Foreign investments to benefit bank industry

MANILA, Philippines — The entry of foreign investors in Philippine banks may usher the inflow of more foreign direct investments (FDIs) and employment opportunities in the country, according to Bangko Sentral ng Pilipinas.

BSP Governor Benjamin Diokno said the entry of foreign investors in local banks, particularly rural banks, would also contribute to the promotion of healthy competition in the banking industry.

Diokno said the infusion of foreign funds would result in greater market penetration and more efficient delivery of financial products and services.

Foreign investors, particularly Chinese nationals, are looking at opportunities in the Philippine banking industry.

Chinese investors are reportedly interested in acquiring shares of stock of banks, particularly rural banks.

The BSP chief said the entry of foreign investors in the country’s banking industry would pave the way for exchange of risk management and governance practices, as well as technology innovations and usage resulting in an improved overall efficiency.

“It would also boost the development of the countryside where the niche markets of rural banks are predominantly located,” Diokno said.

However, Diokno said foreign investors should comply with pertinent laws and regulations on foreign stockholdings, transfer of shares, stock subscriptions and investments from third party investors.

Under Section X102 of the Manual of Regulations for Banks (MORB), a new banking organization must have suitable and fit shareholders, adequate financial strength, a legal structure in line with its operational structure, a management with sufficient expertise and integrity to operate the bank in a sound and prudent manner.

“These requirements likewise apply in evaluating investments of foreign investors in Philippine banks,” Diokno said.

He said qualifications of stockholders, including foreign investors, are assessed to ensure that they have the financial capability and adequate exposure in banking operations that would qualify them to become investors in a bank.

Furthermore, the BSP chief said Section 16 of The General Banking Law of 2000 states the qualifications and disqualifications of individuals elected or appointed as directors or officers of banks are subject to the fit and proper test to ensure the quality of bank management and afford better protection to depositors and the public.

The regulator requires banks to comply at all times with banking laws and regulations, including anti-money laundering and combating the financing of terrorism rules where and violations of the same may be a basis for the imposition of enforcement actions including rescission of banking license.