Rural banking opened to foreigners

The House of Representatives, which did not take up the measure yesterday, essentially has until Feb. 6 to act if it wants to pass the bill before an election break. Congress officially goes on recess on Feb. 8 but plenary sessions are only held from Monday to Wednesday.A bicameral committee yesterday morning decided to adopt Senate Bill 3282’s main provision of allowing foreigners to own, acquire or purchase up to 60% of voting stock in a rural bank. House Bill 5360 proposed a maximum stake of 40%.

Republic Act (RA) 7353 or the Rural Banks Act of 1992 provides that “the capital stock of any rural bank shall be fully owned and held directly or indirectly by citizens of the Philippines or corporations, associations or cooperatives qualified under Philippine laws to own and hold such capital stock.”

Foreigners can own up to 40% of universal and commercial banks, hewing to RA 8791 or the General Banking Act that states that “foreign individuals and non-bank corporations may own or control up to 40% of the voting stock of a domestic bank.”

RA 7906 or the Thrift Banks Act, meanwhile, allows foreigners to own up to 60% of the voting stock of thrift banks.

Senator Sergio R. Osmeña III, chairman of the banks, financial institutions and currencies committee, said in his sponsorship speech of SB 3282 last September that allowing foreigners to invest in rural banks would allow the expansion of services to farmers, microentrepreneurs, small and medium enterprises and rural folk.

The central bank has also expressed support for the lifting of foreign ownership restrictions in RA 7353 as this would help strengthen rural banks, which have been known to collapse due to mismanagement.

A total of 24 banks were shuttered by the Monetary Board and placed under the Philippine Deposit Insurance Corp. receivership last year. Most were rural banks.

In a text message yesterday, Mr. Osmeña said the measure would “invite foreign investments, if they so desire.”

Edward Leandro Z. Garcia, president of Rural Banks Association of the Philippines, said: “We welcome this development as a boost to the industry.” He claimed that “several financial institutions” had already expressed interest in rural bank stakes.

The reconciled bill ratified by the Senate will allow non-Filipinos to sit on the board of a rural bank.

It will also allow a rural bank to foreclose on lands covered by the Comprehensive Agrarian Reform Program that were mortgaged to it. These lands, however, remain subject to the agrarian reform law’s retention limits.

“Rural banks which are not qualified to acquire or hold land in the Philippines shall be allowed to bid and take part in foreclosure sales of real property mortgaged to them, as well as to avail of enforcement and other proceedings, and accordingly to take possession of the mortgaged property, for a period not exceeding five years from actual possession…,” the bill also states.

Rural banks that acquire mortgaged property must transfer this to a “qualified Philippine national.”

By law, foreigners are not allowed to own land in the Philippines.