Bangko Sentral continues easing of bank branching rules

The Bangko Sentral ng Pilipinas has further eased rules on establishing bank branches, allowing banks to establish presence in previously restricted but strategic and fast-growing areas.

In a statement, the BSP said the Monetary Board recently approved a number of amendments to the guidelines on the establishment of branches in a bid to “provide banks with more flexibility in expanding their branch networks to strategic locations.”

The amended rules would also foster a competitive banking environment as well as improve the ease of doing business, the BSP added.

Specifically, the Monetary Board removed the previous rule mandating the use of theoretical capital on top of the combined capital requirement related to geographic location when evaluating branch applications, according to the BSP.
Branch network size
It noted that the latest minimum capital requirement for banks already takes into consideration the branch network size and the location of the head office.

Also, the BSP said the Monetary Board had “reaffirmed the general thrust of allowing banks to establish branches anywhere in the Philippines.”

These will include allowing establishment of branches in cities considered restricted areas such as Makati, Mandaluyong, Manila, Parañaque, Pasay, Pasig, Quezon and San Juan.

“The move is aligned with the initiatives on banking system liberalization which include the removal of the branch moratorium in restricted areas and the gradual lifting of the suspension on the establishment of new domestic banks,” the BSP said.

“Anchored on their overall business model and strategic direction, smaller banks may now establish branches in Metro Manila subject to higher capitalization and special licensing fee if said branches are to be located in the cities previously considered as restricted areas,” it added.

Last February, the BSP also moved to gradually remove the 17-year-old moratorium on the grant of licenses to establish new local banks, such that all restrictions will be gone by 2018 to allow the entry of more foreign capital into the domestic banking system.
License to convert
The Monetary Board had approved a two-phased lifting of the moratorium put in place in 1999, the first phase of which that 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 granting of all new bank licenses, the BSP said.

“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,” according to 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. —BEN O. DE VERA