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MB Approves Implementing Rules of Law on Foreign Equity Infusion in RBs

08.30.2013

The Monetary Board (MB) has approved the implementing rules of Republic Act No. 10574 or “an Act Allowing the Infusion of Foreign Equity in the Capital of Rural Banks” which allows non-Filipino citizens to own up to 60 percent of the voting stock of a domestic rural bank (RB).

Consistent with the provisions of the law, the implementing rules contained in Bangko Sentral ng Pilipinas (BSP) Circular 809 are aimed at revitalizing the rural banking industry and improving the access to banking services in the country’s rural areas.

The implementing rules provide the general guidelines for the entry of foreign banks, non-bank corporations and individuals as shareholders of RBs. The fitness of prospective investors in RBs will be assessed based on their strategic objectives, reputation and integrity and effectiveness of banking or business model. Qualified foreign investors are allowed to pour capital into several RBs to the extent authorized by the MB.

Aside from foreign ownership of RBs, Circular 809 also sets the rules for the number of independent directors for RBs, the membership of elective or appointive official in the RB Board, the foreclosure of lands used as RB loan collateral, the valuation of government-held shares in RBs and the computation of dividend rates on RB shares held by government–owned or -controlled financial institutions.

The MB has issued the implementing rules for RA 10574 after series of consultations with the rural banking industry and key stakeholders.

The BSP is keen on strengthening the RB industry as part of its efforts to promote financial stability. RBs are also essential to enhancing financial inclusion by boosting access to financial services in the countryside. Financial stability and inclusion are supportive of sustained and balanced economic growth, which is a key objective of the BSP.

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