MANILA, Philippines – President Aquino has signed a law allowing foreigners to own up to 60 percent of voting stocks in rural banks.

Under RA 10574, signed by the President last May 24, non-Filipino citizens may now own, acquire or purchase up to 60 percent of the voting stocks in a rural bank.

“It opens up another area where foreign capital can go into,” deputy presidential spokesperson Abigail Valte told a news briefing in Malacañang.

Under the law, foreigners can now be elected members of the board of directors of rural banks in the countryside. However, “their participation is limited to their proportionate share in the equity of the rural bank.”

Previously, rural banks should be “100 percent Filipino-owned,” but now that the law has been amended the arrangement can now be 60-40 – or 60 percent foreign and 40 percent local.

This is in stark contrast, however, to the 60-40 provision in the 1987 Constitution that was affirmed by the Supreme Court in its historic “national patrimony” ruling in 1997, giving priority to Filipinos in owning lands and running companies in the country.

The new law likewise allows rural banks to foreclose the mortgage of properties or lands even if these are covered by the Comprehensive Agrarian Reform Program, although the threshold should not be “more than five hectares,” as provided for in the statute.

“It’s subject to the retention limits under Section 6 of RA 6657, or the Comprehensive Agrarian Reform Law,” Valte explained.

Meanwhile, the Rural Bankers Association of the Philippines (RBAP) lauded yesterday Malacañang’s move to pass RA 10574.

RBAP president Leandro Z. Garcia Jr. said this law would help create an environment conducive to economic growth in the countryside.

“The passage of the foreign equity bill into a law is a major win not only for rural banks, but to the countryside as well. Now that foreign investments are allowed, rural banks are now in a better financial position to reach out and serve both the unbanked and under-banked through improved banking services,” he said.

“We expect continuous development in the countryside especially now that rural banks are made even stronger and sustainable,” he added.

In effect, Garcia said the measure would provide an additional source of capital for rural banks, placing them on a level playing field with thrift and commercial banks.

He said with the law in place, RBAP could now open its doors for talks on potential foreign partnerships.

Under the new law, foreign investors — individuals or entities – may now own up to 60 percent of voting stocks in rural banks. It also states that the percentage of the foreign owned voting stock would be determined by the citizenship of the individual or corporate stockholders of the bank. – With Donnabelle Gatdula

Article lifted from The Philippine Star website: http://www.philstar.com