MANILA, Nov 16 — Brace for the effect or impact on the Philippine banking system now that the Monetary Board has approved the implementing rules and regulations of Republic Act No. 10641. The law which amends R.A. No. 7721 which was passed way back in May 1994 opens the gate for further entry of foreign banks into the country.
According to the Bangko Sentral ng Pilipinas, additional foreign banks can now apply to operate in the Philippines either as a branch or as a wholly-owned subsidiary. The new law allows foreign banks to acquire up to 100 percent of the voting stock of an existing domestic bank, an increase from the 60 percent cap under the old law.
This means foreign banks are now allowed to control up to a combined 40 percent of the total assets of the banking system which is 10 percentage points higher than the previous 30 percent limit.
Instead of a bank’s ranking by size either globally or in their own jurisdiction, the new law focuses on the demonstrated expertise of a potential entrant as an established, reputable and financially sound bank while widely-owned and publicly-listed in their home country.
With the expected increase in the share of total assets under the management of foreign banks, the implementing rules reflects the authority of the Board to adopt necessary measures to ensure that the 60 percent domestic-controlled proportion is preserved.