(11 February 2016 – Philippines) A moratorium, which lasted 17 years, on the granting of licenses to establish new local banks will be gradually removed, with all restrictions gone by 2018 to allow the entry of addition foreign capital into Philippines’ banking system.
The Bangko Sentral ng Pilipinas (BSP) said in a statement earlier this week that its Monetary Board approved a two-phased lifting of the moratorium established in 1999. The first, which takes effect until end-2017, allows existing thrift banks to apply for a license to convert into a universal or commercial bank.
The second phase, scheduled to start on 1 January 2018, will fully remove all restrictions on the grant of all new bank licenses, according to the BSP.
“The two-year transition period gives interested parties ample time to strategically position themselves in line with evolving policy reforms and regional integration efforts,” BSP Governor Amando M. Tetangco Jr. said.
As a whole, the lifting of the moratorium “provides local businesses the avenue to explore opportunities in the banking sector amid the opening of the industry to foreign capital infusion,” said Tetangco, who also chairs the Monetary Board.
In 2014, President Aquino signed into law Republic Act 10641, which allows the full entry of foreign banks. Under the new law, foreign lenders can account for a maximum of 40 percent of the banking industry’s assets.
To date, six foreign banks have been granted access to the local market: Japan’s Sumitomo Mitsui Banking Corp., Singapore’s United Overseas Bank Ltd., South Korea’s Shinhan Bank and Industrial Bank of Korea, and Taiwan’s Cathay United Bank and Yuanta Commercial Bank Co. Ltd.
Last month, Mitsubishi UFJ Financial Group—Japan’s biggest bank—acquired a 20-percent stake in Security Bank in a deal valued at P37 billion, making it one of the biggest foreign acquisitions of a local bank in recent years.
The BSP said that the previous moratorium served as “a policy initiative to encourage mergers and consolidations to facilitate the establishment of larger and stronger financial institutions.”
However, it exempted the grant of licenses for new banks in unbanked areas as well as for microfinance-oriented thrift and rural banks, the central bank added.
“Under regulation approved by the Monetary Board, all of these restrictions and exemptions will be fully lifted in Phase 2,” the BSP said.