Bangko Sentral ng Pilipinas said Wednesday it will phase out a 17-year moratorium on setting up new banks to further boost the banking industry that has recently opened up to foreign investors.
“This initiative provides local businesses the avenue to explore opportunities in the banking sector amid the opening of the industry to foreign capital infusion,” Bangko Sentral Governor Amando Tetangco Jr. said in a statement Wednesday.
The Monetary Board, the policy-making body of Bangko Sentral, approved the lifting of the ban on granting licenses to establish new banks.
The approval comes in two phases. The initial phase, which allows existing thrift banks to apply for a license to convert into a universal or commercial bank, will apply until the end of 2017, it said in a statement.
The second phase will start in January 2018, when all restrictions on granting new licenses will be fully lifted, Bangko Sentral said.
“The two-year transition period also gives interested parties ample time to strategically position themselves in line with evolving policy reforms and regional integration efforts,” Tetangco said.
Foreign banks including Japan’s Sumitomo Mitsui Financial Group Inc. and Singapore’s United Overseas Bank Ltd. have received approval to open branches after the Philippines loosened its rules on foreign ownership in 2014.
Local lender Security Bank Corp. last month agreed to sell a 20-percent stake to Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, in a $773-million deal.
Wealthy families running some of the largest Philippine banks need to attract foreign capital and know-how if they are to withstand growing competition from overseas lenders and avoid “stagnation,” Bangko Sentral Deputy Governor Nestor Espenilla said in January.
Bangko Sentral in 1999 imposed a moratorium on new banks to encourage mergers and consolidation as it sought bigger and stronger lenders. It allowed licenses to still be granted in areas without banks.
Bangko Sentral Deputy Governor Nestor Espenilla Jr. said in a text message phase one of the transition period would take effect immediately “upon [the] issuance of [a] circular.”
All restrictions and exemptions will be fully lifted under phase two. The regulations also provide for a graduated matrix of application and licensing fees.
“However, in line with the continuing policy thrust of the BSP on financial inclusion, as well as for stronger financial institutions, applications for new banks with head offices in unbanked areas as well as applications for mergers and acquisitions for distressed banks are exempted from said fees,” Bangko Sentral said.
It said to provide further for a general incentive for the new regulation, documentary requirements for the establishment of new banks were also rationalized.
Under Republic Act 10641 which further liberalized the banking industry in 2014, foreign banks are allowed to control up to a combined 40 percent of the total assets of the banking system. This
was 10 percentage points higher than the previous 30-percent limit.
Bangko Sentral approved six applications from Asian banks last year, including the United Overseas Bank Ltd. of Singapore, Yuanta Commercial Bank Co. Ltd. of Taiwan, Industrial Bank
of Korea, Shinhan Bank of Korea, Sumitomo Mitsui Banking Corp. of Japan and Cathay United Bank of Taiwan. With Bloomberg