JAN.

5, 2012 DATE

NR # 2639
REF. NO.

House passes bill allowing non-Filipinos to own 40% of rural banks

The House of Representatives has recently passed on third and final reading a bill allowing the entry of foreign equity into the rural banking system to revitalize the rural banking industry and improve access to banking services for the rural areas of the country. House Bill 5360 seeks to amends Section 4 of Republic Act 7353 or the Rural Banks Act of 1992 to open new source of equity infusion for rural banks, allowing nonFilipino citizens to participate and become members of the Board of Directors. Under Section 4 of RA7353, the capital stock of rural banks in the country shall be fully owned and held directly and indirectly only by citizens of the Philippines. With the restriction, rural banks remain the only category of domestic banks that is not allowed any foreign equity, said Rep. Sergio Apostol (2nd District, Leyte), Chairman of the House Committee on Banks and Financial Intermediaries. The State recognizes the need to promote comprehensive rural development to attain a more equitable distribution of opportunities, income and wealth, a sustained increase in the amount of goods and services produced by the nation for the benefit of the people, Apostol said. Apostol said the State encourages and assists in the establishment of a rural banking system designed to make needed credit available and readily accessible in the rural areas on reasonable terms. Under the measure, non-Filipino citizens may purchase, acquire and own up to 40 percent of the authorized capital stock of rural banks. The bill provides that non-Filipino citizens may become members of the Board of Directors of a rural bank to the extent of their foreign participation in the equity of the Bank, Apostol said. Rep. Pedro Romualdo (Lone District, Camiguin), author of the bill, said the entry of foreign investment in the rural banking sector shall pave the way for a sustained competitive and robust banking system. According to Romualdo, the rural bank industry plays a pivotal role in meeting and sustaining the needs of various sectors of the local economy such as the business sector, agriculture and fisheries sector, micro-enterprises and small. The banking industry is one of the engines of development in the country but most

JAN. 5, 2012 DATE

NR # 2639
REF. NO.

universal and top banks are operating in highly urbanized areas and in economically viable towns to the prejudice of depressed areas, Romualdo said. The amendment in the rural banking policy is a positive step towards a better banking environment, allowing the rural banks to expand their services, modernize their facilities and hire highly competent personnel to handle their operations and services, Romualdo added. Under the measure, foreign holdings shall not be increased but may be reduced, and once reduced shall not be increased beyond 40 percent of the authorized capital stock of rural banks. The Bangko Sentral ng Pilipinas shall prescribe the necessary rules and regulations on the amendments of the Rural Bank Act in consultation of various stakeholders and disseminate the entry of foreign equity into the rural banking system. (30) jsc