The legislative battle lines are drawn

In the first regular session of Congress (2nd semester of 1992), Representatives Edmigdio Tanjuatco, Jr., Margarito Teves, and Alberto Veloso authored House Bill 263 entitled “An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines, Amending for the purpose RA 337, otherwise known as the General Banking Act.” They were joined by “additional authors as manifested on the floor”: Miguel Romero, Jose Ramirez, Ramon Bagatsing, Jr., Renato Dragon, Rodolfo Albano, Dante Liban, and Angelito Sarmiento.

All of the above named representatives, save for Dragon, were not connected with the banking industry.  Dragon headed a savings bank based in Cavite before he was elected to the House.  Then in March 1993, HB 223 was substituted by HB 8226 carrying the same title.  HB 8226 had Teves as its principal author: Teves was joined this time by 65 other members of the House as co-authors.  Of this 65 co-authors, only Manuel Villar, Jr., and Ricardo Silverio  were associated with the banking industry.  But Villar only headed the Capitol Bank, another thrift bank, and is not associated with any commercial bank.  Silverio was once associated with Pilipinas Bank but only during the Marcos years.

After two months, on May 17, 1993, HB 8226 was approved on second reading by the House.  A month later, it was approved on third and final reading with an overwhelming 120-2 vote with no abstentions.  The Senators were less united than their counterparts in the House of Representatives.  Three versions were introduced in 1992: Senate Bill 839 by Gloria Macapagal-Arroyo, SB 1474 by Senators Edgardo Angara, Raul Roco and Blas Ople, and SB 1563 by Senator Leticia Ramos-Shahani.  These SBs were soon consolidated into SB 1606 in April 1994.[1]

An examination of the three SBs indicate that Shahani’s version is the most liberal one while the Angara-Roco-Ople version is the most restrictive one.  For instance, on the matter of the entry of foreign banks, the Shahani version had a section that explicitly allowed the entry of foreign banks.  The Arroyo version took the tack of repealing section 11 of the General Banking Act (GBA) that explicitly prohibited the entry of new foreign banks into the country. Meanwhile, the Angara-Roco-Ople version did not contain any provision that either explicitly allowed the entry of new banks or repealed GBA’s section 11.  Arroyo’s version was closest to HB 8226 while Shahani’s bill was apparently more liberal than the already liberal House version.

On the question, for instance, of the mode of entry of new foreign banks, the House and Arroyo versions both provided for three possible modalities: establishment of branches for the four existing foreign banks; establishment of wholly- or majority-owned and controlled banking subsidiaries; and to invest in new shares of stocks or acquire into existing foreign-owned stocks up to 70% of the voting stock of an existing bank.  Under the first modality, Bank of America, Citibank, Hongkong and Shanghai Bank,  and Standard Chartered Bank can open new branches.  Under the second mode, a new foreign bank, for example Dresdner Bank of Germany may decide to establish Dresdner Bank (Philippines) and could own up to 100% of its voting stock.  In the third option, a foreign bank that already has a stake in an existing Philippine bank may opt to increase its share in the same bank.  For example, Chemical Bank of New York, which already had a stake in Far East Bank, may increase its investment in the same bank.  Or it could also happen that Citibank may want to buy into Far East Bank by buying Chemical Bank’s share.  The Shahani version goes beyond the three options mentioned in HB 8226 and proceeds to specify what kinds of business the foreign banks can undertake in the country.  They include:

  • “Lending of funds obtained from the public through receipt of deposits provided that all peso deposits shall not be vested in any manner outside the Philippines”;
  • General banking business; and
  • “Maintain by themselves or by assignee any suit for the recovery of any debt, claim, or demand whatsoever” (Comparative Analysis 1993).

On the other hand, the Angara-Roco-Ople version does not contain any provision on the mode of entry of new foreign banks (as it was equally silent on the entry of new banks), capital requirements, expansion of foreign banks’ scope of operations within the Philippines, and the general guidelines for the approval of entry of the new foreign banks.  It was as if the three senators were not in favor of the entry of new foreign banks at all.  The only concession that the three senators allowed in this direction was to increase the foreign equity ownership in existing Philippine banks from 30% allowed by the GBA to 50% of voting stock.  The other Senate versions and HB 8226 were more liberal allowing from a maximum of 70-100% in foreign ownership of banks organized according to Philippine law.  In effect, the three simply wanted to keep the existing number of commercial banks in place.  In so far as this version is concerned, they were not even in favor of allowing Bank of America et al to increase the number of their branches in the country.

In delineating the guidelines for the approval of entry of new foreign banks, the Shahani version was more liberal compared to HB 8226.  It adopted all of the HB 8226’s stipulations except the ‘reciprocity’ requirement.  The House version required that only applications from banks domiciled in countries that also allow the operation of Philippine banks in their jurisdictions will be qualified.  The Shahani version dropped this restriction altogether (Comparative Analysis 1993).

The political alignments in both legislative chambers must be reviewed in order to put in proper context the dynamics underlying the process of passing the Bank Liberalization Law of 1994 (R.A. 7721, entitled “An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines and for other Purposes).  President Ramos run and won under the banner of Lakas-NUCD, a breakaway party from the Laban ng Demokratikong Pilipino (LDP).  In the House of Representatives, Ramos’ able lieutenant, House speaker Jose de Venecia not only to managed to raid the LDP ranks and entice many into the Lakas fold but also forged a ‘Rainbow Coalition’ composed of incumbents from Lakas, LDP, the Liberal Party, the Nationalist Peoples’ Coalition (NPC), and the Nacionalista Party that invariably supported administration bills. And the Bank Liberalization Law was definitely an administration bill.

In the Senate, however, Lakas had only two senators, Shahani and Santanina Rasul.  Furthermore, the Lakas senators were relative lightweights especially in economic issues compared to the LDP stalwarts who dominated the Senate in terms of influence and prestige—Angara, Roco, Ople, Arroyo, Alberto Romulo, and Neptali Gonzales. Only in late 1994 did the Lakas and the LDP enter into a coalition with each other, a union rhapsodized by columnist Amando Doronilla as the dawning of a new, issue-based politics in the country while derided by other media pundits as the marriage of convenience of not-so-innocent harlots.

The 1992 Senate versions however indicate some fissures within LDP with Gloria Macapagal-Arroyo hewing closely to Ramos’ overall program of economic liberalization.  Angara, Roco and Ople appear to be still wedded to the protectionist, rent-seeking past, for good reason.  Before becoming legislators, Angara and Roco were stalwarts of the top-drawer ACCRA law firm, which counted among its many clients the top corporations, financial or otherwise, of the country.  Between the two, Roco was clearly associated with a family group, the Sorianos who had strong interests in San Miguel Corporation and controlled a middling commercial bank, the Asian Bank.  Angara, meanwhile developed strong links with the coconut monopoly established during the Marcos years and headed by Eduardo “Danding” Cojuangco, who in turn had substantial holdings in the United Coconut Planters Bank and San Miguel Corporation.

To be continued…..


[1]  A document entitled “Comparative Analysis Between RA 337, HB 8226, SB 839, SB 1474, SB 1563” and dated 10 January 1993 is the basic source of information for the subsequent discussion.  Unfortunately, the document does not indicate any author, and the author forgot the exact provenance of the same.  For purposes of citation in text, it will be subsequently referred to as Comparative Analysis 1993.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s