To revitalize the rural banking industry in the country, the Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) has approved the implementing rules of Republic Act (RA) 10574, or an Act Allowing the Infusion of Foreign Equity in the Capital of Rural Banks.
RA 10574— an amendment of RA 7352, or The Rural Banks Act of 1992—allows the entry of foreign equity into the country’s rural bank system.
In a statement, the BSP said that the act “allows non-Filipino to own up to 60 percent of the voting stock of a domestic rural bank.” The central bank added that the implementing rules contained in BSP Circular 809 are aimed to revitalize the rural banking industry, and improve access of banking services to the rural areas in the country.
“The implementing rules provide the general guidelines for the entry of foreign bank, non-bank corporations and individuals as shareholders of RBs [rural banks],” it stated. The BSP further said that, “The fitness of prospective investors in RBs will be assessed based on their strategic objectives, reputation and integrity and effectiveness of banking or business model.”
It added that qualified foreign investors are allowed to pour capital into several RBs to the extent authorized by the MB.
Moreover, the central bank explained that besides foreign ownership of RBs, the circular also sets the rules for the number of independent directors for a rural bank, the membership of elective or appointive official in an RB board, the foreclosure of lands used as RB loan collateral, the valuation of government-held shares in RBs, and the computation of dividend rates on RB shares held by government-owned or -controlled financial institutions.