Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

45" Congress
First Regular Session

4805

House Bill No.

Introduced by Honorable Sergio A. F. Apostol

EXPLANATORY NOTE

Under Section 4 of the Rural Bank Act of 1992, the capital stock of any rural bank
shall be fully owned and held directly or indirectly by citizens of the Philippines. With this
restriction, rural banks remain the only category of domestic banks that is not allowed any

foreign equity.

Amending the Rural Bank Act of 1992 to allow forty percent (40%) foreign
ownership for rural banks would open a new source of equity infusion particulary for the
smallest lenders that cannot expand and sustain the provision of increasingly sophisticated
form of financial services without the benefit of new capital. Foreign equity investments
would without doubt fill this gap and be a major stimulus for microfinance, micro-enterprise

and agriculture sectors and will therefore be catalysts in countryside development.

SERGIO/A. F. APOSTOL
Repyésentative
Second District, Leyte


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

45" Congress
First Regular Session

House Bill No._ 4805

Introduced by Honorable Sergio A. F. Apostol

AN ACT ALLOWING FOREIGN EQUITY IN THE CAPITAL OF RURAL
BANKS, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7353
OTHERWISE KNOWN AS “THE RURAL BANK ACT OF 1992”, AS
AMENDED AND FOR OTHER PURPOSES

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

SECTION 1. Section 4 of Republic Act No. 7353, as amended, is hereby
amended to read as follows:

No rural bank shall be operated without a Certifcate of Authority from the
Monetary Board of the Central Bank. Rural Banks shall be organized in
the form of stock corporations. NON- FILIPINO CITIZENS MAY OWN,
ACQUIRE, OR PURCHASE UP TO FORTY PERCENT(40%) OF THE
VOTING STOCK OF A RURAL BANK. 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 FORTY PERCENT (40%) OF THE VOTING
STOCK OF RURAL BANKS. THE PERCENTAGE OF THE FOREIGN-
OWNED VOTING 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. 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
government-owned or controlled 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 Development Bank of the Philippines or
any government-owned or controlled bank or financial institution, the
registered stockholders shalll 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.

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

NON-FILIPINO CITIZENS MAY BECOME MEMBERS OF THE BOARD
OF DIRECTORS OF A RURAL BANK TO THE EXTENT OF THE
FOREIGN PARTICIPATION IN THE EQUITY OF SAID BANK: Provided,
however, that nothing in this Act shall be construed as prohibiting any
appointive or elective public official from serving as director, officer,
consultant or in any capacity in the said bank, subject to the provisions of
existing laws.

SECTION 3. Separability Clause. - if any provision of this Act is declared
unconstitutional, the same shall not affect the validity and effectivity of other
provisions thereof.

SECTION 4. Repealing Clause. - All laws, decrees, orderes 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 the Offical Gazette, and in at least two (2) national
newspapers of general circulation.

Approved,