QuestionsQuestions (BSP CIRCULAR NO. 858)
BSP Circular No. 858 is issued pursuant to Monetary Board Resolution No. 1794 dated 6 November 2014, implementing Republic Act No. 10641, which allows the full entry of foreign banks in the Philippines and amends Republic Act No. 7721.
Foreign banks, with prior Monetary Board approval, may enter through: (1) acquiring/purchasing/owning up to 100% of the voting stock of an existing domestic bank (including those under receivership or liquidation, provided no final court liquidation order has been issued); (2) investing up to 100% of the voting stock of a new banking subsidiary incorporated in the Philippines; or (3) establishing a branch and sub-branches with full banking authority.
The Monetary Board, through its prior approval, approves the foreign bank’s authority to operate in the Philippines through any mode of entry.
In addition to criteria under Section X105.3, the foreign bank must be: (1) widely-owned and publicly-listed in the country of origin, unless owned/controlled by the government of its country of origin; and (2) established, reputable, and financially sound.
It lists factors such as: geographic representation/complementation; strategic trade/investment relationships; relationship with the Philippines; demonstrated capacity and global reputation for financial innovations/stability; reciprocity rights for Philippine banks; and willingness to fully share banking technology.
It ensures that, at all times, domestic banks majority-owned by Filipinos hold control of 60% of the resources/assets of the entire banking system. The Monetary Board may impose measures like suspending additional foreign entries and suspending license upgrades/conversions to subsidiary.
The measures must be consistent with RA 7721 as amended by RA 10641, consider vested rights, and uphold non-impairment of contracts.
A foreign bank branch must comply with minimum and prudential capital ratios applicable to domestic banks of the same category. For minimum capital purposes, the branch’s 'capital' includes permanently assigned capital, undivided profits, and accumulated net earnings (unremitted profits not yet cleared for outward remittance and losses in operations), less required capital adjustments. Net due from head office/branches outside the Philippines, excluding accumulated net earnings, is a deductible adjustment to capital.
It states that, for SBL compliance, the capital of a foreign bank branch (subject to prescribed adjustments) shall be synonymous to its 'net worth.'
Existing foreign banks must comply with the minimum capital requirement as prescribed under Section X111.1; those not meeting it must submit an acceptable capital build-up program. For SBL, loans/credit commitments as of RA 10641’s effectivity may be maintained but cannot be increased beyond the circular’s ceiling once repaid/expired. Existing foreign branches have until 31 December 2019 to use twice the branch capital (as defined in the circular) as the reference for SBL determination.
Foreign bank branches must comply with the same risk-based capital adequacy ratios as domestic banks of the same category. In computing these ratios, CET1 includes permanently assigned capital, undivided profits, accumulated net earnings, and other capital components; any net due from outside the Philippines (excluding accumulated net earnings) is deducted from CET1.
They may perform the same functions and enjoy the same privileges and limitations imposed upon a Philippine bank of the same category. Privileges include eligibility to operate under a universal banking authority subject to compliance with existing rules and the guidelines in Appendix 3.
Foreign banks already operating in the Philippines may apply to convert their mode of entry, but must comply with all applicable requirements and submit an acceptable transition plan on how the change will be implemented.
Yes. Section X105.12 (Equal Treatment) states that any right/privilege/incentive granted to foreign banks (or their subsidiaries/affiliates) under RA 7721 as amended shall be equally enjoyed by domestic banks under the same conditions.
Each foreign individual or foreign non-bank corporation may own up to 40% of the voting stock of a UB/KB/TB; and aggregate foreign-owned voting shares in UB/KB are capped at 40% (with 60% being Filipino ownership). For TBs, the aggregate foreign-owned voting shares may be 60%.
Qualified foreign banks may own or control up to 100% of the voting stock of a domestic bank.
It declares unlawful and void transactions that (1) result in ownership and control beyond prescribed stockholding limits, or (2) through arrangements (e.g., voting trusts/proxies), vest in a person the right to vote or control beyond ceilings.
Foreign banks may bid and take part in foreclosure sales and may take possession of mortgaged property for up to five (5) years from actual possession (excluding redemption period), but title cannot be transferred to the foreign bank. If foreign bank wins, it must transfer its rights to a qualified Philippine national within the five-year period; failure results in a penalty of 0.5% per annum of the foreclosure price until transfer.
A foreign bank authorized to establish branches under Section X105.1 may open up to five (5) sub-branches as may be approved by the Monetary Board.