House approves bill allowing foreign equity in rural banks

The House of Representatives passed on third and final reading a bill allowing foreign equity into the rural banking system.   In a statement Thursday, the House of Representatives said House Bill 5360 seeks to amend Section 4 of Republic Act 7353 or the Rural Banks Act of 1992 to open new source of equity infusion for rural banks, allowing non-Philippine citizens to become members of the board of directors.   Under Section 4 of RA7353, only Philippines citizens should own and hold directly and indirectly the capital stock of rural banks.   “With the restriction, rural banks remain the only category of domestic banks that is not allowed any foreign equity,” said Rep. Sergio Apostol (2nd District, Leyte), who chair’s the House committee on banks and financial intermediaries.   “The State recognizes the need to promote comprehensive rural development to attain 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,” Apostol noted.   Government helps and encourages the establishment of a rural banking system design to make credit available and accessible in rural areas at reasonable terms, Apostol noted.   With House Bill 5360, non-Filipinos may buy and own up to 40 percent of a rural bank’s authorized capital stock.   “The bill provides that non-Filipino citizens may become members of the board of directors of a rural bank to the extent of their foreign participation in the equity of the bank,” said Apostol.   Rep. Pedro Romualdo (Lone District, Camiguin), who authored the bill, said foreign investment in the rural banking sector should pave the way for a sustained competitive and vigorous banking system.   According to the Camiguin representative, “the rural bank industry plays a pivotal role in meeting and sustaining the needs of various sectors of the local economy such as the business sector, agriculture and fisheries sector, micro-enterprises and small [businesses].”   “The banking industry is one of the engines of development in the country, but most universal and top banks are operating in highly urbanized areas and in economically viable towns to the prejudice of depressed areas,” Romualdo noted.   “The amendment in the rural banking policy is a positive step towards a better banking environment, allowing the rural banks to expand their services, modernize their facilities and hire highly competent personnel to handle their operations and services,” Romualdo added.   House Bill 5360 tasks the Bangko Sentral ng Pilipinas to prescribe the necessary rules and regulations on the amendments of the Rural Bank Act, in consultation with various stakeholders, and distribute the entry of foreign equity into the rural banking system. — CMA/VS, GMA News