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Foreign Banks and Trust

Foreign Banks
• The entry of foreign banks in the Philippines through the establishment of
branches is governed by the provisions of the Foreign Banks Liberalization Act (RA
• Offshore Banking Business- governed by Offshore Banking System Decree (PD No.
• Offshore Banking- conduct of banking transactions in foreign currencies involving
the receipt of funds from external sources and the utilization of such funds.
• Offshore Baking Unit- a branch, subsidiary or affiliate of a foreign banking
corporation which is duly authorized by the Bangko Sentral ng Pilipinas to
transact offshore banking business in the Philippines.
• *foreign corporations doing business in the Philippines are required to obtain a
license under the Corporation Code. It is necessary only if it is transacting or
doing business in the country.
Acquisition of Voting Stock in a Domestic
• Foreign Banks are allowed entry in the Philippines subject to the ff.
• Within 7 years from the effectivity of the GBL and subject to guidelines issued
pursuant to the Foreign Banks Liberalization Act, the Monetary Board may
authorize a foreign bank to acquire up to 100% of the voting stock of only 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 the GBL avail itself of the privilege to acquire
up to 60% of the voting stock of a bank under the Foreign Banks Liberalization
Act and the Thrift Banks Act, to further acquire voting shares of such bank to
the extent necessary for it to own 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 70% of the
resources or assets of the entire banking system is held by banks which are at
least majority-owned by Filipinos.
• Any of the foregoing right, privilege or incentive granted to a foreign bank
shall be equally enjoyed by and extended under the same conditions to banks
organized under the laws of the Republic of the Philippines.
Local Branches of Foreign Banks
• In the case of a foreign bank which has more than 1 branch in the
Philippines, all such branches shall be treated as one unit for the
purpose of GBL, and all references to the Philippine branches of
foreign banks shall be held to refer to such units.
Head Office Guarantee
• In order to provide effective protection of the interests of the
depositors and other creditors of Philippine branches of a foreign
bank, the head office of such branches shall fully guarantee the
prompt payment of all liabilities of its Philippine branch.
• Residents and citizens of the Philippines that are creditors of foreign
banks shall have preferential right to assets of such banks.
Under RA 7721, foreign banks have three modes
entry in the country
• Acquiring 60 of voting stock of the existing bank
• Investing 60% of voting stock of new banking subsidiary incorporated
in the Philippines
• Establishing branches with full banking authority
• A foreign bank may only avail only 1 mode of entry.
• GBL only stated that branches of foreign banks will be treated as one and
shall have the head office guarantee to creditor Filipino citizens.
• However, there is nothing in the law that states that citizens that are
debtors to foreign bank local branches shall also be debtors to the head
• There is also nothing in the law that the head office and its local foreign
branches shall be treated as one.
• Thus, compensation with Philippine branches with foreign branches cannot
be effected as they cannot be considered creditors and debtors of each.