" 
SIXTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
Stlmtl' 
(~ffl~r or Hj2~'t'f;,vt.!1r~ 
, 
'14 
MAR -4 
AlO :18 
SENAT E 
S. B. No. 2159 
RECEIVU) BY, r 
Introduced by Senator Sergio Osmena III 
"AN ACT AMENDING REPUBLIC ACT NO. 7721, OTHERWISE KNOWN AS "AN 
ACT LIBERALIZING THE ENTRY AND SCOPE OF OPERATIONS OF FOREIGN 
BANKS IN THE PHILIPPINES AND FOR OTHER PURPOSES" 
EXPLANATORY NOTE 
In 1994. Republic Act (RA) No. 7721 was enacted liberalizing the entry of 
foreign banks into the country by providing for three (3) modes through which foreign 
banks may enter, namely by (i) acquisition of up to sixty percent (60%) of the voting 
stock of an existing bank, (ii) investing in up to sixty percent (60%) of the voting stock of 
a new banking subsidiary incorporated under the laws of the Philippines. or (ii) 
establishment of branches in the Philippines. The third mode of entry was made 
available for only five (5) years from the effectivity of R.A. NC). 7721. On the other hand. 
while the availability of the first mode was extended and expanded by allowing foreign 
banks to own 100% of the voting stock of a domestic bank, this privilege was granted 
only for a period of seven (7) years starting 2000 pursuant to RA No. 8791. otherwise 
known as the General Banking Law of 2000. 
The opening of the banking sector to more established foreign banks was 
spurred by the economic benefits foreseen with a liberalized economy brought about by 
the General Agreement on Trade and Tariff (GATT). The Philippines benefitted from this 
move by fostering competition in the banking industry which, in turn, raised the 
efficiency levels of banks through adoption of new technology and enhancement of 
human resource skills. reduced operating costs, instilled corporate governance structure 
reforms. encouraged more transparency and further developed the supervisory and 
regulatory framework. It can also be said that by allowing international players in the 
banking industry. the Philippines witnessed an increase in the availability of funds at 
competitive rates and increase in the' types of hybrid financial instruments or products 
available in the market. 
1 
• 
• 


Once again, the Philippines is at the forefront of further regionalization in the 
ASEAN region, particularly through the ASEAN Banking Integration Framework which is 
intended to be implemented by 2020. The. economic and financial integration of the 
ASEAN region is expected to bring across the region opportunities for growth and 
expansion particularly in the banking industry. The Philippines will benefit from this if the 
current limitations and restrictions that currently exist in its banking laws governing entry 
of foreign banks in the Philippines would be lifted to a certain extent. The Philippines 
now has the chance to be a step ahead and position itself ready to take advantage of 
the benefits of this economic integration through the further opening up of the banking 
industry to foreign banks, which the present bill seeks to address. 
The entry of foreign banks through the full acquisition of voting stocks of domestic 
banks can also serve as a device to further strengthen the financial system. This opens 
up opportunities for weak banks to exit the system through sale of their voting stock to 
foreign banks which possess sufficient resources for such purpose. As cited above, 
foreign banks are also expected to bring new and fresh perspectives and technology in 
managing the entity which is fundamental in reversing conditions of investee bank. 
There is a greater incentive for foreign banks to engage in such transactions if the 
privilege to purchase the entire voting stock of the domestic bank is granted. 
More importantly, the greater foreign participation in the banking industry is 
expected to augment the financial resQurces to which the Philippine economy may have 
access, thereby supporting the initiatives of the present administration in implementing 
various infrastructure projects and rehabilitation programs. The greater influx of capital 
coming into the Philippines and the availability of international capital to the domestic • 
economy would also see expansion of enterprises and trades, which may potentially 
create more jobs for our fellow Filipinos. 
Without a doubt, the Philippines stands to gain from the proposed expansion of 
foreign bank entry into the Philippines, especially in light of the prevailing economic 
conditions, both domestically and internationally. 
For these reasons, the immediate passage of this bill is earnestly sought. 
2 
/I /\-LtNJ1 rv--
~~GIO OSMENA III 
Senator 


