President Benigno Aquino 3rd recently signed into law a bill allowing the full entry of foreign banks into the Philippines. This new law, Republic Act (RA) 10641 or “An Act Allowing the Full Entry of Foreign Banks in the Philippines,” amends RA 7721, “An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines, and for Other Purposes.”
Under the new law, the Monetary Board may allow foreign banks to operate in the Philippine banking system by acquiring, purchasing or owning up to 100 percent of the voting stock of an existing bank; by investing in up to 100 percent of the voting stock of a new banking subsidiary incorporated under the laws of the country; or by establishing branches with full banking authority.
The old law, RA 7721, only allows foreign banks to own or invest in 60 percent of the voting stock of Philippine finance institutions. The Department of Trade and Industry (DTI) sees the entry of foreign banks to further boost investments and economic growth in the Philippines. At present, about 11 percent of the banking industry is controlled by foreign banks like Citi Philippines, ANZ banking group, Maybank Philippines, HSBC, Deustche Bank, and others.
“With the entry of similar banks in the country, we do not only augment the domestically available financial resources to boost commerce but also ensure the free flow of financing to support the current Administration’s infrastructure projects that will further boost the economy and create more jobs,” DTI Undersecretary Ponciano Manalo said. How? Manalo says with the entry of global banks in the country, it is expected to offer various commercial opportunities by expanding the financial resources that will be domestically available. This can likewise entice these bank’s corporate clients to transfer or expand their operations in the country.
The Philippine Chamber of Commerce and Industry looks at it otherwise. Its president Fred Yao, who happens to own the Philippine Business Bank, says the situation threatens the viability of smaller local banks. Given the foreign banks’ vast resources, it would be easier for them to put up several branches easily.
That may be true and soon we may witness more mergers and acquisitions. The reality is our banking industry is not as big if you compare it with our Asean counterparts. And BDO President Nestor Tan confirms this as he says that a bank, even with the combined resources of the country’s three biggest banks (BDO, BPI, and Metrobank), will only be comparable to Bangkok Bank.
As a consumer, I welcome this new development especially if it means better service, easier time and less requirements for one to open accounts, and minimal fees to maintain one. As it is, a savings account requires a minimum average balance of P5,000.00 pesos. For micro, small, and medium enterprises, this amount may be a bit too high to maintain. And if they fail, they are slapped with fines of no less than P300 pesos a month. Again, making it prohibitive to maintain an account. I want more service, not more fees. After all, it is my money that helps you keep your business of banking afloat. If not, I will just resort to keeping my little savings the old-fashioned way: in my bamboo piggy bank!
God is Great!