MANILA, Philippines - Several foreign banks are expected to apply for entry in the Philippines before year-end or early 2015 following the release of the implementing rules and regulations of the amended foreign banks law, the Bangko Sentral ng Pilipinas (BSP) chief said.
“We just released the IRR and they will become effective sometime in December but we’ve gotten letters expressing interest. For the applications, we expect to receive them either before the end of the year or next year,” BSP Governor Amando M. Tetangco Jr. told reporters.
He said these banks which have expressed their interest in the Philippines are based in Asia, Europe, and the Middle East.
Republic Act 10641 liberalized the entry of foreign banks in the country, earlier capped at only 10. This law, signed by President Aquino in July, also allows foreign banks to buy as much as 100 percent of a local bank, amending a previous provision that only permits them to own up to 60 percent of any Philippine lender’s voting stock.
The IRR was released by the BSP last month to execute the law and publish a criteria for the foreign banks that may be allowed to operate in the domestic market.
“We have some criteria for the assessment of applications for foreign banks that want to enter the Philippine banking system... It’s an overall assessment of the financial capacity, the quality of management that are in the bank,” Tetangco said.
The BSP requires foreign banks wanting to enter the domestic landscape to be established, reputable, and financially sound as the amended law focuses on these three instead of a firm’s ranking by size either globally or in their own jurisdiction.
Interested foreign banks should also be widely-owned and publicly listed in their home country to apply for entry in the Philippines.
“We also need to get information (from their home country’s central bank)-the usual assessment being made by regulators with respect to financial institutions,” Tetangco said.
At the same time, the BSP may also consider “strategic relationships” and reciprocity rights when accepting applications of interested foreign banks.
Since the new law does not put any limit on the number of foreign banks in the country, it requires the BSP to keep a cap on the assets they hold at 40 percent of the whole banking system’s resources, higher than the previous 30-percent ceiling.
This means that domestic banks should at all times hold at least 60 percent of the system’s resources.
The BSP last month said foreign bank entrants should also comply with the new minimum capital requirements and prescribed capital ratios here in the country.
The new law came amid the upcoming banking integration among the Association of Southeast Asian Nations (ASEAN) members, eyed by 2020.
The central bank earlier said opening up the banking system to more foreign banks will help promote more investments as they can easily facilitate the transactions of non-Filipino firms and institutions wishing to operate in the domestic market.
As this is also seen increasing competition in the banking sector, the BSP has said this will push local lenders to become more efficient and to provide better value to their clients.
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