The Philippines may have found a way to make de-risking by foreign banks a tool for development, according to one if its biggest lenders, the Philippine National Bank (PNB).
Foreign banks seeking to reduce their exposure to developing markets are severing their correspondent banking relationships (CBRs) with local lenders and such de-risking, as it is known, is stunting development in countries that rely on CBRs for growth.
But management at the Philippine National Bank have suggested that a drop in foreign transaction services may open up competition and advance the country’s financial sector within global markets. The bank’s Executive Vice President Head, Horacio E. Cebrero III, told press members after an annual shareholders’ meeting on 7th June 2016 that there is an opportunity for PNB to expand its remittance business globally.
“We view it that there is lot of opportunity when the foreign banks start de-risking because the market sector that they are de-risking off will eventually flow/concentrate to us,” he said in the press talk reported in The Manila Times.
Remittances allow Filipino workers to send home money they earn overseas and such transfers provide income to households independently, in little time and at minimum cost.
Cebrero’s comments suggest a more competitive international branch of PNB’s business could increase the Philippines’ financial resilience and allow it to grab a larger share of the remittance market.
De-risking meanwhile continues to adversely effect developing economies, in particular those that depend heavily on exports, such as the Caribbean, which is currently in its second consecutive year of recession, according to the World Bank. The region may need to resort to further external borrowing as its own remittance flows start to decrease.