MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is confident that the Philippine banking system will not be affected by the Obama administration's proposal to ban US banks from proprietary trading, or trading unrelated to serving their customers.

Early this week, US president Barack Obama announced plans that would prevent banks from investing in, owning or sponsoring a hedge fund or private equity fund. It would set a new limit on banks' size in relation to the overall financial sector and, perhaps most dramatically, could also bar institutions from proprietary trading operations, which are unrelated to serving customers, for their own profit.

Proprietary trading has been the source of a big portion of banks' bumper profits before and after the financial crisis.

BSP deputy governor Nestor Espenilla said that while the reform was understandable for the US scenario, it was not something the Philippines would likely take up since local banks rely more on traditional means to shore up capital.

"In the Philippines' case, our banks today have not really taken on proprietary trading as their main line of business. We are closer to the model of traditional, commercial banks, and these reforms are not as applicable to the Philippine setting. But we look at these international recommendations and adapt to the Philippine case," he said.

The BSP, along with the country's banks had learned a lot from the Asian Financial Crisis in 1997, particularly in strengthening capital generation, and cleaning up of non-performing assets. Espenilla said Philippine banks would continue on this path after the recent crisis.

"The game plan post this recent crisis is to continue with the measures we've been taking over the past years. Ours is continued improvements rather than radical change," he said.

Local banking stocks have been sliding since US President Barack Obama announced the proposed reform to limit banks' risk-taking.

Ed Francisco, president of BDO Capital Investment, said there was knee-jerk reaction on fears other countries would follow suit.

"The sell down is unfair, and should not even be happening. Our banks here have very little exposure to equities, and the Obama plan has no effect on us at all," Francisco said.

He however noted that the local banking system cannot remain as conservative as it is now in the long term. He suggested regulatory adjustments such as increasing the single borrower's limit of banks to cater to a growing economy.