MANILA, Philippines – The Senate approved Monday, June 9 a bill seeking to expand the participation of foreign banks in the Philippine financial sector.
Senate Bill no. 2159 or an “Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines” was approved on third and final reading “to allow our economy and our people to reap the benefits thereform,” said Senator Sergio Osmeña III, the bill’s proponent and chairman of the committee on banks, financial institutions and currencies.
The bill was coauthored by Senator Cynthia Villar.
The measure allows full foreign ownership of domestic banks. It permits the entry of “established, reputable, and financially sound foreign banks” in the country.
The bills also grants locally incorporated subsidiaries of foreign banks “the same banking privileges as domestic banks of the same category,” Osmeña said.
The measure will give the Philippines advantage in the economic integration of the Association of Southeast Asian Nations (ASEAN) where a common banking framework will be implemented.
The ASEAN Banking Integration Framework, to be implemented by 2020, will allow qualified ASEAN banks (QABs) to operate within ASEAN jurisdictions on equal terms as domestic banks, subject to certain prudential and governance standards.
Authorities gave assurances there would be sufficient governance standards in place within ABIF for Philippine banks to qualify as QABs and for other ASEAN banks to operate in the Philippines as QABs.
“Greater foreign participation in the banking and financial sectors is expected to augment the financial resources to which the Philippine economy may have access, thus supporting the initiatives of the present administration in implementing various infrastructure projects and rehabilitation programs,” Osmeña added.
In February, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) endorsed to Congress a bill amending Republic Act 7721 to effectively liberalize the banking sector.
The 20-year-old RA 7721 or “An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines and for Other Purposes,” promulgated in May 1994, allowed the entry of foreign banks either through ownership of up to 60% of the voting stock of an existing domestic bank or of a new banking subsidiary or establishment of branches with full banking authority.
Proposed amendments to RA 7721 included provision for safety nets, ensuring that banking resources continue to be dominantly in the hands of domestic banks; the current requirement is retained where at least 70% of resources must be held by domestic banks which are majority owned by Filipinos; and for the power of the Monetary Board to suspend the further entry of foreign banks under any or all of the modes of entry as national interest warrants.
The endorsement of the BSP to amend RA 7721 was also in line with the preparations for the ABIF. – Rappler.com