SrtUlh' 
SIXTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
,Oll,;, .. r til' >'rfTPbrV 
'14 
MAR -4 
AID :19 
SENAT E 
S, B. No. 2159 
Introduced by Senator Sergio Osmena III 
"AN ACT AMENDING REPUBLIC ACT NO. 7721, OTHERWISE KNOWN AS "AN 
ACT LIBERALIZING THE ENTRY AND SCOPE OF OPERATIONS OF FOREIGN 
BANKS IN THE PHILIPPINES AND FOR OTHER PURPOSES" 
Be it enacted by the Senate and the House of Representative of the Philippines in 
Congress assembled: 
1 
SECTION 1. Section 2 of Republic Act No. 7721 is hereby amended to read as 
2 
follows: 
3 
"Sec. 2. Modes of Entry. - The Monetary Board may authorize foreign 
4 
banks to operate in the Philippine banking system through any ONE of the 
5 
following modes of entry: (i) by acquiring, purchasing or owning up to ONE 
6 
HUNDRED PERCENT (100%) [sixty percent (60%)) of the voting stock of 
7 
an existing bank; (ii) by investing in up to ONE HUNDRED PERCENT 
8 
(100%) [sixty percent (60%)) of the voting stock of a new banking 
9 
subsidiary incorporated under the laws of the Philippines; or (iii) by 
10 
establishing branches with full banking authority[: Provided, That a foreign 
11 
bank may avail itself of only one (1) mode of entry: Provided, further, That 
12 
a foreign bank or a Philippine corporation may own up to a. sixty percent 
13 
(60%) of the voting stock of only one (1) domestic bank or new banking 
14 
subsidiary]." 
15 
SEC. 2. Section 3 of Republic Act No. 7721 is hereby amended to read as 
16 
follows: 
17 
18 
19 
"Sec. 3. Guidelines for Approval.- In approving entry applications of 
foreign banks, the Monetary Board shall: 
(i) ensure geographic 
representation and complementation; (ii) consider strategic trade and 
1 
• 
• 


1 
investment relationships between the Philippines and the country of 
2 
incorporation of the foreign bank; (iii) study the demonstrated capacity, 
3 
global reputation for financial innovations and stability in a, competitive 
4 
environment of the applicant; (iv) see to it that reciprocity rights are 
5 
enjoyed by Philippine banks in the applicant's country; and (v) consider 
6 
willingness to fully share their technology. 
7 
[Only those among the top one hundred fifty (150) foreign banks in the 
8 
world or the top five (5) banks in their country of origin as of the date of 
9 
application] ONLY ESTABLISHED, REPUTABLE AND FINANCIALLY 
10 
SOUND FOREIGN BANKS shall be allowed entry in accordance with 
11 
Section 2 OF THIS ACT [(ii) and (iii) hereof]. THE FOREIGN BANK 
12 
APPLICANT MUST BE WIDELY-OWNED AND PUBLICLY-LISTED 
13 
UNLESS THE FOREIGN BANK APPLICANT IS OWNED BY THE 
14 
GOVERNMENT OF ITS COUNTRY OF ORIGIN. 
15 
In the exercise of this authority, the Monetary Board shall adopt such 
16 
measures as may be necessary to[: (i)) ensure that [at all times] the 
17 
control of AT LEAST seventy percent (70%) of the resources or assets of 
18 
19 
20 
the entire banking system is held by domestic banks which are [at least] 
majority-owned by Filipinos; THE MONETARY BOARD MAY ALSO 
SUSPEND FURTHER ENTRY OF FOREIGN BANKS UNDER ANY OR 
21 
ALL OF THE MODES PROVIDED IN SECTION 2 OF THIS ACT AT ANY 
22 
TIME AS NATIONAL INTEREST MAY REQUIRE. 
[Oi) prevent a 
23 
dominant market position by one bank or the concentration of economic 
24 
power in one or more financial institutions, or in corporations, 
25 
participations, partnerships, groups or individuals with related interests; 
26 
and (iii) secure the listing in the Philippine Stock Exchange of the shares 
27 
of stocks of banking corporations established under Section 2(i) and (ii) of 
28 
this Act: Provided, That said banking corporations shall establish stock 
29 
option plans for their officers and employees as the resources or assets of 
30 
these corporations 
may allow in the best business judgment of their 
31 
respective boards of directors, pursuant to the Corporation Code of the 
32 
Philippines.] 
33 
[To qualify to establish a branch or a subsidiary, the foreign bank applicant 
34 
must be widely-owned and publicly-listed in its country of origin, unless the 
2 


