Article 163Supplement v1, p. 163

COMMERCIAL LAWS SUPPLEMENT

Section 32. This Act shall take effect upon its approval.

RA No 7721 | An Act Liberalizing the

Entry and Scope of Foreign Banks in the

Philippines and for other purposes

As amended by RA No 10641

May 18, 1994

REPUBLIC ACT NO. 7721

AN ACT LIBERALIZING THE ENTRY AND SCOPE OF

OPERATIONS OF FOREIGN BANKS IN THE PHILIPPINES

AND FOR OTHER PURPOSES

SECTION 1. Declaration of Policy . — The State shall

develop a self-reliant and independent national economy

effectively

controlled

by

Filipinos

and

encourage,

promote, and maintain a stable, competitive, efficient,

and dynamic banking and financial system that will

stimulate economic growth, attract foreign investments,

provide a wider variety of financial services to Philippine

enterprises,

households

and

individuals,

strengthen

linkages

with

global

financial

centers,

enhance

the

country's competitiveness in the international market

and

serve as a channel for the flow of funds and

investments

into

the

economy

to

promote

industrialization.

Pursuant

to this policy, the Philippine banking and

financial system is hereby liberalized to create a more

competitive environment and encourage greater foreign

participation through increase in ownership in domestic

banks by foreign banks and the entry of new foreign bank

branches.

In allowing increased foreign participation in the financial

system, it shall be the policy of the State that the financial

system shall remain effectively controlled by Filipinos.

SECTION 2. Modes of Entry . — The Monetary Board may

authorize foreign banks to operate in the Philippine

banking system through any one of the following" modes

of entry: (i) by acquiring, purchasing or owning up to one

hundred percent (100%) of the voting stock of an existing

bank; (ii) by investing in up to one hundred percent

(100%) of the voting stockof a new banking subsidiary

incorporated under the laws of the Philippines; or (iii) by

establishing branches with full banking authority. (as

amended by RA No 10641)

SECTION 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 investment relationships

between the Philippines and the country of incorporation

of the foreign bank; (iii) study the demonstrated capacity,

global reputation for financial innovations and stability in

a competitive environment of the applicant; (iv) see to it

that reciprocity rights are enjoyed by Philippine banks in

the applicant’s country; and (v) consider willingness to

fully share their technology.

Only established, reputable and financially sound foreign

banks shall be allowed entry in accordance with Section 2

of

this

Act.

The

foreign

bank

applicant

must

be

widely-owned and publicly-listed in its country of origin,

unless

the

foreign

bank

applicant

is

owned

and

controlled by the government of its country of origin.

In the exercise of this authority, the Monetary Board shall

adopt such measures as may be necessary to ensure that

the control of at least sixty percent(60%) of the resources

or assets of the entire banking system is held by domestic

banks

which

are

majority-owned

by

Filipinos.

(as

amended by RA No 10641)

SECTION

4. Capital Requirements . — (i) For Locally

Incorporated

Subsidiaries

–

The

minimum

capital

required for locally incorporated subsidiaries of foreign

banks shall be equal to that prescribed by the Monetary

Board for domestic banks of the same category.

(ii) For Foreign Bank Branches – Foreign banks that shall

be authorized to establish branches pursuant to Section

2(hi) of this Act shah permanently assign capital of an

amount not less than the minimum capital required for

domestic banks of the same category. The permanently

assigned capital shall be inwardly remitted and converted

into Philippine currency.

The

foreign

bank

branch

may

open up to five (5)

sub-branches as may be approved by the Monetary

Board. Locally incorporated subsidiaries of foreign banks

pursuant to Section 2(h) of this Act shall have the same

branching privileges as domestic banks of the same

category. (as amended by RA No 10641)

SECTION 5. Head Office Guarantee . — The head office of

foreign bank branches shall guarantee prompt payment

of all liabilities of its Philippine branches.

SECTION 6. Entrants under Section 2 (iii) . — Foreign

banks shall be allowed entry under Section 2 (iii) within

five (5) years from the effectivity of this Act. During this

period, six (6) new foreign banks shall be allowed entry

under Section 2(iii) upon the approval of the Monetary

Board. An additional four (4) foreign banks may be

allowed

entry

on

recommendation of the Monetary

Board, subject to compliance with Sections 2, 3, 4, and 5

of this Act, upon approval of the President as the national

interest may require. (as repealed by RA No 10641)

SECTION 7. Board of Directors . — Non-Filipino citizens

may become members of the Board of Directors of a

bank to the extent of the foreign participation in the

equity of said bank.

SECTION

8.

Equal

Treatment .

—

Foreign

banks

authorized to operate under Section 2 of this Act, shall

perform the same functions, enjoy the same privileges,

and be subject to the same limitations imposed upon a

Philippine

bank

of

the

same

category.

The

single

borrower’s limit of a foreign bank branch shall be aligned

with that of a domestic bank.

The foreign banks shall guarantee the observance of the

rights of their employees under the Constitution.

Any right, privilege or incentive granted to foreign banks

or their subsidiaries or affiliates under this Act, shall be

equally

enjoyed

by

and

extended

under

the

same

conditions to Philippine banks. (as amended by RA No

10641)

SECTION

9.

Participation

in

Foreclosure

Proceedings.— Foreign banks which are authorized to do

banking business in the Philippines through any of the

modes of entry under Section 2 hereof shall be allowed to

bid and take part in foreclosure sales of real property

mortgaged to them, as well as to avail of enforcement

and other proceedings, and accordingly take possession

of the mortgaged property, for a period not exceeding

five (5) years from actual possession: Provided, That in no

event shall title to the property be transferred to such

foreign bank. In case said bank is the winning bidder, it

shall, during the said five (5)-year period, transfer its rights

to a qualified Philippine national, without prejudice to a

borrower’s rights under applicable laws. Should the bank

fail to transfer such property within the five (5)-year

period, it shall be penalized one half (1/2) of one percent

(1%) per annum of the price at which the property was

foreclosed until it is able to transfer the property to a

qualified Philippine national. (as amended by RA No

10641)

RA No 10641 Section 7. Transitory Provisions. – Foreign

banks

which

are

already

authorized

to do banking

business in the Philippines through any of the modes of

entry under Section 2 hereof may apply to change their

original mode of entry.

Foreign

banks

operating

through

branches

in

the

Philippines upon the effectivity of this Act shall retain

their original privilege upon entry to establish a limited

number

of

sub-branches.

However,

the

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