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Philippines to open doors to more foreign banks
Publication Date : 12-06-2014
The Philippine of Representatives has ratified a bill that would pave the way for greater foreign participation in the banking industry in the Philippines which, proponents say, could help boost trade and create more jobs.
The measure, approved by both the House of Representatives and the Senate, will allow the Monetary Board to authorise more foreign banks to operate within the Philippine banking system by acquiring, purchasing, or owning up to 100 per cent of voting stock of an existing bank, or by investing in up to 100 per cent of the voting stock of a new banking subsidiary incorporated under Philippine laws.
Under the present law, foreign banks may only own or invest in 60 percent of voting stock of Philippine financial institutions. The bill seeks to amend that law.
The bill states that only established, reputable and financially sound foreign banks may be allowed into the Philippines.
According to the measure, the foreign bank applicant must be widely owned and publicly listed, unless the foreign bank applicant is owned and controlled by the government of its country of origin.
It says the Monetary Board must also adopt measures to ensure that control of at least 60 per cent of the resources or assets of the entire banking system will be held by banks majority owned by Filipinos.
Foreign banks allowed to establish branches in the country may be required to assign capital of amount not less than the minimum capital required for domestic banks of the same category. A foreign bank branch may open up to five branches.
Locally incorporated subsidiaries of foreign banks will have the same branching privileges as domestic banks of the same category. The single borrower’s limit of a foreign bank branch must be aligned with that of a domestic bank.
The bicameral version of the bill also states that foreign banks may be allowed to bid and take part in foreclosure sales of real property mortgaged to them, and take possession of the mortgaged property for up to five years.
But the title of the property may not be transferred to the foreign bank.
Should the bank win the bid, it must transfer its rights to a qualified Philippine national during the five-year period. If a bank were not able to comply, it would face a penalty of one half of one percent per annum of the price at which the property was foreclosed.
Earlier, in seeking approval for the measure, its proponents said it would augment the country’s financial resources and help create more jobs.
They said the measure was also meant to further strengthen the banking system by providing an opportunity for weaker banks to exit the system through the sale of their voting stock or equity to foreign banks.
It likewise aims to promote the Asean Banking Integration Framework, which is supposed to be implemented by 2020.