THE Bangko Sentral ng Pilipinas (BSP) has laid out reforms and policy directions in hopes of ensuring a more competitive environment in the Philippine banking industry.
Stakeholders discussed the plight and possible reforms in the country’s banking sector during Euromoney’s 2nd Annual Philippines Investment Conference held at the Shangri-la’s Mactan Island Resort and Spa last week.
Nestor Espenilla Jr., BSP deputy governor for supervision and examination sector, addressed industry leaders that BSP’s reforms will center on a “robust and resilient financial system that is able to withstand shocks and promote a flexible and inclusive financial system that is able to adopt innovations and seize opportunities.”
He said one reform will strengthen prudential standards in the banking system, specifically in areas relating to corporate governance, risk management and capital adequacy in commercial banks.
Espenilla said part of the corporate governance advocacy will be the implementation of the Philippine Financial Reporting Standards and the Philippine Accounting Standards.
Disclosure
With these, BSP expects to improve the quality of financial information disclosed by commercial banks, enhance risk disclosure and better market discipline in the banking system.
The implementation of the new financial reporting package will facilitate enhanced off-site surveillance by BSP.
BSP will also push for the issuance of new guidelines on internal audit, which will be made possible by adopting a code of ethics and establishing a course of action for reporting irregularities in financial transactions.
In line with this, the role of the external auditors will ensure the quality of financial reporting, Espenilla said.
Under the complementary reform initiatives, BSP will foster the development of financial markets through support from various legislative measures.
Espenilla also cited the Credit Information System Act which provides the framework for a reliable and comprehensive credit information system that will improve the quality and cost of financial information available to creditors and investors.
Globally competitive
“We wish to promote the creation of stronger and globally competitive institutions through mergers and consolidations and strengthen the ties with our financial regulators both locally and internationally,” he said.
“BSP has set the tone. We need to chew on the reforms set by them. The pillars are already there,” said Development Bank of the Philippines president and chief executive officer Reynaldo David in a panel discussion during the Euromoney conference.
Meanwhile, Mark Watkinson, Hong Kong and Shanghai Banking Corp. Ltd. president and chief executive officer, said the Philippine banking sector has “grown tremendously” since the Asian crisis in 1997.
He said the sector has become an interesting market for foreign investors.
Viktor Valdepeñas, Union Bank of the Philippines president and chief executive officer, echoed Watkinson, saying that with so much liquidity in the market the country’s banking system is “far more better” than when the crisis occurred.
“Investors are becoming more bullish. It’s almost an obsession due to the strong macro-economic performance of the country,” Valdepeñas said.
Espenilla stressed, though, that the successful implementation of BSP’s programs will heavily depend on the partnership between the private and public institutions in terms of promoting financial literacy among Filipinos. (MMM)
