MANILA, Philippines–Banks from Asia-Pacific, Europe and even the Middle East are now raring to set up shop in the Philippines, recognizing the value of doing business in a fast-growing country.
This comes after the passage of new legislation that allows more foreign banks to break into the Philippine financial sector, which, despite its health, has failed to reach the majority of the population.
Republic Act 10641, which liberalizes the banking industry, was signed by President Aquino into law last July.
It takes effect this month following the approval of implementing rules and regulations by the Bangko Sentral ng Pilipinas (BSP).
BSP Governor Amando M. Tetangco Jr. said Asian, European, and Middle Eastern banks were studying the prospects of breaking into the Philippine market.
“We’re also promoting Islamic banking. We have to plan long term,” Tetangco told reporters when asked about the possible entry of Middle Eastern banks.
Currently, rules on Islamic finance only allow one bank—government-owned Al-Amanah—to offer Shariah-compliant financial services.
Earlier, the BSP said the entry of more foreign banks in the Philippines would help facilitate the entry of additional investments.
Foreign companies are often more comfortable banking with institutions that come from their home nations.
“The economic benefits that can be derived from the further opening of the Philippine banking system to foreign banks are clear,” Tetangco said last July.
Under the new law, foreign banks, subject to regulatory approval, may now acquire up to 100 percent of a local lender.
These investments may be restricted by the BSP to ensure that local banks still hold at least 60 percent of the industry’s total resources.
Currently, foreign banks in the country account for only 11 percent of the industry’s resources.
Under the old rules, only foreign banks that belonged to the top 150 largest banks in the world were allowed to set up shop in the Philippines.
These banks also had to be among the top five in their respective home countries.
These restrictions were lifted under the new law, although foreign banks still need to be publicly listed and widely held before entering the Philippines.