foreign banks into the local market,” Fitch said.

Notwithstanding the central bank’s supportive stance towards the consolidation of smaller banks, Fitch said further consolidation of smaller banks would reduce the BSP’s supervisory burden.

Fitch has reaffirmed the issuer default ratings and outlook of BDO Unibank Inc., Bank of the Philippine Islands, Metropolitan Bank & Trust Co., China Banking Corp., Philippine National Bank and Rizal Commercial Banking Corp.

It added the asset quality of Philippine banks has improved considerably over the last few years, owing to the supportive economic environment and the banks’ ongoing efforts to manage and resolve their problem loans.

“We assess the banks’ profitability profiles as acceptable. The larger banks’ earning profiles are superior to those of their mid-sized peers, due to their scale and diversity of earning sources,” Fitch said.

Source: http://www.philstar.com/business/2017/03/01/1676655/more-foreign-banks-beneficial-phl-fitch