Working Committee - ASEAN Banking Integration Framework Meeting – Tour de Tab:

PHILIPPINES

Dr. Johnny Noe E. RavaloAssistant Governor

Bangko Sentral ng Pilipinas6 December 2016

of 1,634 cities and municipalities do not have a banking office

42%

68%

of the total number of deposit accounts

of the total amount of deposits

are concentrated in NCR

archipelagic barriers pose a significant challenge to financial access

of adults had a loan in a formal financial institution in the past year

11.8%With at least one banking office

Unbankedof adults have an account at a formal

financial institution

31.3%

36%

Financial Demographics

Physical Footprint of Banks

996

618

6,650

10,318

600

650

700

750

800

850

900

950

1,000

5,5006,0006,5007,0007,5008,0008,5009,0009,500

10,00010,50011,00011,50012,000

1998* 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jun-16

Head Offices (RHS) Branches (LHS)

No. of Head Offices (RHS)

Philippine Banking System: Total Banking UnitsFor End-Periods Indicated

* BSP's merger and consolidation policy began in 1998 with the issuance of Circular No. 172 dated 03 September 1998.

No. of Branches (LHS)

2

• Over 100 million individuals whose average age is 24 yrs old

• an archipelago of 7,107 islands

• 186 individual languages with 19 regional languages

• More than 10 ethnic groups

• 18 regions, 81 provinces, 144 cities, 1,490 municipalities, and 42,029 barangays

• 86% of the population is Roman Catholic

The Philippines In a Snapshot

121 banks engaged in e-banking13,435 e-money agents

501 MicroBanking Offices

Foreign banks have a market share of 8.4%

Among the world’s best in regulation for microfinance

Augmented By Alternative Delivery Mechanisms

18,328 ATMs (56.4% on-site, 43.6% offsite)

Basel III

Universal/Commercial Banks including their

subsidiary banks

Basel 1.5

Stand-alone thrift and rural banks

Implementation of Capital Standards

Capital Reforms Liquidity StandardsSystemic Risk &

Interconnectedness

Tier 1

Tier 2

Capital Conservation

RWAs

Credit

Market

Operational

LCR

NSFR

D-SIBs

OTC Derivatives

Interfinancial Exposures

New with Basel 3

Updated with Basel 3

Updated with Basel 2.5

No change from Basel 2

Trading Books

SecuritizationCountercyclical

Leverage

The Basel 3 Reform Agenda Remains Key

Emerging Challenges to Regional Integration

• Different jurisdictions are at different macro-financial stages Different existing prudential frameworks Different paths towards regional integration Different capacity-building requirements & prospects

• Global reforms would need to take cognizance of “proportionality”

• Reforms would need a certain “sequence” to be more effective

• Financial stability is the overarching anchor but …

BANKING

CAPITALMarket

Price DiscoveryFunding Liquidity

Payment System• Retail• Large Value• Securities

MarketInfra

Mobilization and Intermediation

Cash Market

Liquidity Price Discovery

ContingentMarket

Insurance Derivatives

Price DiscoveryHedgingHedging

Integration Creates an Added (Risk) Perspective

Repo/Securities LendingASEAN Integration

BENCHMARKS

Basel AccordCrisis Management,

Resolution, Recovery

Private Banking Bank CapitalASEAN Integration

FMI

BENCHMARKSMarket Liquidity

ASEAN Integration

OTC Derivatives BENCHMARKSMinimum capital

ASEAN Integration

ASEAN Integration

ASEAN Integration

CapacityBuilding

Capacity Building

Payments & Settlements

Capital Market Dev’t

Banking

Market Surveillance

A Possible Sequencing of the Reforms

Macro

Risks

Credit

Risks

Market

Risks

Our Re-Thinking of the Systemic Risk Framework

Contagion

Risks

Liquidity Risks• Funding• Bank Liquidity• Leverage

Our risk framework is built on an analysis of five key risks which we believe to affect markets, institutions, transactions and agents.

This allows us to focus on the linkages between risks that could curtail a well-functioning macro-financial market

The Emergence of the Impossible Trinities

Capital Mobility

Fixed Exchange Rate

Financial Stability

FinancialIntegration

Sovereign Monetary Policy

Sovereign Monetary Policy

Working Committee - ASEAN Banking Integration Framework Meeting – Tour de Tab:

PHILIPPINES

Dr. Johnny Noe E. RavaloAssistant Governor

Bangko Sentral ng Pilipinas6 December 2016