As the BSP leads banks towards full compliance with international banking standards and requirements, regulators said banking will be much easier and possibly more lucrative for well-run banks.
BSP Deputy Governor Amando Tetangco said over the weekend that the BSP was looking at the possible liberalization of its bank-branching rules, specifically its moratorium currently in force in the major cities of Metro Manila, Metro Cebu and Metro Davao.
"Well-run banks should be allowed enough flexibility to operate," Tetangco said. "We are looking at our regulations–not just branching but also licensing–to see what we can do about this."
According to Tetangco, banking is inherently risky but there are banking institutions that manage these risks better than others. "If a bank is a well-run institution, that means they are managing their risks well enough for them to engage in more exotic businesses."
Tetangco said the BSP is studying its licensing policies particularly for highly-sophisticated instruments apart from the plain derivatives they are allowed to engage in at present.
"If the bank is a good one, it might even be possible for the BSP to allow them more branching privileges," Tetangco said.
Tetangco said the BSP was only waiting for its staff to wrap up the review of the existing banking network for the purpose of refining the definition of "over-banking".
Tetangco said the BSP wanted to determine whether there have been substantial changes in economics, demographics and level of sophistication in areas that are considered either over-banked or under-banked.
Earlier, BSP Deputy Governor Nestor Espenilla said that certain urban centers would look congested at first glance but closer examination would show speciation in bank operations that would not be reflected in the number of banks operating in the area.
"For example, a bank like Deutsche Bank would doesn’t really care about the consumer market–its focused on high net worth businesses and treasures. On the other hand, a bank like the Bank of Tokyo caters mostly to Japanese companies operating here."
In rural areas, on the other hand, Espenilla said the bank practices that would look indicative of over-competition in urban centers would be perfectly normal and even necessary such as solicitation.
"The BSP’s regulatory framework has to address all these dimensions so we want to see if our framework still works in the fast-changing dynamics of the market," he said.