FIFTEENTH CONGRESS: )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House Bill No. _451 3

EXPLANATORY NOTE

Under Republic Act 7353, otherwise known as the Rural Banks Act of
1992, the capital stock of rural banks shal! be fully owned by citizens of the
Philippines.

It is fully understandable why 100 percent Filipino ownership is
required, However, recent experiences show that a shift is view may be
necessary. Since last June 2010, numerous rural banks were in the brink of
ruin and no less than Philippine Deposit Insurance Corporation (PDIC}
president Jose Nograles admitted that more or less 15 percent or 179 of the

rural bank population have been weakened and under some form af financial
distress.

While the Bankgo Sentrat ng Pilipinas (BSP) is doing everything it can
in order to save these rural banks, it is not enough. Deputy BSP govemor
Nestor Espenilia Jr said that a plan to allow foreign interests to acquire equity
in rural banks had been abandoned as this requires a change in legislation.

Itis in this line that this bill is filed. It is about time that foreign investors
be allowed to infuse their money in rural banks. According to the Rural
Bankers Association of the Philippines, industry placers have received

Proposals from foreign investors but it cannot push thru because the law
prohibits it.

In view of the foregoing, immediate passage of this bill is eamestly
requested

RUPUS 8. ROGRIGUEZ

MAXI!



FIFTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES —)
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B, Rodriguez, Jr.

4519

House Bill No.

AN ACT
AMENDING REPUBLIC ACT 7353, OTHERWISE KNOWN AS THE RURAL
BANKS ACT OF 1992 BY ALLOWING LIMITED FOREIGN OWNERSHIP
OF RURAL BANKS IN THE PHILIPPINES

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

SECTION 1. Section 31 of Republic Act 9165 is hereby amended to read as
follows:

Sec. 4.No rural bank shall be operated
without a Certificate of Authority from the Monetary
Board of the Central Bank. Rural banks shall be
organized in the form of stock corporations, Upon
consultation with the rural banks in the area, duly
established cooperatives and corporations primarily
organized to hold equities in rural banks may organize
a rural bank and/or subscribe to the shares of stock of
any rural bank: Provided, That a cooperative or
corporation owning or controlling the whole or majority
of the voting stock of the rural bank shall be subject to
special examination and to such rules and regulations
as the Monetary Board may prescribe. With the
exception of shareholdings of corporations organized
primarily to hold equities in rural banks as provided for
under Section 12-C of Republic Act No. 337, as
amended, and of Filipino-controlled domestic banks,
AT LEAST FORTY PERCENT (40%) OF THE
VOTING STOCK OF A RURAL BANK SHALL BE
OWNED BY CITIZENS OF THE PHILIPPINES,
EXCEPT WHERE A NEW SANK MAY SE
ESTABLISHED AS A RESULT OF A MERGER OR
CONSOLIDATION OF EXISTING THRIFT BANKS
WITH FOREIGN HOLDINGS IN WHICH CASE, THE
RESULTING FOREIGN HOLDINGS SHALL NOT BE
INGREASEO BUT MAY BE REDUCED AND, ONCE



REDUCED, SHALL NOT BE _ INCREASED
THEREAFTER BEYOND SIXTY PERCENT (80%)
OF THE CAPITAL STOCK OF RURAL BANKS. THE
PERCENTAGE OF THE FOREIGN-OWNED
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 capital stock of any
tural bank shall be fully owned and held directly or
indirectly by citizens of the Philippines or corporations,
associations or cooperatives qualified under
Philippine taws to own and hold such capital stock] :
Provided, That any provisions of existing !aws to the
contrary notwithstanding, stockholdings in a rural
bank shall 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 Monetary Board. If
subscription of private shareholders to the capital
stock of a rural bank cannot be secured or is not
available, or insufficient to meet the normal credit
needs of the locality, the Land Bank of the Philippines,
the Development Bank of the Philippines, or any
government-owned or controlled bank or financial
institution, on representation of the said private
shareholders but subject to the investment guidelines,
policies and procedures of the bank of financial
institution and upon approval of the Monetary Board
of the Central Bank, shall subscribe to the capital
stock of such rural bank, which shall be paid in full at
the time of subscription, in an amount equal to the
fully paid subscribed and unimpaired, capital of the
private stockholders or such amount as the Monetary
Board may prescribe as may be necessary to promote
and expand rural economic development: Provided,
however, That such shares of stock subscribed by the
Land Bank of the Philippines, the Development Bank
‘of the Philippines or any govermment-owned or
controtled bank or financial institution may be sold at
any time at 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, the Oevelopment 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


buyer, preference, however, shall be given to

residents of the locality or province where the rural

bank is located
SEC. 2. Repealing Clause. — All laws, executive orders, rules and regulations
or parts thereof in conflict with the provision of this Act are hereby repealed or
amended accordingly.

SEC. 3. Separability Clause. — If for any reason any section or provision of
this Act, or any portion thereof, or the application of such section, provision or
Portion thereof to any person, group or circumstance is declared invalid or
unconstitutional, the remainder of this Act shall not be affected by such
declaration and shal! remain in force and effect.

SEC. 3. Effectivity. ~ This Act shali take effect after fifteen (15) days following
its full and complete publication in the Official Gazette or in two (2)

newspapers of general circulation.

Approved.