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The Impact of Foreign Bank Presence on the Performance of Philippine Domestic Banks Post-GFC


This empirical study assessed the impact of foreign bank presence on the performance of Philippine domestic universal and commercial banks (U/KBs) for the period 2010-2019. It covers the post-2014 foreign bank entry liberalization (Republic Act No. 10641), as contrasted to the past studies which examined foreign bank presence in the Philippines in the context of the post-1994 foreign bank entry liberalization (Republic Act No. 7721). The findings revealed that in contrast to the 1994 foreign bank liberalization, the 2014 foreign bank liberalization and the presence of foreign banks in the country from 2010-2019 have limited impact on the profitability of domestic U/KBs. This implies that two decades after the 1994 liberalization, domestic U/KBs have adapted well to the presence of foreign banks, enabling them to maintain a strong foothold in the banking industry. Furthermore, foreign bank presence has prompted domestic banks, particularly those with moderate market shares, to be more cost-efficient. This is indicative of both competitive and positive spillover effects from foreign bank presence.


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