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This page features the full text of
Republic Act No. 7721
AN
ACT LIBERALIZING THE ENTRY AND SCOPE OF OPERATIONS OF FOREIGN BANKS IN
THE PHILIPPINES AND FOR OTHER PURPOSES.
REPUBLIC
ACT NO. 7721AN
ACT LIBERALIZING THE ENTRY AND SCOPE OF OPERATIONS OF FOREIGN BANKS IN
THE PHILIPPINES AND FOR OTHER PURPOSES.
SECTION
1. Declaration of Policy. — The
State shall develop a self-reliant and independent national economy
effectively
controlled by Filipinos and encourage, promote, and maintain a stable,
competitive, efficient, and dynamic banking and financial system that
will
stimulate economic growth, attract foreign investments, provide a wider
variety of financial services to Philippine enterprises, households and
individuals, strengthen linkages with global financial centers, enhance
the country's competitiveness in the international market and serve as
a channel for the flow of funds and investments into the economy to
promote
industrialization.chanrobles virtuallaw libraryred
Pursuant
to this policy, the Philippine banking and financial system is hereby
liberalized
to create a more competitive environment and encourage greater foreign
participation through increase in ownership in domestic banks by
foreign
banks and the entry of new foreign bank branches.cralaw:red
In
allowing increased foreign participation in the financial system, it
shall
be the policy of the State that the financial system shall remain
effectively
controlled by Filipinos.cralaw:red
Sec.
2. Modes of Entry. — The Monetary
Board may authorize foreign banks to operate in the Philippine banking
system through any of the following modes of entry: (i) by acquiring,
purchasing
or owning up to sixty percent (60%) of the voting stock of an existing
bank; (ii) by investing in up to sixty percent (60%) of the voting
stock
of a new banking subsidiary incorporated under the laws of the
Philippines;
or (iii) by establishing branches with full banking authority:
Provided,
That a foreign bank may avail itself of only one (1) mode of entry:
Provided,
further, That a foreign bank or a Philippine corporation may own up to
a sixty percent (60%) of the voting stock of only one (1) domestic bank
or new banking subsidiary. chanrobles virtuallaw libraryred
Sec.
3. Guidelines for Approval. —
In approving entry applications of foreign banks, the Monetary Board
shall:
(i) ensure geographic representation and complementation; (ii) consider
strategic trade and investment relationships between the Philippines
and
the country of incorporation of the foreign bank; (iii) study the
demonstrated
capacity, global reputation for financial innovations and stability in
a competitive environment of the applicant; (iv) see to it that
reciprocity
rights are enjoyed by Philippine banks in the applicant's country; and
(v) consider willingness to fully share their technology. chanrobles virtuallaw libraryred
Only
those among the top one hundred fifty (150) foreign banks in the world
or the top five (5) banks in their country of origin as of the date of
application shall be allowed entry in accordance with Section 2 (ii)
and
(iii) hereof.cralaw:red
In
the exercise of this authority, the Monetary Board shall adopt such
measures
as may be necessary to: (i) ensure that at all times the control of
seventy
percent (70%) of the resources or assets of the entire banking system
is
held by domestic banks which are at least majority-owned by Filipinos;
(ii) prevent a dominant market position by one bank or the
concentration
of economic power in one or more financial institutions, or in
corporations,
participations, partnerships, groups or individuals with related
interests;
and (iii) secure the listing in the Philippine Stock Exchange of the
shares
of stocks of banking corporations established under Section 2(i) and
(ii)
of this Act: Provided, That said banking corporations shall
establish
stock option plans for their officers and employees as the resources or
assets of these corporations may allow in the best business judgment of
their respective boards of directors, pursuant to the Corporation
Code of the Philippines.chanrobles virtuallaw libraryred
To
qualify to establish a branch or a subsidiary, the foreign bank
applicant
must be widely-owned and publicly-listed in its country of origin,
unless
the foreign bank applicant is owned by the government of its country of
origin.chanrobles virtuallaw libraryred
Sec.
4. Capital Requirements. — (i)
For Locally Incorporated Subsidiaries. — The minimum capital required
for
locally incorporated subsidiaries of foreign banks shall be equal to
that
prescribed by the Monetary Board for domestic banks of the same
category.cralaw:red
(ii) For
Foreign Bank Branches. — Foreign banks seeking entry pursuant to
Section
2 (iii) of this Act shall permanently assign capital of not less than
the
U.S. dollar equivalent of Two hundred ten million pesos
(P210,000,000.00)
at the exchange rate on the date of the effectivity of this Act, as
ascertained
by the Monetary Board. The permanently assigned capital shall be
inwardly
remitted and converted into Philippine currency. The
foreign bank shall be entitled to three (3) branches. chanrobles virtuallaw libraryred
The
foreign bank may open three (3) additional branches in locations
designated
by the Monetary Board by inwardly remitting and converting into
Philippine
currency as permanently assigned capital, the U.S. dollar equivalent of
Thirty-five million pesos (P35,000,000.00) per additional branch at the
exchange rate on the date of the effectivity of this Act, as
ascertained
by the Monetary Board. The
total number of branches for each new foreign bank entrant shall not
exceed
six (6).cralaw:red
For
purposes of meeting the prescribed capital ratios, the term "capital"
shall
include permanently assigned capital plus "net due to head office,
branches
and subsidiaries and offices outside the Philippines" in the ratio
prescribed
by law or as may be prescribed by the Monetary Board: Provided,
That in all cases, the permanently assigned capital and fifteen percent
(15%) of "net due to" required to comply with prescribed capital ratios
shall be inwardly remitted and converted to Philippine currency: Provided,
further, That amounts invested in productive enterprises or
utilized
by Philippine companies for export activities, shall not be subject to
conversion into Philippine currency: Provided, finally, That
the
Monetary Board shall monitor the effective use of the "net due to"
funds.Whenever
there results "net due from head office" outside the Philippines, this
shall be deducted from the capital accounts for purposes of determining
the required capital ratios.cralaw:red
Sec.
