BY JOHNNY NOVERA
WE were amazed by the speed by which Congress approved the amendment to Republic Act No. 7721, the “Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines.”
Identified as House Bill No. 3984, the amending measure had on record the UNANIMOUS vote of 98 to zero in the Lower House. The same thing happened in the Senate. They also voted for the amendment unanimously!
On Friday, July 18, 2014, President Benigno S. Aquino III affixed his signature on the bill and it has now become law.
What is the effect of the new banking law to Philippine banks and to the business community in general?
We understand that it was passed in preparation for our integration to the ASEAN (Association of Southeast Asian Nations) Community in 2015.
With the entry of more foreign banks, however, the new law can bring in stiff competition to local banks, without much benefit to the country.
By the nature of banking business, funding for operation and lending even by foreign banks operating locally largely come from deposits that they generate also as part of their function. The new law, as our old folks would say, will have us cooked in our own lard.
Bank employee groups and labor unions in the industry have expressed their opposition to the new law. With the coming in of more foreign players, this can result into mergers and acquisition of local banks.
When this happens, many employees might be terminated from work because of redundancy. Worse, if the old bank is dissolved, then all employees would lose their jobs.
Our Bangko Sentral ng Pilipinas (BSP) has been implementing a program of merger and consolidation among local banks in the country. We do not know what they will say with the big increase in the number of banks to supervise when more foreign banks would come in. Some say there is also possible internal security risks.
As it is now, we already have a network of 9,884 banks and 14,528 ATMs (automated teller machines). The only problem is that they choose to concentrate in cities and big urban centers. In fact, BSP has been approving more applications for new bank branches lately and we hope it asked them to disperse their operation to other areas not yet adequately served.
In our column of June 2, 2014, we mentioned of the Bankers Association of the Philippines (BAP), also with its objections to the new law as detrimental to the local banking industry and the country. We wonder if Congress had any hearing with the local banks before the law was passed?
In international banking, there is the foreign banking correspondent system established between banks. It is an agreement entered into by a local bank with another bank in a foreign country to provide necessary services for its account holders without incurring the expense of setting up a bank or branch in another city or country.
Why not just a foreign correspondent arrangement among banks in the ASEAN countries as described above? (For comments or reactions, please e-mail to jnoveracompany@yahoo.com)/PN
