Financial sector moves closer to new round of liberalization

by Jovee Marie N. Dela Cruz | January 19, 2016

The country is moving closer to further liberalization of its financial sector, with the bill removing foreign-investment restrictions in four laws now ready for plenary approval at the House of Representatives.

The Senate counterpart of the bill—which seeks to amend the Insurance code for adjustment companies; the Investment Houses Law for investment houses; Lending Company Regulation of 2007 for lending companies; and  the Financing Company Act of 1998 for financing companies—was already approved on third reading on Monday.

The House Committee on Economic Affairs on Tuesday endorsed for plenary approval the measure allowing foreigners to own 100 percent of adjustment companies, lending companies, financing companies and investment houses, which are currently restricted under the Foreign Investment Negative List (FINL).

“The bill is very important for the financial sector because it will provide additional capital coming from foreign sources. One of the problems we’ve been having in the past years is the fact that a lot of foreign finance companies really want to come to the Philippines. But because of the prevailing negative list, a lot of the foreign entities have decided not to come in because of the restrictions. But now we’ve amended it and we’ve now lifted the restrictions, wherein we will now be allowing foreign investors to go up to 100 percent, we are now optimistic that more money will come in,” said Liberal Party Rep. Anthony G. del Rosario of Davao del Norte, chairman of the panel and main author of the measure.

He added: “This will help people, we’re not only talking big business, but definitely this is targeted toward micro, small and medium enterprises, because now we are looking for more funds for lending.”

Julian Payne, president of the Canadian Chamber of Commerce of the Philippines, said: “We welcome the measure; we support the easing of restrictions in the FINL and we believe this is a step on that direction, and it will very much help the economy of the Philippines and also foreign investment.”

The Philippines earlier allowed foreigners to own 100 percent of local banks.

“Given the country’s development objectives/thrusts and the need to increase investments to achieve these, removing the limitations on foreign investments or participations in certain activities/areas listed in the FINL, as provided for in specific laws, becomes necessary,” del Rosario noted.

Under Article XII of the Constitution, foreign investors are prohibited to own more than 40 percent of companies in certain industries, while they are totally restricted to exploit natural resources, public utilities and own any company in the media industry.

Del Rosario said the lower chamber is eyeing to approve the measure on final reading on January 27.

“An investment house may be owned up to 100 percent by foreign nationals. Foreign nationals may become members of the board of directors to the extent of the foreign participation in the equity of said enterprise,” the measure said.

It also said a lending company may be owned up to 100 percent by foreign nationals, “provided, however, that where the loan is secured by land, a lending company, more than 40 percent of whose capital is owned by foreign nationals, may bid and take part in any sale of such land as a consequence of such mortgage, avail themselves of enforcement proceedings, take possession and transfer their rights to qualified Philippine nationals for a period not exceeding five years from actual possession.”

The title to said land “shall not be transferred to such lending companies, and that investments of a lending company shall be in accordance with the provisions of the Constitution.”

It also provides that financing companies shall be organized in the form of stock corporations, may be owned up to 100 percent by foreign nationals, and shall have a paid-up capital of not less than P10 million in case the financing company is in Metro Manila and other first class cities, P5 million if in other classes of cities and P2.5 million in municipalities.

The measure said the Securities and Exchange Commission may adjust the minimum paid-up levels as it deems warranted by its prudential oversight requirements.

The bill added that the capital requirements for financing companies with quasi-banking licenses under the Bangko Sentral ng Pilipinas’s (BSP) supervision and regulation shall comply with applicable rules of the BSP, “provided, however, that financing companies duly existing and in operation before the effectivity of this act shall comply with the minimum capital requirement within one year from the date of the said effectivity and that where land is concerned, the financing company shall comply with the Constitutional provision on foreign ownership of land.”

Source: www.businessmirror.com.ph