MANILA, Philippines - A bill seeking to ease the entry of foreign banks in the country will strengthen local lenders through heightened competition and will allow the Philippine banking system to integrate with regional peers, a Bangko Sentral ng Pilipinas (BSP) official said.
“The proposed amendments to RA 7721, if approved by Congress, will put us in a position to participate and implement ASEAN (Association of the Southeast Asian Nations) bank integration once that is finalized,†BSP Deputy Governor Nestor A. Espenilla Jr. said in an e-mail to The STAR.
Earlier this month, House Bill 3984, which seeks to amend RA 7721, was approved on second reading at the Lower House.
The measure allows foreign banks to acquire up to 100 percent of a local lender or to fully own a new banking subsidiary established. The bill also allows foreign banks to put up branches in the country.
RA 7721, The Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines and for Other Purposes, approved in 1994, only allows the entry of 10 foreign banks the country.
The central bank earlier this year proposed amendments to RA 7721 to allow the entry of more foreign banks in the country but stressed it wants to retain the provision on the ceiling on assets held by foreign banks currently set at 30 percent of the entire banking system.
This means domestic banks majority owned by Filipinos should at all times hold at least 70 percent of the system’s assets.
“[O]ur support for the amendments is for much more than that. Our view is that it will promote more foreign direct investments. This is an immediate benefit. By introducing real competition, it will also push our domestic banks to become more efficient, more ambitious in reaching out to customers, and provide better value,†Espenilla said.
“In this more competitive environment, domestic banks may decide to combine or acquire as a strategic response. That is a business decision,†he added.