Qualification Criteria for Foreign Banks
- Foreign bank applicants must be:
- Widely-owned and publicly listed in their home country (except government-owned banks);
- Established, reputable, and financially sound.
- If owned by a holding company, qualification may apply to the holding company.
- Evaluations based on submitted documents per Appendix 2.
Selection Guidelines for Allowing Foreign Banks
- Factors include:
a. Geographic diversity and financial center representation;
b. Strategic trade/investment relations with the Philippines;
c. Capacity to promote trade and investment with the Philippines;
d. Global reputation for financial innovation and stability;
e. Reciprocity rights for Philippine banks in the foreign bank's home country;
f. Willingness to share banking technology fully.
Capital Requirements
- Subsidiaries must meet minimum capital and prudential ratios applicable to domestic banks.
- Branches must also comply; "capital" includes permanently assigned capital, undivided profits, and accumulated net earnings.
- Permanently assigned capital must be inwardly remitted.
- Net dues from outside offices, excluding accumulated net earnings, are deductible adjustments.
- Transitory provisions allow existing foreign banks to meet capital or single borrower limits by specified dates.
Risk-Based Capital Adequacy for Foreign Bank Branches
- Foreign bank branches adhere to the same risk-based capital adequacy ratios as domestic banks.
- CET1 capital includes assigned capital, retained earnings, accumulated net earnings, and other capital components.
- Net dues from foreign offices (except accumulated earnings) are deducted from CET1 capital.
Scope of Authority and Privileges
- Foreign bank subsidiaries and branches have the same functions, privileges, and limitations as Philippine banks of the same category.
- Eligible for universal banking authority, subject to compliance with rules in Appendix 3.
Control of Banking System Resources
- Monetary Board shall ensure domestic banks (Filipino-owned majority) hold at least 60% of total banking resources.
- Measures include suspension of new foreign bank entries and suspension of license upgrades.
- Measures will respect vested rights and contractual obligations.
Conversion Between Modes of Entry
- Foreign banks may apply to change their mode of entry, submitting transition plans and complying with requirements.
Equal Treatment Provision
- Rights and incentives granted to foreign banks, subsidiaries, or affiliates must be equally extended to domestic banks under the same conditions.
Limits on Stockholdings in Banks
- Foreign individual or non-bank corporations may own up to 40% voting shares in universal, commercial, or thrift banks; 60% in rural banks.
- Aggregate foreign ownership capped at 40% for universal and commercial banks, 60% for thrift/rural banks.
- Qualified foreign banks may own up to 100% voting shares.
- Filipino individuals/entities have corresponding ownership limits.
- Family groups and related interests are treated collectively for ownership limits.
- Full disclosure of relationships among stockholders is required.
Transactions Involving Voting Shares
- Transactions causing ownership to exceed stockholding limits are unlawful and void.
- Voting trusts or proxies that result in excess control are also void.
Selection of Foreign Investors in Rural Banks
- Non-foreign bank foreign investors in rural banks must meet qualification and selection criteria similar to those for foreign banks seeking full ownership.
Establishment of Foreign Bank Sub-Branches
- Monetary Board approval required for establishment.
- Applications must be signed by top Philippine officers and include board resolutions and business plans.
- Subject to pre-qualification requirements, processing fees, and special licensing fees in certain cities.
- Opening requires 30-day prior notice and proof of capital remittance, staffing, facilities, and permit issuance.
- Maximum of five sub-branches allowed per foreign bank branch.
Participation of Foreign Banks in Foreclosure
- Foreign banks engaged in Philippine operations may participate in foreclosure sales for up to five years of possession (excluding redemption period), but cannot acquire title.
- Winning bidders must transfer rights to qualified Philippine nationals within five years or face penalties.
- Must maintain records for regulatory inspection.
Foreclosures by Rural/Cooperative Banks
- Exemption from newspaper publication for foreclosures under ₱100,000, with notices posted locally instead.
- Rural banks not qualified to own land may hold possession for up to five years but cannot acquire title.
- Must transfer to qualified Philippine nationals within prescribed period or incur penalties.
Definitions Related to Lending and Loan Portfolios
- Lending institutions include all bank types and government-owned banks.
- Total loan portfolio excludes loans booked in foreign currency deposit units and certain wholesale or agrarian reform loans.
Limits on Equity Investments in Financial Allied Undertakings
- Banks’ equity investment in a single allied financial undertaking is limited relative to that undertaking's total subscribed and voting capital.
- Publicly-listed universal or commercial banks may own up to 100% of voting stock in one other universal or commercial bank, otherwise only minority holdings.
Simplification of Documentary Requirements for Foreign Bank Applications
- Documentation rationalized and simplified as per amended Appendix 2.
Guidelines for Universal Banking Authority Issuance for Foreign Branches
- Minimum capital must meet Monetary Board prescribed level.
- Compliance with capital adequacy ratios and valuation reserves required.
Risk-Based Capital Adequacy Framework Amendments
- CET1 capital includes assigned capital, undivided profits, retained earnings, net earnings, other comprehensive income.
- Net due-from balances deducted from CET1 capital except accumulated earnings.
- Tier 2 capital defined with limits on general loan loss provisions.
Deletions and Effectivity
- Certain subsections on "Net Due" ratio and stock listing deleted.
- Circular effective 15 days after publication in a newspaper of general circulation.