QuestionsQuestions (PROCLAMATION NO. 479)
RA 7721 declares a policy to develop a self-reliant and independent national economy effectively controlled by Filipinos, while encouraging a stable, competitive, efficient, and dynamic banking/financial system that stimulates growth, attracts foreign investments, provides wider financial services, strengthens linkages with global financial centers, and serves as a channel for funds and investments into the economy for industrialization.
A foreign bank may enter by: (i) acquiring/purchasing/owning up to 60% of the voting stock of an existing bank; (ii) investing up to 60% of the voting stock of a new banking subsidiary incorporated in the Philippines; or (iii) establishing branches with full banking authority.
No. A foreign bank may avail itself of only one (1) mode of entry.
A foreign bank or a Philippine corporation may own up to 60% of the voting stock of only one (1) domestic bank or new banking subsidiary.
The Monetary Board must: (1) ensure geographic representation and complementation; (2) consider strategic trade and investment relationships between the Philippines and the foreign bank’s country of incorporation; (3) study the applicant’s demonstrated capacity, global reputation for financial innovations, and stability in a competitive environment; (4) ensure reciprocity rights for Philippine banks in the applicant’s country; and (5) consider willingness to fully share technology.
Only those among the top 150 foreign banks in the world, or the top 5 banks in their country of origin as of the date of application, may be allowed entry under Sections 2(ii) and 2(iii).
It directs the Monetary Board to adopt measures to ensure that at all times control of 70% of the resources/assets of the entire banking system is held by domestic banks that are at least majority-owned by Filipinos.
A foreign bank must permanently assign capital of not less than the US dollar equivalent of P210,000,000.00, at the exchange rate on the date of the Act’s effectivity as ascertained by the Monetary Board.
The foreign bank is entitled to three (3) branches. It may open three (3) additional branches, making the total number of branches for each new foreign bank entrant not exceed six (6).
For meeting capital ratios, “capital” includes permanently assigned capital plus “net due to head office, branches and subsidiaries and offices outside the Philippines” in the ratio prescribed by law or as prescribed by the Monetary Board.
In all cases, the permanently assigned capital and 15% of “net due” required to comply with prescribed capital ratios must be inwardly remitted and converted into Philippine currency. Also, amounts invested in productive enterprises or utilized by Philippine companies for export activities are not subject to conversion into Philippine currency.
Whenever there results “net due from head office” outside the Philippines, this shall be deducted from the capital accounts for purposes of determining the required capital ratios.
The head office of foreign bank branches shall guarantee prompt payment of all liabilities of its Philippine branches.
Foreign banks may be allowed entry under Section 2(iii) within five (5) years from effectivity. During this period, six (6) new foreign banks may be allowed entry upon Monetary Board approval. An additional four (4) foreign banks may be allowed upon recommendation of the Monetary Board and approval of the President, subject to compliance with Sections 2, 3, 4, and 5, as required by national interest.
Non-Filipino citizens may be members of the board of directors of a bank only to the extent of the foreign participation in the equity of that bank.
Foreign banks authorized under the Act shall perform the same functions, enjoy the same privileges, and be subject to the same limitations imposed upon a Philippine bank of the same category. For computing ratios, the basis is the capital of the foreign bank branch in the Philippines.
Foreign banks must guarantee observance of the rights of their employees under the Constitution. Any right, privilege, or incentive granted to foreign banks or their subsidiaries/affiliates must be equally enjoyed and extended under the same conditions to Philippine banks.