BMI View: We expect robust growth over the next five years in the nominal USD Gross Value Added of thePhilippines' banking and financial services sectors, which is underpinned by the country's favourableeconomic growth trajectory, growing middle-class and stable banking sector. The country's heightenedpolitical risk and security risk profiles mean that any potential rewards to be garnered come withsignificant risks attached, and therefore render the Philippines one of the riskiest markets to operate in frombanking and financial services' perspectives in the Asian region.
The Filipino banking sector comes with many potential rewards but with many high profile risks attached.
The most pertinent rewards stem from the fact that the banking sector is largely viewed as stable, wellcapitalised and not having any significant liquidity restraints. Furthermore the sector is opening up to farmore open to foreign players with the launch of the ASEAN Economic Community (AEC) single market in2015, and as from 2014 the Filipino government has allowed 100% foreign equity in local subsidiaries ofbanks. Banking penetration rates in the country remain low on a global, indicating significant customerpotential from the country's middle class. This strong potential comes with significant downside risks fromthe high exposure to financial crimes such as money laundering, cybercrime and tax evasion, which marketentrants will face due to the country's high levels of corruption, terrorist group presence and prevalence oforganised crime.