1 
foreign bank applicant is owned by the government of its country of 
2 
origin.)" 
3 
SEC. 3. 
Section 4 of Repubiic Act No. 7721 is hereby amended to read as 
4 
follows: 
5 
"Sec. 4. Capital Requirements. - (i) For Locally Incorporated Subsidiaries. 
6 
-
The minimum capital required for locally incorporated subsidiaries of 
7 
foreign banks shall be equal to that prescribed by the Monetary Board for 
8 
domestic banks of the same category. 
9 
(ii) For Foreign Bank Branches.- Foreign banks THAT SHALL BE 
10 
AUTHORIZED TO ESTABLISH BRANCHES [seeking entry] pursuant to 
11 
Section 2 (iii) of this Act shall ,permanently assign capital [of not less than 
12 
the 
U.S. 
dollar equivalent of Two 
hundred .ten 
million 
pesos 
13 
(P210,OOO,OOO.OO) at the exchange rate on the date of the effectivity of 
14 
this Act, as] OF AN AMOUNT NOT LESS THAN THE MINIMUM 
15 
CAPITAL REQUIRED FOR DOMESTIC BANKS OF THE SAME 
16 
CATEGORY [ascertained by the Monetary Board]. The permanently 
17 
assigned capital shall be inwardly remitted and converted into Philippine 
18 
currency. [The foreign bank shall be entitled to three (3) branches.)" 
19 
SEC. 4. The third and fourth paragraphs of Section 4 of Republic Act No. 7721 
20 
are hereby amended to form part of Section 5 of Republic Act No. 7721. The original 
21 
provisions of Section 5 shall form part of Section 6. 
22 
"SEC. 5. BRANCHING PRIVILEGES.- The foreign bank BRANCH may 
23 
open [three (3) additional] UP TO FIVE (5) SUB-branches [in locations 
24 
designated] AS MAY BE APP~OVED by the Monetary Board. LOCALLY 
25 
INCORPORATED SUBSIDIARIES OF FOREIGN BANKS PURSUANT 
26 
TO SECTION 2(ii) OF THIS ACT SHALL HAVE THE SAME 
27 
BRANCHING PRIVILEGES AS DOMESTIC BANKS OF THE SAME 
28 
CAREGORY. [by inwardly remitting and converting into Philippine 
29 
currency as permanently assigned capital, the U.S. dollar equivalent of 
30 
Thirty-five million pesos (P35,OOO,OOO.OO) per additional branch at the 
31 
exchange rate on the date of the effectivity of this Act, as ascertained by 
32 
the Monetary Board. The total number of branches for each new foreign 
33 
bank entrant shall not exceed six (6).] 
3 


1 
[For purposes of meeting the prescribed capital ratios, the term "capital" 
2 
shall include permanently assigned capital plus "net due to head office, 
3 
branches and subsidiaries and offices outside the Philippines" in the ratio 
4 
prescribed by law or as may be prescribed by the Monetary Board: 
5 
Provided, That in all cases, the permanently assigned capital and fifteen 
6 
percent (15%) of "net due to" required to comply with prescribed capital 
7 
ratios shall be inwardly remitted and converted to Philippine currency: 
8 
Provided, further, That amounts invested in productive enterprises or 
9 
utilized by Philippine companies for export activities, shall not be subject 
10 
to conversion into Philippine currency: Provided, finally, ThaUhe Monetary 
11 
Board shall monitor the effective use of the "net due to" funds.Whenever 
12 
there results "net due from head office" outside the Philippines, this shall 
13 
be deducted from the capital accounts for purposes of determining the 
14 
required capital ratios.]" 
15 
SEC. 5. Section 6 of Republic Act No. 7721 is deleted and replaced with the 
• 
16 
original provisions of Section 5 as follows: 
17 
"Sec. 6. HEAD OFFICE GUARANTEE. THE HEAD OFFICE OF 
18 
FOREIGN 
BANK 
BRANCHES 
SHALL 
GUARANTEE 
PROMPT 
19 
PAYMENT OF ALL LIABILITIES OF ITS PHILIPPINE BRANCHES. 
20 
[Entrants under Section 2(iii). - Foreign banks shall be allowed entry under 
21 
Section 2 (iii) within five (5) years from the effectivity of this Act. During 
22 
this period, six (6) new foreign banks shall be allowed entry under Section 
23 
2(iii) upon the approval of the Monetary Board. An additional four (4) 
24 
foreign banks may be allowed entry on recommendation of the Monetary 
25 
Board, subject to compliance with Sections 2, 3, 4, and 5 of this Act, upon 
26 
approval of the President as the national interest may require.]" 
27 
SEC. 6. Section 8 of Republic Act No. 7721 is hereby amended to read as 
28 
follows: 
29 
"Sec. 8. Equal Treatment. - Foreign banks authorized to operate under 
30 
Section 2 of this Act, shall perform the same functions, enjoy the same 
31 
privileges, and be subject to the same limitations imposed upon a 
32 
Philippine bank of the same category. PROVIDED, HOWEVER, THAT 
33 
THE MONETARY BOARD MAY PRESCRIBE A HIGHER SINGLE 
4 


