The central banks of the Philippines and Malaysia have signed an agreement that will allow Qualified Asean Banks to operate subsidiaries in each other’s markets, marking a milestone in the broader Association of Southeast Asian Nations (Asean) community.
The Bangko Sentral ng Pilipinas (BSP) and Bank Negara Malaysia (BNM) have agreed on the guidelines under the heads of agreement (HoA) signed by BSP Governor Amando Tetangco Jr. and BNM Governor Zeti Akhtar Aziz in Kuala Lumpur on Monday.
In a statement, the BSP said this development is in line with strengthening intra-regional trade and investments under the Asean Banking Integration Framework (ABIF).
The BSP-BNM heads of agreement is one of the first bilateral agreements to be signed under ABIF.
ABIF is designed to realize the vision of “One Asean Community,” using these qualified banks as vehicles for maximizing the vast trade and investment potential of the region.
The BSP explained that while the bilateral agreement outlines market access and operational flexibilities that may be accorded to qualified banks from each jurisdiction into the other, these banks shall operate under the prevailing laws and regulations in the Philippines and Malaysia, respectively.
The BSP stressed that a key provision of the heads of agreement is that it allows up to three qualified banks from each jurisdiction to operate in the other country.
These qualified banks will enter the host jurisdiction only in the form of a subsidiary of the parent bank in the home jurisdiction in line with the principle of reciprocity.
As these qualified banks from Malaysia enter the Philippines, they will then be regulated under applicable BSP regulations and within the legal framework defined under Republic Act 10641.
Qualifed Asean banks are normally well-managed banks headquartered in the region and majority owned by Asean nationals.
Banks that apply for QAB status must be endorsed by the home country regulator to and may be accepted by the host country regulator based on their bilateral agreement.
“By signing this agreement, the BSP manifests its commitment to support greater regional financial integration and economic development through the ABIF,” Tetangco said.
“… Being among the first Asean economies to do so only further highlights the importance we place upon the ABIF as a regional initiative and as the future of our region,” he added.