MANILA, Philippines - Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco, Jr. urged thrift banks to prepare for competition that would be brought about by the entry of new players in the market with the start of ASEAN integration in 2015.
Tetangco is optimistic that thrift banks would be able to benefit from the integration given the bigger market that it would be able to access.
"The thrift banking industry in the Philippines is strong. Looking at the numbers, they have improved their capital position, the asset quality has also improved. Profitability has gone up, they are able to generate funds from deposits mainly. So it's doing well. But at the same time, competition is also increasing. So they have to gear up for that," Tetangco told reporters at the sidelines of the Chamber of Thrift Banks 2014 national convention.
Tetangco said competition can come from bigger local banks, but also from global banks.
"The other one is global banks particularly when we have the ASEAN integration. There will be foreign banks that will be interested to come in and also generate competition as a result," he said.
"But overall, this integration is positive because this is gonna open opportunities in terms of both market potential as well as in terms of the source of funding. There will be a bigger market for loan, there's also a bigger source of funds because [it] will be covering a bigger area," he added.
Meanwhile, the Chamber of Thrift Banks called for the removal of mandatory lending for small businesses and the agriculture sector, as they prepare for the ASEAN integration.
"We still have member-banks who find it difficult to comply with the required credit allocation simply because the MSME is not their niche market," CTB President Jose Teodoro Limcaoco said.
"Rather than imposing penalties, the government should provide a window for other alternative compliance, so that under-complied banks will not be heavily burdened by penalties which small banks may not be in a position to handle given their limited capital or resources."
Under the Agri-Agra law, banks are mandated to set aside 25% of their loan portfolio to the farm sector, while the the Magna Carta for Micro, Small and Medium Enterprises (MSME) requires banks to allocate 10% of their loan portfolio for small businesses.
Earlier, the CTB said the law should not distinguish between lending to micro and small enterprises, and borrowings to medium-sized firms.