5. Head Office Guarantee. — The
head office of foreign bank branches shall guarantee prompt payment of
all liabilities of its Philippine branches.cralaw:red
Sec.
6. Entrants under Section 2(iii).
— Foreign banks shall be allowed entry under Section 2 (iii) within
five
(5) years from the effectivity of this Act. During
this period, six (6) new foreign banks shall be allowed entry under
Section
2(iii) upon the approval of the Monetary Board. An
additional four (4) foreign banks may be allowed entry on
recommendation
of the Monetary Board, subject to compliance with Sections 2, 3, 4, and
5 of this Act, upon approval of the President as the national interest
may require.cralaw:red
Sec.
7. Board of Directors. — Non-Filipino
citizens may become members of the Board of Directors of a bank to the
extent of the foreign participation in the equity of said bank. chanrobles virtuallaw libraryred
Sec.
8. Equal Treatment. — Foreign
banks authorized to operate under Section 2 of this Act, shall perform
the same functions, enjoy the same privileges, and be subject to the
same
limitations imposed upon a Philippine bank of the same category. These
limits include, among others, the single borrower's limit and capital
to
risk asset ratio as well as the capitalization required for expanded
commercial
banking activities under the General Banking Act and other related laws
of the Philippines.cralaw:red
The
basis for computing the ratio shall be the capital of the foreign bank
branch in the Philippines.cralaw:red
The
foreign banks shall guarantee the observance of the rights of their
employees
under the Constitution.cralaw:red
Any
right, privilege or incentive granted to foreign banks or their
subsidiaries
or affiliates under this Act, shall be equally enjoyed by and extended
under the same conditions to Philippine banks. Philippine
corporations whose shares of stocks are listed in the Philippine Stock
Exchange or are of long standing for at least ten (10) years shall have
the right to acquire, purchase or own up to sixty percent (60%) of the
voting stock of a domestic bank.
Sec.
9. Development Loans Incentives.
— Loans extended by a foreign bank's majority-owned subsidiary
incorporated
under the laws of the Philippines and/or a Philippine bank sixty
percent
(60%) of the voting stock of which is held by a foreign bank, to
finance
educational institutions, cooperatives, hospitals and other medical
services,
socialized or low-cost housing, and to local government units without
national
government guarantee, shall be included for purposes of determining
compliance
with the provisions of Presidential Decree No. 717, as amended.cralaw:red
Sec.
10. Transitory Provisions. —
Foreign banks operating through branches in the Philippines upon the
effectivity
of this Act, shall be eligible for the privilege of establishing up to
six (6) additional branches under the same terms and conditions
required
by Section 4 (ii) hereof: Provided, That for any branch
additional
to what is existing at the time of the effectivity of this Act, the
prescribed
permanently assigned capital shall be complied with immediately:
Provided,
further, That a foreign bank may open three (3) branches in the
location
of its choice and the next three (3) branches in locations designated
by
the Monetary Board to insure balanced economic development in all the
regions.cralaw:red
The
existing Philippine branches of foreign banks shall be given
one-and-a-half
(1 1/2) years from the effectivity of this Act to comply with the
minimum
capital requirements as prescribed under Section 4 (ii) of this
Act. chanrobles virtuallaw libraryred
Sec.
11. Separability Clause. — If
any provision of this Act is declared unconstitutional, the same shall
not affect the validity of the other provisions not affected
thereby.cralaw:red
Sec.
12. Applicability of Other Banking
Laws. — The provisions of Republic Act No. 337, as amended, otherwise
known
as the General Banking Act, insofar as they are applicable and not in
conflict
with any provision of this Act, shall apply to banks authorized
pursuant
to this Act.cralaw:red
Sec.
13.Delegation of Rule-Making Powers
and Compliance Reports. — The Monetary Board is hereby authorized to
issue
such rules and regulations as may be needed to implement the provisions
of this Act after consultation with the chairpersons of the Banks
Committee
of the House of Representatives and the Senate of the Philippines. On
or before May 30 of each year, the Monetary Board shall file a written
report to Congress and its respective Banks Committees, on the
developments
in the implementation of this Act.cralaw:red
Sec.
14. Amendment and Repeal of Inconsistent
Laws. — Sections 11, 12, 12-A, 12-B, 13, 14-A, 21-B, and 68 of Republic
Act No. 337, as amended, otherwise known as the General Banking Act:
Sections
4 and 5 of Republic Act No. 7353, otherwise known as the Rural Banks
Act;
Sections 4 and 14 of Republic Act No. 3779, as amended, otherwise known
as the Savings and Loan Association Act; and Section 4 of Republic Act
No. 4093, as amended, otherwise known as the Private Development Banks
Act insofar as they are inconsistent with this Act, are hereby repealed
or modified accordingly.chanrobles virtuallaw libraryred
Sec.
15. Effectivity Clause. — This
Act shall take effect fifteen (15) days after its publication in the
Official
Gazette or in two (2) national newspapers of general circulation.
Approved:
May
18, 1994
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