FOREIGN banks will no longer be required to go public under newly liberalized rules, a monetary official confirmed yesterday, even as the chief of the stock exchange said this would rob local investors of the chance to partake in the fruits of multinationals’ local operations.
“Yes, that’s actually in the law. That’s one of the liberalized features,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor A. Espenilla, Jr. told reporters at the sidelines of the Philippine Midyear Economic Briefing at the Philippine International Convention Center in Pasay City, when asked whether the listing requirement ceases to exist under relaxed rules on foreign bank entry signed into law last July by President Benigno S.C. Aquino III.
BSP Governor Amando M. Tetangco, Jr. had said last Thursday that the matter would be clarified once the central bank releases the implementing rules and regulations (IRR) of the law -- Republic Act (RA) No. 10641 or An Act Allowing the Full Entry of Foreign Banks in the Philippines -- within the year.
The regulators’ recent comments came nearly two weeks after Maybank Philippines, Inc. President and Chief Executive Officer (CEO) Herminio M. Famatigan, Jr. told reporters that the Malaysian-owned lender believes RA 10641 relieves it of a requirement to go public by 2015.
Philippine Stock Exchange (PSE) President and CEO Hans B. Sicat, however, expressed reservations about this latest development.
“Obviously, from our side, we encourage listing of more companies, including subsidiaries of foreign banks here,” Mr. Sicat said at the sidelines of the same government briefing.
“That will be good, because it obviously adds to market liquidity.”
Mr. Sicat said the listing requirement “allows, at the very least, the local population to actually gain the benefits of what a [multinational] company produces locally.”
“You may argue that, from their end, perhaps capital raising is not their main priority, because most of these multinationals are quite self-sufficient or well-funded by the parent,” Mr. Sicat explained.
“However, participation in the broader public market is the primary issue,” he stressed.
“[Listing] broadens the ability of retail investors in any jurisdiction to benefit from the revenues and profits that the institution makes.”
The BSP, in Circular No. 775 dated Nov. 28, 2012, required Philippine-based lenders majority-owned by foreign banks to list on the PSE.
These banks were given three years to comply with the circular from the date of its effectivity, which was Dec. 4, 2012.
Mr. Espenilla last week clarified in a text message that the PSE listing requirement applied to “foreign bank subsidiaries.”
BSP’s directory of banks and non-banks, last updated on Sept. 5, listed Maybank Philippines and CTBC Bank (Philippines) Corp. as the only subsidiaries of foreign banks among universal and commercial banks in the country.
Other foreign banks with local operations, such as The Hongkong & Shanghai Banking Corporation and Citibank, N.A., are listed as “branches of foreign banks.”
Circular 775 cited as basis for the listing requirement the provisions of RA 7721, or An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines and for Other Purposes that was enacted in 1994.
However, RA 10641 -- enacted last July -- amended certain parts of the two-decade-old RA 7721, which permitted the entry of only a limited number of foreign banks into the country.
The newer law provided that more foreign banks -- which should be publicly listed in their home country, unless state-owned -- could operate in the Philippines through any one of three modes of entry: by acquiring, purchasing or owning up to 100% of the voting stock of an existing bank; by investing in up to 100% of the voting stock of a new banking subsidiary incorporated under the laws of the Philippines; or by establishing branches with full banking authority.
RA 10641 also did away with the part of RA 7721 that Circular 775 enforced. The circular enforced Section 3 of RA 7721, which mandated BSP’s Monetary Board to “secure the listing in the Philippine Stock Exchange of the shares of stocks of banking corporations established” under that older law.
Mr. Sicat said that the stripping of the listing requirement, however, could hamper the public’s participation in firms doing business in “the local economies that do provide a very good market for these companies to make good profits [in].”
Mr. Espenilla said that the removal of the listing requirement should not be an issue as “[foreign banks] have means of raising capital” other than tapping the bourse.
But the question of listing, Mr. Sicat explained, should not be “so much an economic one from [the foreign banks’] point of view -- they have to make that distinction.”
“The fact that these companies do earn profitably from the local economies, what you’re really doing [by listing on the bourse] is just being more participative -- in a corporate governance sense -- for local investors to also benefit,” Mr. Sicat said.