House bill allows full entry of foreign banks in Philippines

MANILA, Philippines — The House of Representatives has approved on second reading a bill that would allow the full entry of foreign banks into the country.

House Bill 3984 seeks to amend Republic Act 7721, that law allowing foreign banks to acquire, purchase and own 60 percent of the voting stock of an existing bank.

But under the pending proposed law, foreign banks may be authorized to operate in the Philippines by owning up to 100 percent of the voting stock.

Foreign banks would also be allowed to establish branches and invest in 100 percent of the voting stock of a new banking subsidiary.

Batangas Third District Rep. Nelson Collantes, the bill's author, said the entry of foreign banks through full acquisition of domestic banks' voting stock will strengthen the financial system.

"This opens up opportunities for weak banks to exit from the system through sale of their voting stock or equity of foreign banks which are expected to possess sufficient resources for such purpose," Collantes said in the bill.

He added that foreign banks are also expected to bring new perspectives and technology with their full entry, which would also augment the financial resources that will benefit the Philippine economy.

"The greater influx of capital coming into the Philippines and the availability of international capital to the domestic economy would also see expansion of enterprises and trades, which may potentially create more jobs for our fellow Filipinos," Collantes said.

Foreign business groups have expressed support for the passage of House Bill 3984. The Joint Foreign Chambers (JFC) said the increased foreign ownership of domestic banks can "pave the way for more competition and capital that will benefit the public.

"Increased participation by foreign banks will help sustain the growth of the Philippine economy," the JFC said.

It added that the passage of the proposed law would allow the country to prepare for the Association of Southeast Asian Nations (Asean) financial integration.

"It is consistent with the Asean Banking Integration Framework under which so-called qualified Asean Banks can operate within Asean jurisdictions on equal terms as domestic banks of that jurisdiction subject to certain prudential and governance standards," the group said.

Read: JFC backs measure to further liberalize entry of foreign banks