3-yr moratorium on bank licenses eyed

A three-year moratorium on the issuance of new commercial bank licenses may be imposed starting June this year once the General Banking Act (GBA) is signed by President Estrada, Bangko Sentral ng Pilipinas (BSP) Gov. Rafael B. Buenaventura said over the weekend.

"The three-year moratorium will take effect about a month after the amendments to the GBA," Buenaventura said adding that the "GBA bill is awaiting signature of the President this month."

The three-year moratorium on the issuance of new commercial bank licenses is part of the BSP's efforts to encourage mergers and consolidation among local banks.

The BSP is still bent on encouraging existing banks to get bigger and achieve economies of scale rather than allowing more banks to simply sprout with low capitalization.

So far, the BSP has been able to encourage only three big bank mergers and two medium-size mergers.

These include that of the Bank of the Philippine Islands and Far East Bank and Trust Co., Equitable Bank and Philippine Commercial International Bank and that of Metropolitan Bank and Trust Co., which recently gobbled Solidbank.

Another provision in the GBA which is aimed at encouraging more mergers and consolidation is to allow up to 100 percent complete foreign ownership of local banks within a seven-year period.

A safety clause, however, to that provision indicates that 70 percent of the resources of the entire banking system must be in the hands of Filipinos.

Initially, the 100 percent foreign ownership allowance will be allowed only for distressed local banks.