Hon. Raul Roco

January 25, 1994 Hon. Raul Roco Chairman, Senate Committee on Banks, Financial Institutions and Currencies 4th Floor, PAL Building 1500 Roxas Boulevard Manila S i r : Hereunder are our comments on Senate Bill Nos. 839, 1474 and 1563 entitled: "An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines." LexLib The Commission interposes no objection to the proposed liberalization of entry of foreign banks in the Philippines. Their entry would provide linkage or access of Philippine businesses to foreign markets through global network of foreign banks and would tend to encourage more investments in other fields from abroad since foreign companies would now have banking linkages in the country. For the Philippines to be equally competitive and able to take part in international trade, it should take positive view towards globalization of business activities, trade and finance, and in order to achieve the status of the Philippines as envisioned in the Government's goal in "Philippines 2000", the policy of liberalization should thus be adopted. However, while the entry of foreign banks in the country deserves full support, the lawmakers should also look into the following points so that domestic banks and the Filipino people in general do not end up victims of discrimination in their own country: 1. The "reciprocity issue" on the extent of allowable banking activities should be given importance. The laws of the country or state of the applicant must effectively allow Filipino citizens and corporations to engage in the same banking business activities in the foreign bank's home country with equal rights and privileges as provided under the rules and regulations of the host country. LexLib 2. Adherence to the following constitutional provisions that "The State shall develop a self-reliant and independent, national economy effectively controlled by Filipinos (Art. II, Section 19 of the 1987 Philippine Constitution) and . . . . The State shall protect Filipino enterprises against foreign competition and trade practices. (Article XII, Section 1 of the Constitution). To be consistent with the above Constitutional provisions, only a limited number of new foreign banks should be allowed entry to prevent possible foreign domination. Preference should be given to publicly held foreign banks with global credentials and reputations and foreign banks from key countries which are strategically important to Philippine economic development, and the Monetary Board should be given the discretionary power to determine the allowable number taking into account existing domestic and international economic situations. This is premised on the volatile economic and market conditions and legislation may not foresee the appropriate adjustments to cope up with the ever changing business developments that may have to be made accordingly. The criteria to be set up in assessing foreign banks entry should not be discriminatory to domestic banks so that the liberalized entry will not be viewed as competition with local banks but the former shall be considered as partners in economic development and capital market formation. 3. Foreign banks should be subjected to the same rules and regulations applicable to domestic banks; capital requirement must be the same; and similar incentives must be given to Filipino owned banks. 4. Philippine creditors and depositors should be given the right to go after the assets of the parent bank which must act as the guarantor and shall be jointly and severally liable with foreign banks doing business in the Philippines. With the adoption of the foregoing recommendations, we are not merely broadening our international business horizons, but we are also adhering to the policy of protecting domestic industries, ultimately, the Filipinos who will benefit in the long run. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman