FACTSHEET: 4 foreign banks to operate in PHL this year

The move by Philippine monetary authorities to ease the rules that limit the entry of foreign lenders into the country widens the variety of banking options, products and services available to businesses and individual clients.
 
The majority of foreign banks now operating in the Philippines is global financial leaders and have expansive international reach. With the onset of the ASEAN regional integration and the easing of banking policies, Asian banks are now starting to carve inroads into the Philippines.
 
Foreign banks with a wider network of international branches offer remittance options for overseas Filipinos loved ones back home.
 
The Bangko Sentral ng Pilipinas (BSP) has so far approved four foreign banks under Republic Act (RA) 10641 or “An Act Allowing the Full Entry of Foreign Banks in the Philippines.” The BSP also said two more Asian banks have expressed interest to set up shop in the Philippines and are pending approval.
 
Here’s a quick look at the latest banks that gained the central bank’s seal of approval to expand their operations into the country.

1. Cathay United Bank

Country of origin: Taiwan
 
 

• Products and services: Deposits, loans and guarantees, international banking, trust and stock brokerage, overseas Chinese services, credit cards, internet banking

 
 

• Overseas branches: Cambodia, China, Hong Kong, Lao, Malaysia, Singapore, and Vietnam, with representative offices in Indonesia, Myanmar, Thailand and the United States

Cathay United Bank (CUB) is one of the largest commercial banks in Taiwan with $71 billion worth of assets. CUB is a wholly owned subsidiary of Cathay Financial Holding Company, the largest financial holding company in Taiwan. It is a full-service bank which caters to both consumers and businesses in over 100 branches in Taiwan and other international locations.

Prior to the BSP approval, CUB has been operating a representative office in the Philippines for more than 20 years. Company executives said branch operations will begin in the third quarter of 2015.
 
 

2. Industrial Bank of Korea

Country of origin: South Korea
 
 

• Products and services: Corporate banking, private banking, retail loans, deposits, remittances, credit cards, phone banking, internet banking, foreign exchange

• Overseas branches: China, Hong Kong, India, Japan, Myanmar, United Kingdom, United States, Vietnam

If you are looking at funding your startup, you can consider the Industrial Bank of Korea (IBK). With more than $234 billion of assets, IBK primarily caters to small- and medium-sized enterprises (SMEs). It offers creative financial solutions, like extending loans on collateral for intellectual properties. IBK has over 1.1 million corporate clients across 638 branches in South Korea. A subsidiary in China has 15 local and seven international branches, as well as three representative offices. IBK is a government-owned bank established in 1961.
 
 

3. Shinhan Bank

Country of origin: South Korea
 

• Products and services: Retail banking, wealth management, corporate banking, treasury services, internal asset and liability management, Securities and derivatives trading, investment portfolio management, international bank services, merchant banking account, deposits, loans, investment options, internet banking, remittance

• Overseas branches: Cambodia, Canada, China, Germany,  Hong Kong, India, Japan, Kazakhstan, Mexico, Myanmar, Poland, Singapore, United Kingdom, United States, Uzbekistan, and Vietnam

Shinhan Bank is the second largest commercial bank in South Korea in terms of assets. It is part of the Shinhan Financial Group, a company listed on the Korea Stock Exchange and the New York Stock Exchange. It was established in 1897 as Hanseong Bank, and was the first bank in South Korea. Since it reopened in 1982, it has been operating more than 750 domestic branches, 100 depositary offices, 20 premises, and 8 overseas branches.
 
Shinhan Bank is set to open its Manila branch by September. “The bank will apply localized business strategy based on its broad experience in the Asian region, providing various financial services to both Korean and local corporations and the Korean community in the Philippines,” CEO Cho Yong Byoung said a statement.
 

 

4. Sumitomo Mitsui Banking Corp.

Country of origin: Japan
 
 

• Products and services: Leasing, securities, credit cards, investment, venture capital, deposits, loans, insurance, wealth management, foreign exchange, remittance, M&A advisory services, cash management settlement, equity underwriting services

• Overseas branches: Australia, Belgium, Brazil, Canada, China, Czech, France, Germany, Hong Kong, India, Indonesia, Ireland, Italy, Korea, Malaysia, Myanmar, Netherlands, Qatar, Russia, Singapore, Spain, Taiwan, Vietnam, Thailand, UAE, United Kingdom, United States and Representative offices in Bahrain, Cambodia, Chile, Egypt, Iran, Mongolia, Colombia, Mexico, Peru, South Africa, Turkey

Sumitomo Mitsui Banking Corp. (SMBC) is the first foreign bank to gain the BSP’s approval in January under the revised foreign banking law. From a representative office, it is scheduled to open its first branch in Makati, offering basic services such as deposits, loans, and foreign currency trading, as well as trade financing and cash management services. It is the second largest bank in Japan in asset size at  $1.254 trillion.
 
SMBC has more than 400 branches in Japan with 70 international offices, and operates as a subsidiary of Sumitomo Mitsui Financial Group Inc.
 
Aside from the two upgrades and two new arrivals, there are six foreign universal banks, eight commercial banks, 11 representative offices, and three offshore banking units currently operating in the Philippines, according to the BSP.
 

 
Positive for clients

Economist Ronald U. Mendoza of the Asian Institute of Management sees several positive developments favoring institutional and individual clients with the entry of new foreign lenders, including the latest technology and ways of managing banking services.
 
Such developments offer local banks the opportunity to absorb what the foreign banks are bringing into the Philippines. Here is another way of looking at this: Local banks will be forced to adapt quickly and introduce innovations in order to keep their Filipino customers.
 
The entry of foreign banks also opens doors for local banks to partner with the new industry players, which may help local lenders the establishment a presence in other ASEAN economies – thus expanding their reach to other markets.
 
Increased competition could also facilitate more improvements in banking services, especially if the new players start lending to large corporations for expansion and growth. This kind of encroachment may prompt local players to step up their services and keep up with the competition.
 
However, Mendoza noted how the domestic market will react to the entry of foreign banks will vary from person-to-person and the type and scale of business, saying low income consumers and SMEs are practically an untapped market.
 
“Presently, there's growing evidence that low income consumers and SMEs are not really benefitting from the benign economic and credit conditions. One hopes that some of the new players may begin to look to the country's base of the economic pyramid (lower income consumers and smaller firms),” said Mendoza.
 
While local banks specialize in services that specifically cater to the financial habits of Filipinos, foreign banks will have a more universal approach because of the resources available and global experience in dealing with customers. Clients can play on to this strength depending on their financial needs.

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This article first appeared in slightly different form on iMoney.