DOJ Opinion No. 016, s. 2004

DOJ OPINION NO. 016, s. 2004 January 26, 2004 Atty. Juan De Zuniga Jr. Assistant Governor and General Counsel Bangko Sentral ng Pilipinas Manila Sir : This refers to your request for opinion on the present status of banks vis-a-vis the provisions of the Anti-Dummy Law (C.A. No. 108, as amended) specifically the issue of whether banking activities should be deemed as having been take out of the coverage of the said law with the subsequent passage of several amendatory laws, such that the requirement to secure a Department of Justice authorization for employment of expatriates in banks should now be dispensed with. The request, it appears, was precipitated by the comments from certain sectors of the banking industry that with the enactment of statutes liberalizing the entry and scope of operations of foreign banks in the country, the banking business should be deemed as having been taken out of the coverage of the Anti-Dummy Law. In support of their contention, they cited the following legal provisions, namely, Section 2 of Republic Act No. 7721 ( Foreign Banks Liberalization Act ), Section 8 of Republic Act No. 7906 ( The Thrifts Bank Act of 1995 ) and Sections 72 and 73 of Republic Act No. 8791 ( General Banking Act of 2000 ). You state that the Bangko Sentral ng Pilipinas (BSP), acting on the above-mentioned comments, has rendered an opinion that Section 2 of the Anti-Dummy Law no longer applies to the following categories of banks, to wit: a) a branch of a foreign bank or a domestic bank that is wholly owned by a foreign bank, b) a domestic bank which is organized pursuant to R.A. No. 7721, by a foreign bank which owns more than 40% but less than 100% of the voting stock, and, (3) a thrift bank organized under R.A. No. 7906 regardless of whether Philippine ownership thereof is less than, or constitute at least 60% of its equity. Thus, we take it that you now want this Office to confirm the correctness of the said opinion. It bears stress that the very essence of the Anti-Dummy Law (Commonwealth Act No. 108, as amended) was to limit a certain economic activity, or the exercise or enjoyment of a certain right, franchise, privilege, property or business only to Filipino citizens, or to corporations or associations at least sixty (60%) percent of the capital of which is owned by Filipino citizens. 1 The law was intended to prevent the circumvention of the nationalization laws of the country. Coming now into the issue on whether certain banking activities can no longer be placed under the coverage of such nationalization laws, we rule in the affirmative. The pertinent provisions of the above-cited laws, arranged chronologically, read as follows: Republic Act No . 7721 Sec. 2. Modes of Entry . The Monetary Board may authorize foreign banks to operate in the Philippine banking system through any of the following modes of entry: (i) by acquiring, purchasing or owning up to sixty percent (60%) of the voting stock of an existing bank ; (ii) by investing in up to sixty percent (60%) of the voting stock of a new banking subsidiary incorporated under the laws of the Philippines ; or (iii) by establishing branches with full banking authority ; Provided that a foreign bank may avail itself of only one (1) mode of entry : Provided, further, That a foreign bank or a Philippine corporation may own up to sixty percent (60%) of the voting stock of only one (1) domestic bank or new banking subsidiary . DIESaC Republic Act No . 7906 Sec. 8. Ownership . At least forty percent (40%) of the voting stock of a thrift bank which may be established after the approval of this Act shall be owned by citizens of the Philippines, except where a new bank may be established as a result of a merger or consolidation of existing thrift banks with foreign holdings in which case the resulting foreign holdings shall not be increased but may be reduced and, once reduced, shall not be increased thereafter beyond sixty percent (60%) of the voting stock of thrift banks . 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. 2004dojcd Any provision of existing laws to the contrary notwithstanding, stockholdings in a thrift bank shall be exempt from any ownership ceiling for a period of ten (10) years from the effectivity of this Act. Republic Act No . 8791 Sec. 72. Transacting Business in the Philippines . The entry of foreign banks in the Philippines through the establishment of branches shall be governed by the provisions of the Foreign Banks Liberalization Act. The conduct of offshore banking business in the Philippines shall be governed by the provisions of the Presidential Decree No. 1034, otherwise known as the "Offshore Banking System Decree". Sec. 73. Acquisition of Voting Stock in a Domestic Bank . Within seven (7) years from the effectivity of this Act and subject to guidelines issued pursuant to the Foreign Banks Liberalization Act, the Monetary Board may authorize a foreign bank to acquire up to one hundred percent 100% of the voting stock of only one (1) bank organized under the laws of the Republic of the Philippines . Within the same period, the Monetary Board may authorize any foreign bank, which prior to the effectivity of this Act availed itself of the privilege to acquire up to sixty percent (60%) of the voting stock of a bank under the Foreign Banks Liberalization Act and the Thrifts Bank Act, to further acquire voting shares of such bank to the extent necessary for it to own one hundred percent (100%) of the voting stock thereof . In the exercise of this authority, the Monetary Board shall adopt measures as may be necessary to ensure that at all times the control of seventy percent (70%) of the resources or assets of the entire banking system is held by banks which are at least majority-owned by Filipinos. Any right, privilege or incentive granted to a foreign bank under this Section shall be equally enjoyed by and extended under the same conditions to banks organized under the laws of the Republic of the Philippines. ( Emphasis supplied ) The above-quoted provisions, in clear and unmistakable terms, state that foreign banks may now own or acquire one hundred percent (100%) or sixty percent (60%) of the voting stock of a domestic bank thereby effectively removing the banking industry from the coverage of the Anti-Dummy Law. Well entrenched is the rule in statutory construction that if the language of the statute is plain and free from ambiguity, and expresses a single, definite, and sensible meaning, that meaning is conclusively presumed to be the meaning which the legislature intended to convey. 2 It is worth observing, however, that the right of foreign banks to own or acquire sixty percent (60%) or one hundred percent (100%) of the bank capital in the Philippines is not without restrictions. One of the legal conditions set forth under the above-quoted provisions for allowing foreign banks to operate in the Philippine banking system is the prior approval of the Monetary Board of the Bangko Sentral ng Pilipinas. Likewise, foreign banks are only allowed to acquire one hundred percent (100%) of the voting stock of one domestic bank organized under Philippine laws. Furthermore, to insure that the entry of foreign banks would not result into a foreign domination of the banking system, the law has prescribed a retention limit of seventy percent (70%) of the resources or assets of the entire banking system to banks which are majority owned and controlled by Filipinos. Summarizing, we submit that certain banking activities involving the entry and operation of foreign banks into the Philippine banking system may now be deemed to have been taken out of the coverage of the Anti-Dummy Law, thereby dispensing the need for the prior authorization (see par. 1 of p. 1) of this Department with respect to the employment of foreign nationals, provided all the sine qua non conditions set forth by law are complied with. Please be guided accordingly. Very truly yours, (SGD.) MA. MERCEDITAS N. GUTIERREZ Acting Secretary Footnotes 1. Section 2-A of Commonwealth Act No. 108, as amended. 2. citing Ruben E. Agpalo, Statutory Construction , Fifth Edition, (2003), p. 124.