The Market Monitor Minding the Nation's Business
By Jerry Maglunog
The Monetary Board (MB) has further opened new opportunities for banks as it lifted restrictions on them in opening up new branches or expanding to a higher banking level.
This latest development was the offshoot of the Bangko Sentral ng Pilipinas’s (BSP) lifting of the moratorium in opening new bank branches in eight cities in Metro Manila in July 2014.
Since then, the BSP said banks have been allowed open a new branch in Makati, Taguig, San Juan, Quezon City, Paranaque, Manila, Pasay and Muntinlupa, but with a P20-million special licensing fee.
The latest order from the MB comes in two phases. The initial phase will take effect until end-2017, according to the MB. During this time, existing thrift banks may apply for a license to convert into a universal or commercial bank (UKB).
The second phase begins on January 1, 2018, when all restrictions, from conversion to a universal commercial bank (UKB) to opening a new branch, will be totally lifted.
“This initiative provides local businesses the avenue to explore opportunities in the banking sector amid the opening of the industry to foreign capital infusion. It also gives interested parties ample time to strategically position themselves in line with revolving policy reforms,” BSP Governor Amando Tetangco Jr. said.
This latest development supersedes the moratorium on opening new banks in 1999, including elevation to the UKB level, the highest level of banking practiced around the world.
The best part of the latest order from the MB is the waving of the special licensing fee when a bank opens a branch in a new frontier.
“The biggest advantage of this latest order from the MB is that it will widen banks’ coverage in providing access to credit. More businesses will now have bigger chances of obtaining funding either for operation or expansion,” said outgoing Bankers’ Association of the Philippines (BAP) President Lorenzo Tan.
The Philippines has a comprehensive banking system encompassing various types of banks, from large universal banks to small rural banks and even nonbanks.
As of February 17, 2015, there were 34 universal and commercial banks, 67 thrift banks, 512 rural banks, 40 credit unions and 6,267 nonbanks with quasi-banking functions, all licensed by the BSP.
A universal bank has the same powers as a commercial bank, but with the following additional powers: the powers of an investment house as provided in existing laws and the power to invest in non-allied enterprises.
In addition to having the powers of a thrift bank, a commercial bank has the power to accept drafts and issue letters of credit; discount and negotiate promissory notes, drafts, bills of exchange and other evidences of debt; and accept or create demand deposits.
A thrift bank accept savings and time deposits, act as a correspondent with other financial institutions and as a collection agent for government entities, issue mortgages, engage in real-estate transactions and extend credit.
Rural and cooperative banks are the more popular type of banks in the rural communities. Their role is to promote and expand the rural economy in an orderly and effective manner by providing the people in the rural communities with basic financial services.
On top of regular banking services offered by universal, commercial, thrift and rural banks, there are savings and loans association which are mainly based in communities and among retirees in the armed forces and the police organization and other employees of the government of the Philippines.