"The challenges in the banking industry today ranges from globalization to huge non-performing loans (NPLs), to matching customer’s needs with facilities, products and services, to reducing friction costs and meeting government regulations," Cesar E.A. Virata, president of the Bankers Association of the Philippines (BAP) said. Virata is also the vice chairman of the Rizal Commercial and Banking Corp. (RCBC) and former finance secretary.
The most immediate concern especially of the commercial banking system is the issuance of the implementing rules and regulations (IRR) of the special purpose vehicle (SPV) law. The piece of legislation in principal allows asset management companies (AMCs) to acquire the bad assets of banks thus freeing the system for new borrowing as well as lending.
The commercial banking system’s non-performing assets (NPAs) to total assets ratio stood at a high 14.26 as of September 2002 versus the 14.04 in the same period last year. It stood at 12.7 percent in 2000 and 14.6 percent the year before.
Its bad debts were recorded at P59 billion by end September 2002.
Meanwhile, Virata said that another concern of the industry is the tax payment.
"We have been wrestling with this issue because the banking system is being re-tinkered, we are forced to continue with our old practice of payment by checks. But the recent scams and frauds that have taken place make it difficult to continue with this practice," the former finance secretary said. "That is why we want electronic payment, debit arrangements so that we do not need clearing as we could forward all payments to the Bureau of Treasury (BTr) for payments with the Bureau of Customs (BOC) and the Bureau of Internal Revenue (BIR) through electronic or e-mail."
There are also issues pertaining to the type of taxes that are slapped on banking products such as the proposed expanded value-added tax or EVAT, and the documentary stamp tax (DST) on both primary and secondary markets.
Discussions are ongoing and tedious as the banking executive said that there were "still a number of elements that have to be convinced." He refused to elaborate.
For improved services to the banking system’s client base, the marketing of new services such as a bill payment system is necessary not just for customer service but also for fee-based earnings. Aside from the already popular phone banking and drop boxes, banks should develop facilities such as e-banking.
Convenience and security for the bank’s clients should be at the forefront of the system’s thrust towards efficient services without overlooking security of the customer’s investments or savings.
Others areas of concern are the money laundering and the threat of sanctions by the international community.
Virata said that they hope that Congress will act fast on the passage of amendments to the Anti-Money Laundering Act.
The Financial Advisory Task Force (FATF) will be holding its plenary session on Feb. 12 and the decision on slap sanctions on the Philippines depends on the passage of the amendments.
The BAP president warned that if the Philippine government does not have "an acceptable law", sanctions may be imposed on the country resulting in tremendous delays in international financial and trade transactions.
"We are concerned that the immediate effect will be on remittances of our overseas Filipino workers (OFWs)," Virata said. "There are already moves aboard by banks and supervisory authorities on stiff examinations of the remittances and other bank transaction from Philippine businesses."