CHANGES to monetary policy tools and other key regulations such as the Anti-Money Laundering Act should be ‘market driven’ to support the competitiveness of the Philippine banking sector, the head of Maybank Philippines told The Manila Times in an exclusive interview on Tuesday.
Maybank Philippines President and CEO Herminio Famatigan Jr. made the suggestion in response to questions about possible changes to the country’s existing anti-money laundering law, and the reserve requirement ratio imposed by the Bangko Sentral ng Pilipinas (BSP) on the other.
The banking environment has become a “transparent regulatory world,” the Maybank chief said, “and the government and the banking industry alike should be sensitive to outside perceptions about things like the regulatory framework and best practices.”
“It should be market driven,” Famatigan explained. “If the market wants to see more transparency in things like the bank secrecy laws, for example, that is certainly something the government should consider.”
RRR highest in region
‘Market driven’ is also the approach the BSP should apply to considering monetary policy moves, particularly the reserve requirement ratio (RRR), which has stood at 20 percent since May 2014.
“The Philippines has one of the highest RRR in the region,” Famatigan explained. “This can have an impact on banks’ profitability, and on their financial intermediation capabilities. This needs to be more market driven when the BSP considers making adjustments to it.”
Famatigan stressed, however, that the BSP’s oversight had put the entire banking sector in a formidably sound position. “From 1997 onward, the central bank has done a fantastic job to build up the policy and capitalization strength of banks here, which helped them recover much faster than other countries after the Asian Financial Crisis,” he explained.
But with the Asean integration, “Borders are disappearing, barriers are being lowered. . . . The BSP now has to help support Philippine banks’ competitiveness,” he added. “Banks are looking to be more competitive.”
Looking ahead, Famatigan sees a promising landscape for the banking sector under the administration of President Rodrigo Duterte. “It’s still early in the game, but so far, it seems the new government is saying all the right things and taking the right actions,” he said.
“Of course, the proof is in the pudding, as the saying goes. But I think he [Duterte] has a real commitment to reducing corruption, eliminating red tape, and streamlining processes. If he can make real progress in that, it will make a real difference to the economy,” he added.
“If the economy continues to grow, or grows even faster, and I see no reason why it won’t unless the government really shoots itself in the foot with its policy, there is a lot of opportunity for us here at Maybank and for the sector in general,” Famatigan said.
“Infrastructure investment is one area; that includes roads, essential services, power, hospitals—that’s huge. The other area where we see a lot of opportunity is in the consumer segment, where we expect demand to expand significantly, as it has been doing over the past couple years.”
The consumer sector is in fact where Maybank is focusing somewhat greater efforts over the near term, Famatigan explained, taking advantage of fast growth in the middle class.
“We’re looking at mortgages, auto loans, personal loans, even investment products,” he said. In auto lending in particular, Maybank’s business has expanded rapidly. “We are, I think, now the fifth-largest auto lender in the country,” despite the bank’s comparatively small size, he said, with average total auto loans now reaching about P1.2 billion per month.
Gamble paying off
Famatigan, who is the first Filipino president of the Malaysian banking giant’s local operations in its nearly 20-year history, said that while Maybank does not have current plans to expand beyond its 80-branch network in the Philippines, the Malaysia-based group sees the country as ‘the next big thing.’
“Obviously, we [Maybank] are giants in Malaysia. We have a significant presence in Singapore, and in Indonesia. After that, the Philippines is considered the next important market,” he said.
“The Group made a deliberate choice to take a gamble on this country back in 1997, and we’re seeing it paying off,” he said. While Maybank is not publicly listed and does not readily provide its financial reports, Famatigan, who has served as Maybank PH’s president since 2012, said, “We are seeing growth across the board, in every segment, and expect that will continue.”
Maybank Philippines is a nearly wholly-owned subsidiary of Malayan Banking Bhd (Maybank), the largest financial services group in Malaysia, and a leading banking group in the region with a presence in every Asean country. Maybank Philippines was formed in 1997 when Maybank acquired a 60-percent stake in PNB Republic Bank, changed the name, and took over the local bank’s management. In 2000, Maybank raised its ownership share to 99.6 percent.