BSP expands list of non-bank acquisitions

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) has expanded the list of enterprises that could be acquired by banks as part of their non-financial allied undertakings.

The BSP has issued Circular 896 Series of 2015 amending the regulations on non-financial allied undertakings through the inclusion of companies engaged in merchant acquiring business.

The central bank allows a bank to acquire up to 100 percent of the equity of a non-financial allied undertaking provided the equity investment of a thrift or rural bank in any single enterprise should remain less than 50 percent of the voting shares.

The investment requires prior approval from the BSP’s if it is in excess of 40 percent of the total voting stock of such allied undertaking.

Universal, commercial, and thrift banks are allowed to invest in warehousing companies; storage companies; safe deposit box companies; companies primarily engaged in the management of mutual funds but not in the mutual funds themselves; management corporations; companies engaged in providing computer services; insurance agencies or brokerages as well as companies engaged in home building and home development.

Likewise, big banks are also allowed to invest in companies providing drying and milling facilities for agricultural crops such as rice and corn; service bureaus, organized to perform for and in behalf of banks and non-bank financial institutions; the Philippine Clearing House Corp., Philippine Central Depository Inc. and Fixed Income Exchange as well as other similar activities as the Monetary Board may declare as non-financial allied undertakings of banks.

Likewise, universal banks may also invest in health maintenance organizations.

On the other hand, rural and cooperative banks are allowed to invest in non-financial undertakings such as warehousing and other postharvest facilities; fertilizer and agricultural chemical and pesticides distribution; farm equipment distribution; trucking and transportation of agricultural products; marketing of agricultural products; leasing; automated teller machine (ATM) networks; and other undertakings as may be determined by the Monetary Board.

Data from the central bank showed the total resources of the Philippine financial system grew 10.6 percent to P11.9 trillion in end September last year from P10.7 trillion in end September 2014.

The continued rise in resources including deposits, profits, and retained earnings indicate that banks have the ability to service funding needs of corporate and household clients.

At the same time, this shows banks have enough funds to act as a buffer against any external shocks.