Question & AnswerQ&A (BSP CIRCULAR NO. 858)
Foreign banks may operate in the Philippines through acquiring up to 100% of the voting stock of an existing domestic bank, investing up to 100% in a new banking subsidiary incorporated in the Philippines, or by establishing a branch and sub-branches with full banking authority with prior approval of the Monetary Board.
A foreign bank must be widely-owned and publicly-listed in its country of origin unless government-owned, and must be established, reputable, and financially sound, with these qualifications based on submitted documents.
Factors include geographic representation, strategic trade and investment relations with the Philippines, the applicant bank's capacity to promote trade and investments in the Philippines, its global reputation and financial innovations, reciprocity rights for Philippine banks in the applicant's country, and willingness to share banking technology.
Foreign bank branches must comply with minimum capital and prudential capital ratios applicable to domestic banks, including permanently assigned capital inwardly remitted and converted to Philippine currency, with net due from head office deducted from capital. Risk-based capital adequacy ratios must also be met.
At all times, 60% of the banking system’s resources or assets must be controlled by domestic banks majority-owned by Filipinos. Measures may include suspending entry of additional foreign bank subsidiaries and branches or license upgrades for existing foreign banks.
Yes, foreign banks may apply for conversion of their mode of entry by complying with all applicable requirements and submitting an acceptable transition plan outlining implementation of the change.
Foreign individuals or non-bank corporations may own up to 40% of voting shares in universal, commercial, and thrift banks, with aggregate foreign ownership capped at 40% for universal/commercial banks and 60% for thrift banks. Qualified foreign banks may own up to 100% of voting stock.
Any transaction resulting in ownership or control of voting shares exceeding prescribed limits under relevant laws and any contracts or arrangements, such as proxy or voting trusts, that result in control exceeding those ceilings are unlawful and void.
A foreign bank authorized to establish branches may open up to five (5) sub-branches as approved by the Monetary Board.
Foreign banks may participate in foreclosure sales and take possession of mortgaged property for up to five years but cannot obtain title. They must transfer rights to a qualified Philippine national within this period or be penalized 0.5% per annum until transfer.