BSP won't recall outsourcing circular

MANILA, Philippines - The Central bank will not recall a circular allowing banks to outsource services, reasoning that banks are creating more jobs and hiring more people after they have become viable. "Because the Philippine banking system is healthier, it is able to sustain overall growth and employ more people," Amando M. Tetangco, Jr., Bangko Sentral ng Pilipinas (BSP) governor, told reporters in an e-mail. He pointed out that employment in local banks had risen by 12% between 2000 and 2007. The Banking and Financial Unions Against Circular 268 (BFU), which is composed of the labor unions of various banks, picketed the gates of the BSP building in Malate, Manila last Friday to oppose BSP Circular 268. The circular, which was approved in 2000, allows banks to outsource services that are not inherent to the business of banking such as check clearing and processing, IT storage and retrieval, human resources functions, accounting, among others. The League of Independent Bank Organizations (LIBO) said half of 300,000 bank employees nationwide will go out of work if certain services were outsourced. LIBO is a member of the BFU, and is composed of the labor groups of the Bank of the Philippine Islands, China Banking Corp., Bank of Commerce, Banco Filipino, Hongkong and Shanghai Banking Corp., GE Money Bank, GSIS Family Bank, AFP Savings and Loans Association, Inc., and the United Overseas Bank. Mr. Tetangco clarified the circular is not mandatory as it is only meant to provide flexibility to banks. The decision to outsource services rests on the management of individual banks. "Outsourcing is a business decision made by individual banks and financial institutions as a means to remain competitive. This is true not only in the Philippines but in other jurisdictions as well," Mr. Tetangco said. And even if banks outsource some of their services, some banks have opted to provide retraining and retooling to affected employees. Meanwhile, jobs are created in the outsourcing industry, which is one of the sectors where the country is most competitive, the central bank chief added. Alexander Escucha,China Bank first vice-president, said outsourcing has been the basic practice not just among banks but among other industries as well. "Banks and other organizations are compelled by both the economic conditions and the current operating environment to be as efficient as possible, and outsourcing is one of the ways to achieve that," Mr. Escucha said in a phone interview. He said China Bank outsources credit investigation and appraisals to firms that are, more often than not, established by former bankers. "The same functions are not lost; these are just being done elsewhere." Enrico Ballesteros, head of the BPI Employees Union-Metro Manila, however argued that bank employees lose security of tenure as more and more functions are contracted out. "The list of services that are being outsourced is growing. The list of services that are not ’inherent’ to banking has become subjective," Mr. Ballesteros told BusinessWorld in a phone interview. "So the security of tenure of regular employees is threatened. The time may become that the only employees left are the bank managers." Mr. Ballesteros said central bank officers assured them last week that the bank will formally respond to their pleas by writing or by calling a dialogue.