JULY 8, 2011

NR # 2459B

Solon wants foreign equity in the capital of rural banks

A veteran lawmaker has proposed the infusion of foreign equity in the capital of rural banks to increase its financial services. Rep. Sergio Apostol (2nd District, Leyte), author of House Bill 4805 and Chairman of the House Committee on Banks and Financial Intermediaries, said allowing 40 percent foreign ownership for rural banks would open a new source of equity infusion. This would benefit particularly the smallest lenders that cannot expand and sustain the provision of an increasingly sophisticated form of financial services without the benefit of new capital, Apostol said. Apostol said foreign equity investments would, without a doubt, fill this gap and be a major stimulus for micro-finance, micro-enterprise and agriculture sectors. This will, therefore, be catalysts in countryside development, Apostol stressed. The bill seeks to amend Section 4 of Republic Act No. 7353 otherwise known as An Act Providing for the Creation, Organization and Operation of Rural Banks, And for Other Purposes or the Rural Bank Act of 1992. Apostol said under Section 4 of RA 7353, the capital stock of any rural bank shall be fully owned and held directly or indirectly by citizens of the Philippines. With this restriction, rural banks remain the only category of domestic banks that is not allowed any foreign equity, Apostol said. Apostol said the State recognizes the need to promote comprehensive rural development with the end in view of attaining a more equitable distribution of opportunities, income and wealth, a sustained increase in the amount of goods and services produced by the nation for the benefit of the people. The State also encourages and assists in the establishment of a rural banking system designed to make needed credit available and readily accessible in the rural areas on reasonable terms, Apostol said. Under the measure, non-Filipino citizens may own, acquire or purchase up to 40 percent of the voting stock of a rural bank.

The bill provides that where a new bank is established as a result of a merger or

consolidation of existing rural banks with foreign holdings, the resulting foreign holdings shall not be increased but may be reduced, and once reduced shall not be increased thereafter beyond 40 percent of the voting stock of rural banks. Likewise, the percentage of the foreign-owned voting stocks shall be determined by the citizenship of individual stockholders and in case of corporations owning shares, by the citizenship of each stockholder in the said corporations. The bill provides further that non-Filipino citizens may become members of the Board of Directors of a rural bank to the extent of the foreign participation in the equity of the bank. (30) lvc