1 
BORROWER'S LIMIT FOR A FOREIGN BANK BRANCH UP TO THE 
2 
EQUIVALENT OF ITS PERMANENTLY ASSIGNED CAPITAL FOR THE 
3 
PURPOSE OF PROMOTING FOREIGN INVESTMENTS. [These limits 
4 
include, among others, the single borrower's limit and capital to risk asset 
5 
ratio as well as the capitalization required for expanded commercial 
6 
banking activities under the General Banking Act and other related laws of 
7 
the Philippines. The basis for computing the ratio shall be the capital of the 
8 
foreign bank branch in the Philippines.] 
9 
The foreign banks shall guarantee the observance of the rights of their 
10 
employees under the Constitution. 
11 
Any right, privilege or incentive granted to foreign banks or their 
12 
subsidiaries or affiliates under this Act, shall be equally enjoyed by and 
13 
extended under the same conditions to Philippine banks. [Philippine 
14 
corporations whose shares of stocks are listed in the Philippine Stock 
15 
Exchange or are of long standing for at least ten (10) years shall have the 
16 
right to acquire, purchase or own up to sixty percent (60%) of the voting 
17 
stock of a domestic bank.]" 
18 
SEC. 7. A new provision in Section 9 is hereby inserted in the same Act, in lieu 
19 
of the original provisions of Section 9 repealed by Section 11 9f Republic Act No .. 
20 
10000. Section 9 shall read as follows: 
21 
"SECTION 9. PARTICIPATION IN FORECLOSURE PROCEEDINGS. 
22 
FOREIGN BANKS WHICH ARE AUTHORIZED TO DO BANKING 
23 
BUSINESS IN THE PHILIPPINES THROUGH ANY OF ITS MODES OF 
24 
ENTRY UNDER SECTION 2 SHALL BE ALLOWED TO BID AND TAKE 
25 
PART IN FORECLOSURE SALES OF REAL PROPERTY MORTGAGED 
• 
26 
TO THEM, AS WELL AS TO AVAIL OF ENFORCEMENT AND OTHER 
27 
PROCEEDINGS, AND ACCORDINGLY TAKE POSSESSION OF THE 
28 
MORTGAGED PROPERTY, FOR A PERIOQ NOT EXCEEDING FIVE (5) 
29 
YEARS FROM ACTUAL POSSESSION: PROVIDED, 
THAT IN NO 
30 
EVENT SHALL TITLE TO THE PROPERTY BE TRANSFERRED TO 
31 
SUCH FOREIGN BANK. IN CASE SAID BANK IS THE WINNING 
32 
BIDDER, IT SHALL, DURING THE SAID FIVE (5)-YEAR PERIOD, 
. 
. 
33 
TRANSFER ITS RIGHTS TO A QUALIFIED PHILIPPINE NATIONAL, 
34 
WITHOUT 
PREJUDICE TO A 
BORROWER'S RIGHTS 
UNDER 
5 


1 
APPLICABLE LAWS. SHOULD THE BANK FAIL TO TRANSFER SUCH 
2 
PROPERTY WITHIN THE FIVE (5)-YEAR PERIOD, IT SHALL BE 
3 
PENALIZED ONE HALF (1/2) OF ONE PERCENT (1%) PER ANNUM OF 
4 
THE PRICE AT WHICH THE PROPERTY WAS FORECLOSED UNTIL IT 
5 
IS ABLE TO TRANSFER THE PROPERTY TO A QUALIFIED 
6 
PHILIPPINE NATIONAL." 
7 
SEC. 8. Section 10 of Republic Act No. 7721 is hereby amended to read as 
8 
follows: 
9 
"Sec. 10. Transitory Provisions. -
FOREIGN BANKS WHICH ARE 
10 
ALREADY AUTHORIZED TO DO BANKING BUSINESS IN THE 
11 
PHILIPPINES THROUGH ANY OF THE MODES OF ENTRY UNDER 
12 
SECTION 2 MAY APPLY TO CHANGE THEIR ORIGINAL MODE OF 
• 
13 
ENTRY. 
14 
Foreign banks operating through branches in the Philippines upon the 
15 
effectivity of this Act, shall RETAIN THEIR ORIGINAL PRIVILEGE UPON 
16 
ENTRY TO ESTABLISH A LIMITED NUMBER OF SUB-BRANCHES. 
17 
HOWEVER, THE PREVIOUS RESTRICTION ON THE LOCATIONS OF 
18 
SUCH ADDITIONAL BRANCHES IS HEREBY LIFTED [be el,igible for the 
19 
privilege of establishing up to six (6) additional branches under the same 
20 
terms and conditions required by Section 4 (ii) hereof: Provided, That for 
21 
any branch additional to what is existing at the time of the effectivity of this 
22 
Act, the prescribed permanently assigned capital shall be complied with 
23 
immediately: Provided, further, That a foreign bank may open three (3) 
24 
branches in the location of its choice and the next three (3) branches in 
25 
locations designated by the Monetary Board to insure balanced economic 
26 
development in all the regions.] 
27 
The existing Philippine branches of foreign banks shall [be given] 
28 
COMPLY WITHIN one [-and-a-half (1 112)] year[s] from the effectivity of 
29 
this Act [to comply] with the minimum capital requirements as prescribed 
30 
under Section 4 (ii) of this Act, UNLESS OTHERWISE EXTENDED BY 
31 
THE MONETARY BOARD." 
6 


