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BSP lifts another bank restriction

Posted on December 12, 2016

SMALL BANKS can now resume setting up branches in key Metro Manila cities previously closed off to new entrants, as part of Bangko Sentral ng Pilipinas (BSP) moves to reopen the financial system even further to more players.

BSP’s Monetary Board has allowed rural and cooperative lenders to open new branches all over the Philippines, including Metro Manila cities earlier deemed “restricted” areas due to high density: Makati, Mandaluyong, Manila, Parañaque, Pasay, Pasig, Quezon City and San Juan.

However, such banks will have to meet higher capital requirements and will be subject to special licensing fees if they are to open branches in these cities, in keeping with sound risk management protocols.

Prior to this reform, only microfinance-oriented lenders were allowed to set up shop in the capital, in order to extend credit to micro and small enterprises.

“Consistent with the BSP’s policy of promoting a competitive banking environment and ease of doing business, the Monetary Board approved the amendments to the guidelines on the establishment of branches to provide banks with more flexibility in expanding their branching network to strategic locations,” the central bank said in a statement sent over the weekend.

“The move is aligned with the initiatives on banking system liberalization which include the removal of the branch moratorium in restricted areas and the gradual lifting of the suspension on the establishment of new domestic banks.”

All banks operating in the Philippines must seek Monetary Board approval before opening a new branch anywhere in the country, and must comply with regulatory standards.

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The central bank lifted in 2011 a branching ban on universal and commercial banks putting up new offices within Metro Manila, as part of a “phased-in” approach in liberalizing the local banking sector.

However, it kept the restriction on rural and cooperative lenders.

The BSP announced in February that it would gradually lift a 1999 moratorium that halted the entry of new domestic banks, except in unbanked areas and for microfinance.

This reform was to be undertaken in two steps: first, thrift banks will be allowed to apply for licenses to upgrade to universal or commercial bank status until mid-2017.

By Jan. 1, 2018, the ban on new licenses will be lifted for all entities.

The simpler rules are seen to allow banks to position themselves better as external players come in, following the signing of Republic Act No. 10641 that in July 2014 allowed the full entry of foreign banks and the formal advent at the end of December last year of Southeast Asia’s economic community.

Currently, a rural lender needs a combined capital of at least P1.5 billion to open a branch in Metro Manila.

Such a bank should also be free of “major supervisory concerns” and must comply with other risk management guidelines set by the BSP, according to the manual of regulations for banks.

The local banking sector continued to expand last semester with a total branch network of 10,318.

Of the total, 484 rural banks operated 2,042 branches while 29 cooperative lenders ran 124 offices, according to latest available BSP data. -- Melissa Luz T. Lopez