THE BANKERS Association of the Philippines (BAP) is pushing for changes to laws on mandated credit and deposit secrecy to make these more relevant to current times and help modernize the banking sector.
“Mandatory credit lending policies and rigid bank secrecy laws, once well-intentioned, have become constraints in today’s labor-driven financial marketplace. The BAP is taking decisive steps to advocate legislative reforms, confronting inertia head-on. By modernizing these laws, we create a fertile ground for tech-driven analytics, smart risk management, better credit assessment, and a more competitive and transparent banking sector,” BAP President and Bank of Philippine Islands (BPI) President and Chief Executive Officer Teodoro K. Limcaoco said in a speech at The Asian Banker’s Finance Philippines 2025 forum held on Thursday.
Mr. Limcaoco said laws that require banks to allot certain percentages of their loan book to the agriculture sector as well as micro, small, and medium enterprises (MSME) may no longer be relevant in the current landscape amid the increase in financial institutions that specifically target these underserved markets.
Bangko Sentral ng Pilipinas (BSP) data have shown that most lenders have failed to meet these credit quotas. The central bank itself has acknowledged that most banks prefer to pay the penalties for not meeting these requirements instead of lending to sectors that they consider risky.
“I think that’s something that we need to look at whether that’s still useful today given the proliferation of many institutions that are now lending to different areas… Microfinance has become big, and then you’ve got all these fintech (financial technology) lenders and e-wallets that are lending,” he told BusinessWorld on the sidelines of the event.
“Credit allocation should be something that is based on an institution’s risk profile [and] desire to penetrate a certain market. It’s hard to mandate it.”
He added that expanding credit access depends on the banking system’s strength.
“What we need to look at going forward is how you strengthen the banking system, make sure that credit is available to everyone who’s deserving of it, how you build an infrastructure so that there’s information, so that credit is based on your risk,” Mr. Limcaoco said.
As for bank deposit secrecy, he cited as an example the Anti-Financial Account Scamming Act (AFASA), under which the BSP can now investigate and inquire into financial accounts involved in prohibited acts or offenses under the law, which include money mule activities and social engineering schemes, mass mailers, or human trafficking, as well as other offenses such as opening a financial account under a fictitious name or using the identity or identification documents of another person.
“There are some refinements that we’re proposing. It’s more just making sure that the banks are able to comply with the requirements of AFASA and not get into trouble with things like deposit secrecy because there are certain items that require the banks to act quickly, and sometimes it might be at risk to the banks, so we just want some clarity… on the process,” Mr. Limcaoco said.
“Right now, I think there’s no clear process how AFASA will be implemented in terms of being able to report potential fraud, and we’re proposing, for example, maybe let’s consider a central place where you report and then they’re the ones who coordinate all across.”
The BSP has also been pushing for amendments to the Philippines’ decades-old bank deposit secrecy law to boost its oversight of the financial sector.
REGIONAL STANDARDSRizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the rationalization of laws on mandated lending and bank secrecy has been long overdue as these are no longer in line with regional standards, especially as financial markets become more integrated.
Reviewing these would help determine “if these regulations are still relevant and would require some adjustments or tweaking in view of new realities in the banking industry and overall economy,” Mr. Ricafort said in a Viber message.
“On deposit secrecy and fraud reporting under AFASA, BAP’s call to revisit deposit secrecy laws is timely and necessary. While depositor privacy is important, there must be a workable legal framework that enables banks to flag and share fraud-related data without risking legal exposure. The central bureau proposal may offer a more efficient, standardized approach than bilateral arrangements under AFASA, especially for detecting organized financial fraud,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, added in a Viber message.
However, as for reviewing laws on mandated credit to underserved sectors, he said that while relaxing these rules may reduce risks for banks in the short term, “the bigger issue is improving how banks assess and manage these risks.”
“Many MSMEs and agri borrowers remain unbanked or underbanked, and fintechs, while helpful, cannot fully replace the role of banks. Instead of scrapping the mandates, what is needed is reform such as better credit guarantee systems, digital credit scoring tools, and public-private risk sharing mechanisms,” Mr. Rivera said.
“Simply erasing the mandates could widen funding gaps and undermine inclusive growth.” — Aaron Michael C. Sy