1 
SEC. 9. 
Section 13 of Republic Act No. 7721 is hereby amended to read as 
2 
follows: 
3 
Sec. [13] 11. [Delegation of] Rule-Making Powers OF THE MONETARY 
4 
BOARD OF THE BANGKO SENTRAL NG PILIPINAS and Compliance 
5 
Reports. - The Monetary Board is hereby authorized to issue such rules 
6 
and regulations as may be needed to implement the provisions of this Act 
7 
[after consultation with the chairpersons of the Banks Committee of the 
8 
House of Representatives and the Senate of the Philippines]. On or before 
9 
May 30 of each year, the Monetary Board shall file a written report to 
10 
Congress and its respective Banks Committees, on the developments in 
11 
the implementation of this Act. THE IMPLEMENTING RULES AND 
12 
REGULATIONS OF THIS ACT SHALL BE PUBLISHED IN AT LEAST 
13 
TWO (2) NEWSPAPERS OF GENERAL CIRCULATION." 
14 
SEC. 10. Section 12 of Republic Act No. 7721 is hereby amended to read as 
15 
follows: 
16 
"Sec. 12. Applicability of Other Banking Laws. -
[The provisions of 
17 
Republic Act No. 337, as amended, otherwise known as the General 
18 
Banking Act,] THE PROVISIONS OF REPUBLIC ACT NO. 7653, 
19 
OTHERWISE KNOWN AS THE NEW CENTRAL BANK ACT, THE 
20 
PROVISIONS OF REPUBLIC ACT NO. 8791, OTHERWISE KNOWN AS 
21 
THE GENERAL BANKING LAW OF 2000, insofar as they are applicable 
22 
23 
and not in conflict with any provision of this Act, shall apply to banks 
authorized pursuant to this Act." 
24 
SEC. 11. Section 14 of Republic Act No. 7721 is hereby amended to read as 
25 
follows: 
26 
"Sec. [14] 13. Amendment and Repeal of Inconsistent Laws. - [Sections 
27 
11,12, 12-A, 12-B, 13, 14-A", 21-B, and 68 of Republic Act'No. 337, as 
28 
amended, otherwise known as the General Banking Act: Sections 4 and 5 
29 
of Republic Act No. 7353, otherwise known as the Rural Banks Act; 
30 
Sections 4 and 14 of Republic Act No. 3779, as amended, otherwise 
31 
known as the Savings and Loan Association Act; and Section 4 of 
32 
Republic Act No. 4093, as amended, 
otherwise known as the Private 
7 
• 


, 
0 
1 
Development Banks Act] 
ALL LAWS, DECREES, EXECUTIVE 
2 
ORDERS, PROCLAMATIONS, RULES AND REGULATIONS, AND 
3 
OTHER ISSUANCES, OR PARTS THEREOF, insofar as they are 
4 
inconsistent with this Act, are hereby repealed or modified accordingly." 
5 
SEC. 12. Section 15 of Republic Act No, 7721 is hereby amended to read as 
6 
follows: 
7 
"Sec. [15] 14, Effectivity Clause. - This Act shall take effect fifteen (15) 
8 
9 
days after its publication in the Official Gazette or in AT LEAST two (2) 
national newspapers of general circulation, WHICHEVER IS EARLIER." 
10 
Approved. 
8 
• 
•