Rural banks ‘digesting’ Foreign Equity Law


Rural banks are in the process of “digesting” the implications of the recently passed Republic Act (RA) 10574 or the Foreign Equity Law, according to the Rural Bankers Association of the Philippines (RBAP).

“It was more than what we want. The law is much more than what we originally wanted. There were changes,” RBAP President Vittorio Almario said in a roundtable with The Manila Times.

Almario noted that the group did not anticipate that the foreign ownership provision of the new law will increase to 60 percent. They had aspired for 40 percent.

RA 10574, which amends RA 7352 or The Rural Banks Act of 1992, allows the entry of foreign equity into the country’s rural banking system. A non-Filipino can now own up to 60 percent of the voting stock of a domestic rural bank.

Almario said the RBAP originally wanted a 40 percent foreign equity infusion since rural banks were originally designed to be family corporations. The old law prevents these heirs to acquire shares because they are not 100 percent Filipino citizens.

He explained that a 40 percent foreign ownership will allow the heirs of family corporations to own voting stocks.

“The basic thing is the family… the rural banking system was set up in 1952, so now there are changes in the generation. Over the years, the heirs of these family corporations have acquired foreign citizenship when they migrated to other countries,” he said.

On the other hand, RBAP Executive Director Vicente Mendoza said that some rural bankers were not too happy with RA10574.

“There were hesitancies on the part of the owners in bringing it to 60 percent because they worry that whatever foreign entity may come in, they may force them to the 60 percent position,” he said.

Almario said that if some banks are controlled by foreigners, they would be called “foreign rural banks.”

“And once you become a foreign rural bank, the bank cannot own anymore bank properties, so that’s another thing. Then all the loans in which their collateral is real properties, you have to put it in another company,” he said.

Almario said the rules in the amended law states that if a bank’s non-Filipino ownership exceeds 50 percent, it is classified as a foreign bank. It must then give up all its real estate properties in the Philippines.


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