JULY 19, 2011

NR # 2470B

Foreign equity infusion on the capital requirement of rural banks sought

A lawmaker has proposed the infusion of foreign equity in the authorized capital stocks of rural banks to help accelerate growth and promote better economic environment in the rural areas. Rep. Pedro Romualdo (Lone District, Camiguin) filed House Bill 4854 to pave the way for the entry of foreign investments in the rural banking sector to sustain a competitive and robust banking system. Romualdo, Vice Chairman of the House Committee on Justice, said the banking industry is one of the engines of development in the country but most universal and top banks are operating in highly urbanized areas and in economically viable towns to the prejudice of depressed areas. The rural bank industry will play 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 to medium enterprises and the service industries, Romualdo said. It is high time that we allow its growth and agree to the infusion of fresh capital from interested foreign investors or non-Filipino citizens to this sector, Romualdo stressed. Romualdo said a change in the rural banking policy is a positive step towards a better banking environment among the stakeholders. The move will allow the rural banks to expand their services, modernize their facilities and hire highly competent personnel to handle their operations and services, according to Romualdo. The bill seeks to amend Section 4 of Republic Act No. 7353, as amended, otherwise known as An Act Providing for the Creation, Organization and Operation of Rural Banks, And for Other Purposes or the Rural Bank Act of 1992. Romualdo said under Section 12-C of Republic Act 337 otherwise known as An Act Regulating Banks And Banking Institutions And For Other Purposes, as amended, 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. Under the measure, non-Filipino citizens may own, acquire or purchase up to 40 percent of the authorized capital stock of a rural bank. The bill provides that where a new bank is established as a result of a merger or consolidation of existing rural banks with foreign holdings, the resulting foreign holdings shall not be increased but may be reduced, and once reduced shall not be increased thereafter beyond 40 percent of the authorized capital stock of rural banks. Likewise, the percentage of the foreign-owned authorized capital stocks shall be determined by the citizenship of individual stockholders and in case of corporations owning shares, by the citizenship of each stockholder in the said corporations. The bill provides further that non-Filipino citizens may become members of the Board of Directors of a rural bank only to the extent of their foreign participation in the equity of the bank. (30) lvc