The Philippine banking system is made up of four types of banks - commercial banks (further subdivided into  universal and regular commercial banks), thrift banks, rural banks and cooperative banks. These banks are differentiated according to size of capitalization and types of activities that they may undertake. In terms of capitalization, universal and regular commercial banks have a minimum required capital of P4.9 billion  and P2.4 billion, respectively, thriftbanks with head office in Metro Manila, P325 million and thrift banks with head offices outside MM, P52 million. Rural and cooperative banks range from 2.6 million to P20 million depending on the type of municipality. Aside from the minimum capital, banks are also required to satisfy a minimum risk-based capital adequacy ratio of 10 percent.

Technology providers are ready with the technologies for e-banking. 

Many rural banks function similarly to major banks the world over, offering personal, business and corporate banking services through a wide variety of means. There are currently 38 universal and commercial banks, 80 thrift banks and 727 rural banks now regulated by the Banko Sentral ng Pilipinas (BSP). The BSP enjoys fiscal administrative autonomy from the National Government in the pursuit of its mandated responsibilities. It exercises supervision over the operations of banking institutions and quaci-banks including their subsidiaries and affiliates engage in allied activities.

The number of banking institutions in thge Philippines dropped as industry players in the banking sector fell to 845 as of March 30 from 861 lat year. The decline reflected the continues consolidation of larger banks as well as the exit of weaker players in the banking system.

Commercial Banking Business Environment Rating (CBBER) has rated Philippines overall 45.3. The country has a lower CBBER than most countries in the Asia Pacific region surveyed by BMI. The Philippines CBBER compares poorly to HongKong's regionleading score 79.5 and is closer to the lowest score attained in the region. Sri Lanka's 28.4. The Philippines earns low to moderate scores for each of the four banking elements of the limit to potential returns. In relation to other countries surveyed by BMI, the country's total asset are moderate, the likely growth in total assets is moderate, the expected growth in client loans is very small and there is little potential for banks to earn fees from distribution of insurance products and other activities.

Following Q107's 17 year high growth rate of 6.9% year-on-year (y-o-y). the Philippine government remains optimistic about hitting its full-year target of 6.1-6%. However, with exports expected to moderate in H207 and capital inflows  anticipated to slow, we remain more cautious about the growth prospects, forecasting economic growth of 6.0% in 2007.

The Philipines enjoyed its fastest growth rate in 17 years in Q107, as healthy domestic consumption, sustained export growth and increased government spending combined to boost growth to 6.9% y-o-y. Government officials have said that the full year target is well-within reach and could even be revised up after the Philippines recorded the third-best first quarter performance of all Asian countries, trailing behind only Vietnam (7.7%) and China (11.1%).

In RP, the government was able to improve banks'  asset quality through the implementation of special purpose vehicle (SPV). SPV is central bank's initial move to encourage banks in disposing bad assets that piled up after the Asian economic crisis, specifically by providing tax incentives. Local banks are estimated to dispose about P150 billion of bad asets in the four-year implementation of the SPV law since 2002. More banks are expected to consolidate over the medium term as inadequately capitalized medium-sized banks seek higher profits and better efficiences under basel 2, an international framework imposing stricter capital requirements.

Indeed, the Philippine banking industry in general has made a lot of progress.The Metropolitan Bank and Trust co., Metrobank, is the country's largest bank - a position it has held for the past eleven years.

There is  still work to be done, especially in terms of consolidation, supervision and innovation.  I guess the BSP should not only devise reforms but geared for financial  innovations to achieve more greater performance. Instill greater market discipline and opened up competition.

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