The Philippines and Indonesia set to ink an agreement to open up the banking industry aimed at greater financial integration and economic development among members of the Association of Southeast Asian Nations (ASEAN).
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said a letter of intent (LOI) on the ASEAN Banking Integration Framework (ABIF) would be signed with Indonesia’s Financial Services Authority (OJK) in Jakarta.
“The LOI is in line with the ASEAN Banking Integration initiative,” he said.
“It reflects the mutual interest of the BSP and OJK to begin discussions intended to culminate in a formal bilateral agreement on the entry of QABs between the Philippines and Indonesia,” said Tetangco Jr.
Under the ABIF timeline, each ASEAN-5 including Indonesia, Malaysia, Philippines, Singapore, and Thailand should conclude at least one bilateral agreement with another ASEAN-5 country by 2018.
By 2020, ABIF targets the conclusion or near conclusion of at least one bilateral agreement for each of the 10 ASEAN members as part of the integration under the ASEAN Economic Community (AEC).
The framework provides guidelines for banks to gain wider access to the Asean markets. The banks that meet all the requirements regarding ownership, size in terms of assets, capital adequacy and reputation, are called the Qualified Asean Banks, or QAB.
"The main principle of this agreement is reciprocity," Indonesia's Financial Services Authority (OJK) Deputy Commissioner for Banking Supervision Sukarela Batunanggar said during a press conference.
"The framework applies to all countries of the Asean community, but we need adjustments in its implementation to allow flexibility ... We can't immediately launch the banking integration, as some countries may be not ready," he added.
The talks between Indonesia and the Philippines will include a number of QABs from each country.
As of now, there is no Philippine bank in Indonesia and no Indonesian bank in the Philippines.
When the authorities reach the agreement, Bank Mandiri, Indonesia's biggest bank by assets, may be the first Indonesian lender to open its branch in the Philippines.
Economic Growth, Financial Inclusion
Batunanggar said the banking integration of Asean will contribute to the region's economic growth and financial inclusion, if the screening process of the QABs is done properly.
According to him, the integrated banking sector will promote competition and improve the quality of services, and in turn should benefit trade and investment in the region.
Source : Jakarta Globe | PhilStar
