Philippine central bank lifts bank branching ban in capital

MANILA: The Philippine central bank said it has lifted the last remaining restriction on bank branching by allowing banks to open new branches in eight key cities in the capital, a move aimed at promoting competition and improving financial services.

The eight cities of Mandaluyong, Manila, Para?aque, Pasay, Pasig, Quezon, San Juan, and the financial district Makati were not included in a 2005 branching liberalisation measure because they were considered adequately served by banks at that time.

"We are expecting that the liberalisation will further improve the competitive environment which should translate to better financial services for the public," Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said in a statement.

"The new policy also aims to encourage banks to further scale up and improve their operations in order to be competitive," Tetangco said.

Commercial and thrift banks with less than 200 branches as of December 2010 may open new branches in the eight cities up to until June 30, 2014 under the first phase of the last liberalisation measure, the BSP said.

Government banks may also establish branches in the eight cities, as long the move complies with their charters and licensing requirements, the BSP also said.

By July 1, 2014, all banks regardless of number of existing branches, except rural and cooperative banks, may establish branches in the previously restricted areas under the second phase.

The BSP partially lifted in 2005 a then six-year-old moratorium on bank branching, which was imposed to encourage banks to consolidate.

As of end December 2010, more than one third of the 8,119 bank offices in the country were operating in the capital, central bank data showed.

Bank lending rose to a two-year high in March to 16.8 percent from a year earlier, supporting forecasts of solid growth prospects for the local economy.

The government has said it was keeping its 7 to 8 percent growth target in 2011 for now after a three-decade high expansion of 7.6 percent last year, even as annual growth in the first quarter slowed from the last three months of last year due to underspending by the government.

Copyright Reuters, 2011