By: Michelle V. Remo
Philippine Daily Inquirer
1:06 am | Wednesday, August 24th, 2011
In a bid to widen people's access to banking services and support the
growing funding needs of the economy, the Bangko Sentral ng Pilipinas
has issued regulations that will effectively allow banks to open more
branches.
According to the central bank, the time has come to allow more
competition among banks to meet the twin objectives of meeting the
rising demand for banking services in wealthy cities and encouraging
banks to put up branches in lower-income areas to help spur economic
activities there.
No more restricted areas
Under the first regulation, the BSP lifted the restriction to put up
branches in the eight highest-income-earning cities in Metro Manila:
Makati, Mandaluyong, Manila, Parañaque, Pasay, Pasig, Quezon and San Juan.
The lifting of the restriction comes in two phases. Under the first
phase, universal and commercial banks with less than 200 branches as of
end-2010 may expand in the eight cities. Under the second phase, which
starts on July 1, 2014, all universal, commercial and thrift banks may
put up branches in the same areas.
BSP Governor Amando Tetangco Jr. said the move is in response to the
growing needs of the eight key cities for more banking services as
economic activities in these areas increase.
The previous restriction on bank branching was meant to avoid excessive
competition among banks, which had a tendency to concentrate on
high-income areas to take advantage of income opportunities.
But Tetangco said that, as local economies expand further, so should the
supply of banking services.
In areas where more and more businesses are being put up and economic
activities are rising, there must be more banks to meet the demand for
loans and other financial services.
He said it's time to allow more competition.
"Liberalization will further improve the competitive environment, which
should translate to better financial services to the public. The new
policy also aims to encourage banks to further scale up and improve
their operations in order to be competitive," Tetangco said.
Liberalization for rural banks
Under the second regulation, rural banks, which are mandated to provide
services in the countryside, are now allowed to put up more than one
branch in Metro Manila to cater to the growing demand for microfinance
services in urban areas.
According to regulators, while there are quite a number of large banks
operating in urban areas, they do not cater to the funding needs of
microenterprises. Most commercial banks tend to focus on large companies
and small and medium enterprises (SMEs).
The BSP believes that, to sustain robust growth of the economy, it will
be necessary to boost the micro-business sector, which accounts for bulk
of the number of enterprises in the country.
Providing microenterprises with adequate financial and technical support
is one of the most effective ways to reduce poverty incidence, which has
remained significant even though the economy has been growing over the
past decade.
It appears that only the middle-and high-income earners are the ones
benefiting from the economic upturn to the detriment of the poor.
The BSP said that with more rural banks providing financial services to
microenterprises, it would be easier to attain the goal of broad-based
growth of the economy.
More countryside services
The move of the BSP to allow rural banks to expand to urban areas is
complemented by its move to encourage large banks to operate in rural
communities.
Under the third regulation, the central bank has cut by half the
processing fee charged on universal/commercial banks or their subsidiary
thrift banks to put up branches in third-to sixth-class municipalities.
Industry players welcome the liberalization of bank branching, saying
that this will give them opportunities to take advantage of the growing
economy and generate more income.
Alex Buenaventura, president of One Network Bank, one of the biggest
rural banks in the country based in Mindanao, said the liberalization
would encourage rural banks to expand outside their usual areas of
operation.
He said rural banks would appreciate a level playing field, gaining the
chance to serve not only microenterprises but bigger corporate clients.
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