Philippines, Indonesia agree to open up banking
MANILA, Philippines – The Philippines and Indonesia are set to ink an agreement this weekend to open up the banking industry aimed at greater financial integration and economic development among members of the Association of Southeast Asian Nations (ASEAN).
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said a letter of intent (LOI) on the ASEAN Banking Integration Framework (ABIF) would be signed with Indonesia’s Financial Services Authority (OJK) in Jakarta over the weekend.
“The LOI is in line with the ASEAN Banking Integration initiative,” he said.
Under the ABIF timeline, each ASEAN-5 including Indonesia, Malaysia, Philippines, Singapore, and Thailand should conclude at least one bilateral agreement with another ASEAN-5 country by 2018.
By 2020, ABIF targets the conclusion or near conclusion of at least one bilateral agreement for each of the 10 ASEAN members as part of the integration under the ASEAN Economic Community (AEC).
The integrated system is defined under the ASEAN Financial Integration Framework (AIFF) that also covers the integration of the banking markets wherein qualified ASEAN banks (QABs).
To achieve the consolidation of the 10 ASEAN markets into a single economic base with the launch of the AEC in 2015, the BSP chief said there is a need to have an integrated and well-functioning regional financial system.
“It reflects the mutual interest of the BSP and OJK to begin discussions intended to culminate in a formal bilateral agreement on the entry of QABs between the Philippines and Indonesia,” the outgoing BSP chief said.
The BSP signed the Declaration of Conclusion of Negotiations (DCN) with Bank Negara Malaysia and the LOI with the Bank of Thailand on the sidelines of the 3rd ASEAN Finance Ministers’ and Central Bank Governors’ joint meeting and related meetings in Mactan, Cebu last April 6.
Tetangco signed the DCN on the entry of Qualified ASEAN Banks between the Philippines and Malaysia with Bank Negara Malaysia Governor Muhammad bin Ibrahim as well as the LOI with Bank of Thailand Governor Veerathai Santiprabhob.
The agreement signed by the BSP and Bank Negara Malaysia reflects the specific conditions for QABs from each jurisdiction to enter the other in a manner that is consistent with global banking standards and meets host jurisdiction regulations.
The ASEAN region has a great potential as savings rate reached 33 percent of gross domestic product (GDP) against the lower rate of 25 percent in other regions.
For his part, BSP Deputy Governor Nestor Espenilla Jr. said several foreign banks have expressed interest in establishing its presence in the Philippines through several modes of entry.
Aside from entering as a QAB or as a strategic partner, he said foreign banks could enter the country through Republic Act 10641 signed by former president Benigno Aquino III in July 2014.