BSP wants foreign banks more involved in infra, ‘green’ financing

Cavite, Batangas, Nueva Ecija LGUs lead to 72% increase in BSP loan approval requests

Bangko Sentral ng Pilipinas. (Filfoto / Philippine Daily Enquirer)

Foreign banks can play an important role in the Philippines’ economic recovery from the coronavirus pandemic by bringing their resources to finance big-ticket infrastructure projects and by implementing so-called green financing activities.

At the same time, these international financial institutions can also increase inclusion in the country with a number of those interested in establishing local digital operations either by acquiring new licenses or converting their existing traditional banking licenses.

Thus, Bangko Sentral ng Philippines (BSP) Governor Benjamin Diokno said in an online briefing that foreign banks in the Philippines “remain on solid footing in the midst of the health crisis as these financial institutions remain well-capitalized and continue to grow.”

“The BSP recognizes the continued growth of foreign banks and their ability to contribute to the country’s path to recovery,” he said. “Given their global market power, foreign banks can make it easier to take out green, social bonds or sustainability bonds or finance infrastructure projects in key sectors such as renewable energy and low-emission transport.”

On solid footing

According to the Governor, the capital adequacy ratio for foreign banks was 27.5 per cent at the end of March this year, well above the regulator’s threshold and the international standard.

Furthermore, assets, loans and deposits in foreign banks at the end of April this year represented a 32 per cent, 23.4 per cent and 43.4 per cent increase, respectively, compared with the figures in 2014, the year in which the Republican Act No. 10641 further liberalized the entry of foreign banks.

There are now 29 foreign banks operating in the Philippines, accounting for P1.4 trillion in assets equivalent to 7 percent of the Philippine banking system.

Twelve of these are on the list of so-called global systemically important banks by 2020. By home country, most foreign bank branches and subsidiaries come from Asia, especially from Taiwan and South Korea.

Digital banking outlook

The statistics show that there is room for foreign bank branches and subsidiaries to expand their balance sheet and operations, Diokno said.

He explained that the presence of foreign banks had also enabled the sharing of new technological innovations and the transfer of recognized banking practices, particularly in business and risk management as well as business processes.

“BSP also expects more foreign investment to come to the country with the implementation of the digital banking framework in December 2020,” Diokno added, noting that the liberalization of foreign banks’ entry had fostered a competitive banking environment, resulting in increased access from banking audiences to a wider range of financial products and services at more competitive prices. INQ

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