BSP: Foreign-controlled banks must go public

By Prinz P. Magtulis, The Philippine Star

Posted at Dec 03 2012 09:52 AM | Updated as of Dec 03 2012 09:40 PM

MANILA, Philippines - Philippine banks controlled by their foreign counterparts will now be required to go public under new regulations issued by the Bangko Sentral ng Pilipinas (BSP) which finally decided to implement a provision of a 1994 law.

At least 10 percent of the capital of local lenders majority owned and controlled by foreign banks will have to be listed at the Philippine Stock Exchange (PSE), Circular No. 775 issued last Nov. 28 stated.

They must do so “within three years from the effectivity of the circular,” which will still have to be published before taking effect 15 days after. Succeeding transactions will have to be approved by BSP first, after which the three-year provision begins.

The circular implements Section 3 of RA 7721 which requires foreign banks that acquire up to 60 percent of the voting stock of a local bank or its subsidiary to list at the PSE. The banking sector is exempted from the 40-percent foreign ownership cap.

“Being listed imposes more transparency and discipline,” BSP Deputy Governor Nestor Espenilla Jr. said in a text message over the weekend. He did not elaborate.

Asked how the three-year provision was conceived, Espenilla said: “It was a judgment call based on a reading of the over-all situation.”

The type of listing was not provided by BSP, which means the bank can either list by way of introduction- which does not involve new capital- or through an initial public offering (IPO) to raise “cheap capital,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc.

 “This should be good for investors and I think it would be easy for these companies to list if they wish to do so,” Ravelas said in a separate text message.

Ideally, banks use their deposits to finance lending activities as this would help them limit the risks they take. However, listed banks sometimes issue shares for other purposes, such as business expansion and to pay maturing debts.

The new BSP order came on the heels of its approval of the sale of a transaction involving a Malaysian bank’s acquisition of a 60-percent stake in Ang-led Bank of Commerce also late last month. CIMB said the transaction is set to be completed January 2013.

Before this, however, there were a number of foreign lenders which entered the Philippine banking industry, some of which are listed while some are not.

In 1998, Singapore-based DBS bought into then Bank of Southeast Asia and established DBS Philippines Inc. The latter was folded in 2001, according to its website, when it acquired a “significant stake” at Ayala-led Bank of the Philippine Islands (BPI) to establish the BPI Family Savings Bank.

Just last October, DBS trimmed its holdings at BPI to 9.9 percent from 20.3 percent. BPI shares closed down five percent to 89 apiece last Thursday.

In August 2000, Malaysian lender Maybank acquired 99.96 percent stake of Maybank Philippines Inc. to become “the first foreign bank to have almost 100 percent ownership stake in a Philippine commercial bank under the new Philippine banking law,” a statement on its web site said.

Maybank is not listed at the bourse. What is listed is the diversified financial services group, Maybank ATR Kim Eng Financial Corp.

BPI and Maybank representatives, as well as those from the banking industry, were not immediately available for comment.