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alex castillo

on 20 October 2014

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Transcript of ASEAN INTEGRATION 2015


design by Dóri Sirály for Prezi


“The Philippine banking system is heavily skewed toward corporate lending. Systemic risks also are heightened because the conglomerates account for a sizable share of bank capital,” S&P said. It noted, nonetheless, that default by a conglomerate was highly unlikely at this point. Meantime, S&P said that pending the Asean integration, banks in the Philippines were expected to continue reaping the benefits of a growing economy.

- The ASEAN Economic Community (AEC) envisions ASEAN as a single market and production base characterized by free flow of goods, services, and investments, as well as freer flow of capital and skills. 

The target is to realize the integration by 2015, although policymakers in the region have agreed that the process could be extended through 2020.
As of September 2013, there were 676 banks in the Philippines. Thirty-six were universal and commercial banks, 71 were thrift banks, and 569 were rural banks.

- The 10 members of the Association of Southeast Asian Nations (Asean) have agreed to integrate their economies with the aim of boosting economic activities, job creation and incomes
ASEAN-based companies can access raw materials, production inputs, services, labor, and capital wherever in ASEAN they choose to set-up their operations.   Companies can save on production costs, focus on their specialization, and/or maximize economies of scale without necessarily leaving high potential market areas within the region.
- Standard & Poor’s said it believed that banks in the Philippines were not yet prepared for the tougher competition that would result from the integration of Southeast Asian economies.

- Standard & Poor’s: Standard & Poor's Financial Services LLC is an American financial services company. It is a division of McGraw Hill Financial that publishes financial research and analysis on stocks and bonds
Source: Article By Michelle V. Remo |Philippine Daily Inquirer
12:06 am | Thursday, April 24th, 2014
S&P said that even the biggest banks in the Philippines were small compared with the likes of CIMB and Maybank of Malaysia or DBS and United Overseas Bank of Singapore.
The Standard & Poor’s said that Philippine banks might find it difficult to preserve market share with the free entry of foreign competition that would follow the regional integration
One of the challenges facing Philippine banks is overcrowding, according to S&P. Since there were too many players in the country’s banking sector, industry members could not scale up their businesses
Another problem confronting Philippine banks was the heavy concentration of credit to the corporate sector. This makes the stability of banks highly dependent on the performance of their big borrowers.
Bangko Sentral ng Pilipinas Governor
Amando M. Tetangco Jr
said Philippine banks can compete under a fully integrated ASEAN economy by 2015, but stressed the need for local banks to scale up.

"Philippine banks can compete under ASEAN integrated market in 2015
by Bernie MagkilatJanuary 23, 2014
source: Manila Bulletin"
, however, said that local banks must scale up their size and expand their reach as they are relatively small compared with other banks in the region, but in terms of competitiveness in their financial services the local banks are competitive enough.
Nestor Tan
, President of the country’s largest bank
BDO Unibank, Inc.
, admitted that Philippine banks are not yet ready for full ASEAN economic integration by 2015.

- According to Tan, BDO, the country’s largest commercial bank, is just number 19 among ASEAN banks. In fact, the top three Philippine banks have just the size of Bangkok bank.

- “For BDO, we may be big here, but if you open it up we are nobody,” he added.
“I don’t think our industries are prepared if we open up our markets for the Asean single market by 2015,”
said Tan in last year’s forum on AEC in Makati.
said even the country’s commercial banks face constitutional constraints of implementing the mutual-recognition clause of the AEC goal to hire Asean nationals in the Philippine industries. Under the Philippine Constitution, banks are not allowed to hire foreign nationals.

said the government should establish protective-policy mechanisms on key areas for the Philippines that include food; financial services, including commercial banks and rural banks that fuel the economy; and the labor market with focus on the business-process outsourcing industry.
Consolidations and mergers among rural banks are expected as they prepare to compete with those of other countries under the Association of Southeast Asian Nations (ASEAN) economic integration next year.

Source: RBAP
Chuchi G. Fonacier
, supervision and examination managing director of Bangko Sentral ng Pilipinas, said several rural banks have been negotiating lately to consolidate or merge.
(RBAP National Convention)
“There is an appetite for that. They have recognized that they need to strengthen their financial conditions for them to be able to compete,”

Ms. Fonacier
told BusinessWorld on the sidelines of the two-day event. She said rural banks must be creative so they can provide products that are needed by their communities; there is no single template that the banks need to follow because the areas served are diverse.
- The country’s central bank has come up with the Strengthening Program for Rural Banks program, which provides incentives to those that would merge or consolidate. Launched in 2010, the program encourages rural banks and thrift banks to merge with bigger banks or be acquired by major third-party investors.

- The program provides incentives to those involved in the transactions in terms of relaxed capital and possible preferred share, or loans from the Philippine Deposit Insurance Corp. The program is set to end by the end of the year.
Points for consideration in the case of MACTAN BANK:

Is ASEAN a threat?
Is it an opportunity?
How do we avail of the opportunity?
Ms. Fonacier

rural banks must also be able to improve their risk management systems so they can compete with similar enterprises in other countries within the ASEAN
She said the industry must prepare for the integration in order to compete for the 600-million-strong consumer market in the region.
What about the case of MRB? Is our risk management system an area of concern?

Strategic Risk Management
Credit Risk Management
Liquidity Risk Management
Interest Rate Risk management
Compliance Risk management
Reputation Risk Management
No single risk management system can work for all banks. It has to be bank-specific.
Risk in a banking organization refers to the possibility that the outcome of an action or event could bring adverse impacts on the institution’s capital, earnings or its viability
The risk management process:

Risk identification
Risk Measurement
Risk Monitoring
Risk Control
Full transcript