The 17-year-old moratorium on the grant of licenses to establish new local banks will be gradually removed, with all restrictions gone by 2018 to allow the entry of more foreign capital into the domestic banking system.
The Bangko Sentral ng Pilipinas (BSP) said on Wednesday that its policy-making Monetary Board approved a two-phased lifting of the moratorium put in place in 1999.
The first phase, which takes effect until end-2017, allows existing thrift banks to apply for a license to convert into a universal or commercial bank.
The second phase, which will start on Jan. 1, 2018, will fully remove all restrictions on the grant of all new bank licenses, according to the BSP.
“The two-year transition period gives interested parties ample time to strategically position themselves in line with evolving policy reforms and regional integration efforts,” BSP Governor Amando M. Tetangco Jr. said.
As a whole, the lifting of the moratorium “provides local businesses the avenue to explore opportunities in the banking sector amid the opening of the industry to foreign capital infusion,” said Tetangco, who also chairs the Monetary Board.
In 2014, President Aquino signed into law Republic Act 10641, which allows the full entry of foreign banks. Under the new law, foreign lenders can account for a maximum of 40 percent of the banking industry’s assets.
To date, the BSP has allowed six foreign banks to operate in the country: Japan’s Sumitomo Mitsui Banking Corp., Singapore’s United Overseas Bank Ltd., South Korea’s Shinhan Bank and Industrial Bank of Korea, and Taiwan’s Cathay United Bank and Yuanta Commercial Bank Co. Ltd.
Last month, Mitsubishi UFJ Financial Group—Japan’s biggest bank—acquired a 20-percent stake in Security Bank in a deal valued at P37 billion, making it one of the biggest foreign acquisitions of a local bank in recent years.
Deputy Governor Nestor A. Espenilla Jr. told reporters last month that the application of another Asian bank to establish operations here was pending with the BSP.
The BSP noted that the previous moratorium served as “a policy initiative to encourage mergers and consolidations to facilitate the establishment of larger and stronger financial institutions.”
The moratorium nonetheless exempted the grant of licenses for new banks in unbanked areas as well as for microfinance-oriented thrift and rural banks, it added.
“Under [the new] regulation approved by the Monetary Board, all of these restrictions and exemptions will be fully lifted in Phase 2,” the BSP said. Ben O. de Vera