Senate OKs bill allowing foreign equity infusion in rural banks

Posted at 01/28/13 7:00 PM

MANILA, Philippines - The Senate on Monday approved on third and final reading a bill amending the Rural Bank Act to allow foreign capital infusion in rural banks.

Senator Serge Osmeña, chairman of the Committee on Banks, Financial Institutions and Currencies, said Senate Bill No. 3282 aims to allow foreign equity in rural banks as a way to spur countryside development.

"This measure amends Section 4 of Republic Act 7353 and once enacted into law, allows foreign individuals and entities to acquire equity of up to 60% in rural banks," Osmeña said in his sponsorship speech.

At present, Section 4 of RA 7353 allows foreign banks to acquire equity in rural banks but prohibits foreign individuals or foreign entities from doing the same.

"Rural banks need to look beyond their limited resources and take advantage of funds available elsewhere. The opportunity to forge international equity partnerships would put rural banks on a level playing field with its thrift and commercial banking counterparts that are able to take in foreign partners," Osmeña said.

The senator emphasized the importance of the rural banking industry. "Total assets as of end September 2011 reached P169 billion, 9.2 percent higher than the P155 billion recorded in the previous year," he said.

Even with the high capital adequacy ratio, Osmeña said a Bangko Sentral report showed that only 482 out of the total 565 rural banks were able to comply with the minimum amount of capital requirement. He said this is why foreign equity investments are needed by rural banks.

"(The bill) will stimulate more activity among rural banks by creating an environment that is beneficial to foreign investors, local banking patrons and the national economy," he said.