The Philippines’ best banks will distinguish themselves by skillful management of risks in the face of tougher market competition when the economic integration of the Association of Southeast Asian Nations takes effect next year, the central bank said.
Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said risk management, good governance and consumer protection will enable Philippine banks to make their mark amid the regional integration and as stricter global regulations are implemented.
“Looking ahead, one imminent challenge for the Philippine banking industry is the economic and banking integration within Asean [Association of Southeast Asian Nations], a market of 600 million consumers. Integration is bound to heighten competitive pressures on domestic banks,” Tetangco said before the members of the Bankers Institute of the Philippines (Baiphil) over the weekend.
“Aside from regional integration, the winds of change are also upon the global regulatory environment. This is evident in the transition of universal and commercial banks… and their subsidiaries… to the Basel 3 standards beginning this year,” he said.
The BSP governor noted that banks should not only ensure to become “bigger in balance sheet size” but also differentiate themselves through effective risk management.
“Given this, we can see that the game is less about increasing size, and more about finding the right size,” he said.
Tetangco added that banks in the country have a fairly good chance of becoming standouts in the critical area of risk management because of the deliberate program of the banking industry to set the bar higher and to be accountable.
He further said that the drive for enhanced risk management must come from the top — the very reason why banks must abide by high standards of governance.
“It should be clear that leadership quality is doubly critical because what separates a good bank from the rest is often the ability of its board and senior management to apply good judgment on risk-return choices,” he added.
On the other hand, Tetangco recognized that good governance also dovetails into the concept of consumer protection.
“As we begin to enforce the Consumer Protection Framework that the Monetary Board has approved, the interaction between governance and consumer protection will become seamless,” he said.