Closed Philippine rural banking system opens to foreign investments

A recently passed bill will allow non-Filipinos to buy and own up to 40% of a rural bank’s authorized capital stock.

Awaiting the signature of President Benigno Aquino III is a law allowing foreign equity into the restricted Philippine rural banking system.

House Bill 5360 passed yesterday by the Philippine House of Representatives seeks to amend Section 4 of Republic Act 7353 or the Rural Banks Act of 1992. The new law seeks to open new sources of equity infusion for rural banks, and allows non-Philippine citizens to become members of the board of directors.

With House Bill 5360, non-Filipinos may buy and own up to 40 percent of a rural bank’s authorized capital stock. The bill provides that non-Filipino citizens may become members of the board of directors of a rural bank to the extent of their foreign participation in the equity of the bank.

House Bill 5360 tasks the Bangko Sentral ng Pilipinas (the central bank) to prescribe the necessary rules and regulations on the amendments of the Rural Bank Act, and distribute the entry of foreign equity into the rural banking system.

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