Philippine banks are bracing for even greater competition among themselves by investing in technology, while improving risk management systems to defend against possible external shocks, the latest survey of the Bangko Sentral ng Pilipinas showed.
In its second Banking Sector Outlook Survey, most of the country’s formal financial institutions said they would also intensify client relationships, upgrade personnel capabilities, keep a high level of liquid assets and increase capitalization to protect themselves against sudden market downturns.
“The respondents recognize the importance of capital to protect the banks from unexpected losses,” the central bank survey concluded. “A majority project capital adequacy ratio (CAR) at more than 16 percent, or significantly higher than domestic and global standards.”
Banks also intend to backstop their respective CAR with strong leverage ratios that will promote institutional stability.
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Specifically, 51.6 percent of the respondents projected leverage ratios at more than 10 percent. Most banks are expected to maintain strong liquidity positions to be able to thrive despite market volatility.
Despite these worries, the survey revealed that Philippine banks maintained their optimism on the country’s economic prospects as 81 percent of respondents expected the domestic economy to grow between 6 and 7 percent within the next two years.
