Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City, Metro Manila
First Regular Session

4854
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Introduced by Representative Pedro P. Romualdo
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EXPLANATORY NOTE,

The Bangko Sentral ng Pilipinas (BSP) has issued Circular No. 696, Series of 2010 on October
2%, 2040 increasing the minimum capital requirement for rural banks for the reason that it is no
longer adequate to sustain a competitive and robust bank. The last time the BSP increased the
"euired minimum requirements was in December 1999.It is for this reason that are introducing
this amendments to pave the way for the entry of foreign investments in the rural banking sector

*he banking industry is one of the engines of development in our country but most universal and
‘yp banks are operating in highly urbanized areas and in economically viable towns. Our rural
cauk industry has a pivotal role in meeting and ‘Sustaining the needs of various sectors of the
socal economy such as the business sector, agriculture and fishery sector, micro-enterprises and
small to medium enterprises and the service industries. It is high time that we ought to allow its
sfowth and allow the infusion of fresh capital from interested foreign investors or non-Filipino
citizens to this sector.

We see this change in the rural banking policy as a positive step towards a better banking
environment among the stakeholders and allow these rural banks the expansion of their services
sai modernization of their facilities as well as the hiring of highly competent personnel to handle
their operations and services.

‘Your support for the early passage of this bill is highly sought.

Congressman, Lone District of Camiguin


Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City, Metro Manila
First Regular Session

_ 4854

Introduced by Representative Pedro P. Romualdo

aN ACT TO ALLOW FOREIGN EQUITY IN THE AUTHORIZED CAPITAL STOCKS
Ox RURAL BANKS, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7353
OTHERWISE KNOWN AS “THE RURAL BANK ACT OF 1992”, AS AMENDED AND
&OR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of Philippines in Congress
wsscunbled:

SECTION 4. Section 4 of Republic Act No. 7353, as amended, is hereby amended to read as
Yuilows:

No rural bank shall be operated without a Certificate of Authority from the Monetary Board of
the {Cemral Bank] BANGKO SENTRAL NG PILIPINAS. Rural Banks shall be organized in
the form of stock corporations, Upon consultation with the rural banks in the area, duly
colablished cooperatives and corporations primarily organize to hold equities in rural banks may
Cruanize a rural bank and/or subscribe to the shares of stock of any rural bank: Provided, That a
Cavperative or corporation owning or controlling the whole or majority of the voting stock of the
seed bank shall be subject to special ‘examination and to such rules and regulations as the
Monetary Board may prescribe. PROVIDED, FURTHER, THAT, NON-FILIPINO
CATLZENS MAY OWN, ACQUIRE, OR PURCHASE UP TO FORTY PERCENT (40%)
‘Gy THE AUTHORIZED CAPITAL STOCK OF A RURAL BANK. WHERE A NEW
»ANK MAY ESTABLISHED AS A RESULT OF A MERGER OR CONSOLIDATION
OF EXISTING RURAL BANKS WITH FOREIGN HOLDINGS IN WHICH CASE, THE
RESULTING FOREIGN HOLDINGS SHALL NOT BE INCREASED BUT MAY BE
EDUCED AND, ONCE REDUCED, SHALL NOT BE INCREASED THEREAFTER
SEYOND FORTY PERCENT (40%) OF THE AUTHORIZED CAPITAL STOCK OF
RURAL BANKS. THE PERCENTAGE OF THE FOREIGN OWNED AUTHORIZED
CAPITAL STOCKS SHALL BE DETERMINED BY THE CITIZENSHIP OF
IND{VIDUAL STOCKHOLDERS AND 1N CASE OF CORPORATIONS OWNING
SHARES, BY THE CITIZENSHIP OF EACH STOCKHOLDER IN THE SAID
ORPORATIONS, {With exception of shareholdings of corporations organized primarily to
hold equities in rural bunks as provided for under Section 12-C of Republic Act No. 337, as
svrended, and of Filipino-controlled domestic banks, the capital stock of any rural ‘bank shall be
fuliy owned and held directly or indirectly by citizens of the Philippines or corporations,
ussociations or cooperatives qualified under Philippine laws to own snd hold such capital stock:
vrovided, That any provision of existing laws to the contrary notwithstanding, stockholdings in a
rural bank shal] be exempt from any ownership ceiling for a period of ten (10) years from the
approval of this Act: Provided, further, That any such exemption shall require the approval of the
sfonetary Board} If subscription of private shareholders to the capital stock of rural cannot be
scoured or is not available, or insufficient to mect the normal credit needs of the locality, the
Land Bank of the Philippines, the Development Bank of the Philippines, or any government-
cavad or coutrolled bank or financial institution and upon approval of the Monetary Board of
the Central Bank, shall subscribe to the capital stock of such rural bank, which shal! be paid im
full at the time of subscription, in an amount equal to the fully paid subscribe and unimpaired
capital of the private stockholders or such amount as the Monetary Board may prescribed as
may be necessary to promote and expand rural economic development: Provided, however, That



the Philippines or any government-owned or controled bank or financial institution may be sold
at any time al market value to private individuals who are citizens of the Philippines: Provided,
finally, That in the sale of shares of stock subscribed by the Land Bank of the Philippines or any
government owned or controlled bank or financial institution, the registered stockholders shall
have the right of preemption within one (1) year from the date of offer in proportion to their
respective holdings, but in the absence of such their respective holdings, but in the absence of
such buyer, preference, however, shall be given to residents of the locality or province where the
rural bank is located.

SECTION 2. Section 5 of the same Act is hereby amended to read as follows:

iAUl members of the Board of Directors of the rural bank shall be citizens of the Philippines at
the time of their assumption to office: Provided, however, That nothing in this Act sball be
construed as prohibiting any appointive or elective public official from serving as director,
offices, consultant or in any capacity in the bank] NON-FILIPINO CITIZENS MAY
BECOME MEMBERS OF THE BOARD OF DIRECTORS OF A RURAL BANK ONLY
TO THE EXTENT OF THEIR FOREIGN PARTICIPATION EN THE EQUITY OF SAID
BANK: Provided, however, That nothing in this Act shail be construed as prohibiting any
appointive or elective public official from serving as director, officer, consultant or in any
capacity in the bank,

SECTION 3. The Bangko Sentral ng Pilipinas consistent with Section 11 of Republic Act No.
7353 shall prescribe the necessary rules and regulations on the amendments of the Rural Bank
Act in consultation with various stakeholders as well as disseminate this information to allow
enty of foreign equity into our rural bank system to revitalize the rural banking industry and
improve access of banking services to the rural areas in the country,

‘The implementing rules and regulations shall be published within ninety (90) days from the
publication of this law in two (2) newspapers of general circulation,

SECTION 4, Repealing Clause. — All laws, decrees, orders and issuances or portions thereof
which are inconsistent with the provisions of the Act are hereby repealed or modified
accordingly.

SECTION 5. Effectivity.- This Act shall take effect fifteen (15) days following its publication
in at least two (2) national newspapers of general circulation.

‘Approved.