The Bangko Sentral ng Pilipinas (BSP) will be gradually lifting restrictions on the establishment of new banks to allow local players to compete in a more liberalized industry.
The central bank on Wednesday said its policy-making body, the Monetary Board (MB), had approved a two-phase approach to the lifting of a moratorium on new banking licenses.
The initial phase, in effect until the end of 2017, allows existing thrift banks to apply for a license to become a universal or commercial (U/KB) bank.
The second phase, which will commence on January 1, 2018, involves the removal of all restrictions on the grant of new bank licenses.
Central bank Governor Amando Tetangco Jr. said the initiative allowed local businesses to explore opportunities amid the opening of the banking industry to foreign capital.
“The two-year transition period also gives interested parties ample time to strategically position themselves in line with evolving policy reforms and regional integration efforts,” he said.
The Philippine banking industry was further liberalized with the signing in 2014 of Republic Act 10641, which allows foreign banks to acquire up to 100 percent of the voting stock of an existing domestic bank, removing the 60 percent limit on foreign equity.
The central bank explained that the moratorium, which took effect in 1999, aimed to encourage mergers and consolidations to facilitate the establishment of larger and stronger financial institutions.
“The only exception to the moratorium was the granting of license for new banks in unbanked areas as well as for microfinance-oriented thrift and rural banks,” it said.
Under the regulation approved by the Monetary Board, all of these restrictions and exemptions will be fully lifted in Phase 2.
“Said regulation also provides for a graduated matrix of application and licensing fees,” the central bank noted.
In line with a continuing financial inclusion policy thrust, applications for new banks with head offices in unbanked areas as well as applications for mergers and acquisitions for distressed banks will be exempted from the above fees.
As a general incentive, documentary requirements for the establishment of new banks were also rationalized.
Tnumber of banking institutions in the country fell to 635 as of the third quarter of 2015 from 652 a year earlier, which the central bank said indicated the “continued consolidation of banks as well as the exit of weaker players in the banking system.”