MANILA, March 18 (PNA) — Applications of three foreign banks to set up branches in the Philippines is seen to be approved in the near term.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor Espenilla Jr. said they are currently processing the applications of the said banks, which he, however, did not identify.
Asked on whether the approval will be made when the central bank’s policy-making Monetary Board (MB) conduct their regular meeting on Thursday, Espenilla said “not yet”, but stressed that the approval will be made soon.
“We’ll make an appropriate announcement if it happens,” he said.
The central bank official said most of the applications of foreign banks is to set up a branch instead of a subsidiary since the former is easier to do while the latter entails not only additional capital but a good partner.
A foreign bank is required to have a minimum capital of Php2 billion to be able to set up a branch in the Philippines. It is allowed to operate maximum of six branches.
Espenilla said those who want to have a local subsidiary will have unlimited chances of putting up branches just like a regular domestic bank but they need to acquire a local bank first.
He said foreign banks that already have a branch or branches in the Philippines are allowed by law to put up a subsidiary.
He noted that most foreign banks that have been in the country since the 1990s have chosen to maintain their sole branches because of their wholesale business model.
”They really require one unit. They don’t really need retail presence,” he said.
Entry of foreign financial institutions in the country have been fully liberalized after the signing of Republic Act 10641 or the Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines in July 2014.
Before the signing of the amendment law covering foreign banks’ operation in the country, foreign financial institutions can only own up to 60 percent in a domestic bank.
The first foreign bank that got approval to operate a branch in the Philippines under the fully liberalized rule is Sumitomo Mitsui Banking Corp., Japan’s second biggest bank. It got the approval last February.
Relatively, Espenilla said entry of more foreign banks in the Philippines is seen to further boost foreign direct investments (FDIs) in the country.
”But more than that is the multiplier effect,” he said citing that “most of the branches that we’re talking to are really following their home companies or committing to bring in their own home companies into this economy.“
Espenilla said these banks are also bringing in their economies’ small and medium enterprises (SMEs).
”That’s a job creating initiative. It’s hard to quantify now because it’s relatively early but I think it will bear fruit soon enough,” he added. (PNA)