By Joann Santiago
MANILA, (PNA)–The Bangko Sentral ng Pilipinas (BSP) is considering to check whether banks’ consumer protection practices are in line with the central bank’s financial inclusion program.
“Up for consideration by our Monetary Board is a consumer protection framework that outlines the modes of behavior and practices that should be adhered to by BSP-supervised institutions,” BSP Governor Amando Tetangco Jr. told delegates of 3rd Annual Asian Banker Philippine International Banking Convention held recently.
The central bank chief stressed that in the central bank “the drive to promote financial inclusion is balanced with programs to institutionalize redress mechanisms and financial education.”
“Today, this balanced approach is part of global standards,” he said.
Tetangco explained that the main goal for a financial consumer protection framework “is the aspect of responsible market conduct” but stressed that “this, extends beyond consumer protection and is a critical pillar of our market.”
He said Philippines’ banks continue to follow high standards of credit discipline.
For one, the current high liquidity situation in the domestic economy can be taken advantage of by the financial institutions in a negative way but Tetangco said the sector remains responsible.
He noted that that while total loan portfolio (TLP) of banks rose by over P1 trillion between December 2009 to March 2013 NPLs over the same period contracted by over P11 billion.
“And even with this improvement, banks further increased their allowance for credit losses on loans by more than P11.6 billion. The result is a declining NPL ratio and an NPL coverage ratio above 100 percent,” he said.
Also, the country’s credit-to-GDP ratio remains low compared to members of the Association of Southeast Asian Nations -5 (ASEAN 5) “suggesting that there is room to grow within the tenets of sound credit standards.”
“In addition, stress tests, which we conduct every semester, tell us that the balance sheet of banks can absorb extreme credit shocks. Even at a 50 percent write off, capital positions are sufficient to take on the magnitudes of such losses,” he said.
Relatively, the central bank chief said the central bank continues to register progress in its bid to push for more inclusive banking system as more underbanked, unbanked and those who are considered “unbankable” join the formal banking system.
He said only about 20 percent of the country’s about 100 million population have bank accounts and ensuring that most of these have access to banking institutions is a feat given the archipelagic situation of the Philippines, which has about 7,107 island.
“While consolidation continues to reduce the number of our banks, the industry’s network and reach continue to grow and deepen through branch banking, ATMs, ebanking, and innovations in marketing and service delivery,” he said.
As banking environment continues to evolve, Tetangco said “opportunities are never permanent, incentives change and macro-financial situations can reverse.”
“At the Bangko Sentral, we do not instigate change for the sake of change. Rather, our policy initiation is calibrated to make the industry stronger against potential waves of shocks,” he added.