The Phl financial services industry

According to the Institute for Development and Econometric Analysis, Inc.  latest Industry Trends, as per the national accounts released by the National Statistical Coordination Board, the gross value added of the financial intermediation sector amounted to Php883.68 billion in 2013, a 12.5 percent growth from last year’s figure, computed from constant prices. The sector’s GVA for the third quarter and fourth quarter was 12.1 percent and 9.9 percent higher than its GVA for the third quarter and fourth quarter in the preceding year, respectively.

Per Idea, although growing by only 1.8 percent in 2008, the sector has clearly managed to sustain its growth during and after the global economic crisis. At constant prices, the GVA of the financial intermediation sector comprises 13.3 percent of the services sector’s output in 2013. Furthermore, it comprises 7.7 percent of the Philippines’ gross domestic product in the same year.

The output of banking institutions in 2013 makes up 44.4 percent of the financial intermediation sector’s output. Banking institutions’ GVA went up by 12.2 percent in 2013, computed from constant prices. Moreover, the output of non-bank financial institutions and insurance make up 32.7 percent and 17.2 percent of the sector’s output, respectively. The subsectors’ GVAs increased by 11.0 percent and 15.8 percent in 2013, respectively. The remaining 5.7 percent of the output of the sector is accounted for by activities auxiliary to financial intermediation.

The Association of Southeast Asian Nations plans to create an integrated economic community by 2015. The ASEAN Banking Integration Framework, which aims to achieve parity of rules and regulation across the ten member countries so that banks in the region can begin to operate not as foreign banks but as local banks in any of the ten jurisdictions, is expected to be implemented by 2020.

According to the same published report, Bangko Sentral ng Pilipinas Governor Amando M Tetangco, Jr. has expressed optimism because of greater market opportunities and more competition that ABIF will bring. According to Tetangco, financial integration will result in greater exchange of technology and innovation and hence more efficient banks.

Philippine banks have been raising capital and aggressively expanding in preparation for the ABIF. However, the assets and capital of the country’s banks are still way below our neighbors’, but the banking system is more than adequately capitalized based on the capital adequacy ratio. Moreover, as BSP Deputy Governor Diwa C. Guinigundo has claimed, flexibilities of current regulations and provisions for foreign investments exposure—the sixty-per cent foreign ownership cap in particular—have to be considered.

Furthermore, based on the same survey, for each peso incurred in cost, financial intermediation establishments generated P1.63 in revenue on average. Nonetheless, revenue performance of activities of holding and fund management were well above the average performance. They generated Php3.18 and Php3.68 on average, respectively according to the researchers of IDEA.

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