MANILA, Philippines - Attracting more foreign investments is one of the reasons why the Bangko Sentral ng Pilipinas has called for the removal of the limit on the number of foreign banks that can enter the country.
“We’re looking at this as an opportunity to promote investments--direct investments and not hot money,” BSP Deputy Governor Nestor A. Espenilla Jr. told reporters.
The central bank’s policymaking Monetary Board has officially endorsed a bill amending RA 7721 to Congress. RA 7721 is the law governing the entry and operations of foreign banks in the Philippines.
“A foreign bank may be here to target investors from their home country... and that’s actually one reason why we want to support such liberalization. It’s a way of attracting more investments into the country,” Espenilla said.
RA 7721, signed into law in 1994, only allows the entry of 10 foreign banks in the country. The BSP’s current proposal aims to liberalize the entry of foreign banks.
However, Espenilla said the BSP wants to retain the provision on the 30-percent ceiling on assets held by foreign banks currently. This means domestic banks majority owned by Filipinos should at all times hold at least 70 percent of the whole banking system’s assets.
“The actual (take up of foreign banks) is 11 percent so there is basically a lot of room to grow. It will take a while for that 30 percent to be reached considering that our own domestic banks themselves are growing rapidly,” he said.
The BSP official further added the proposed amendment includes a provision on the Monetary Board having the authority to suspend further entry of foreign banks if national interest warrants.
BSP Governor Amando M. Tetangco, in a statement, said amending the law is in line with developments in the market and the readiness of the Philippines economy to accept new players.
“Our investment grade makes us part of a limited group of sovereigns who are considered to adhere to the high standards of macroeconomic, fiscal and financial governance. Building on this achievement, we must nurture a competitive environment that can address the expanding needs of stakeholders,” Tetangco said.
“To sustain our growth and expansion, it would be an opportune time to open up further our banking industry to foreign banks who could service the investment and financing interests of foreign direct investors in the Philippines,” he continued.