“R.A. 10641 (the new banking law) utterly gives away the Philippine banking industry to foreign financial giants.” – Banking and Financial Unions Against Central Bank Circular on outsourcing
By MARYA SALAMAT
MANILA – Last Friday (July 18), President Benigno “Noynoy” Aquino III signed into law the full liberalization of the Philippine banking industry or its full opening up to foreign banks’ ownership and control.
Republic Act 10641, “An Act Allowing the Full Entry of Foreign Banks in the Philippines,” consolidates House Bill 3984 and Senate Bill 2159. It would allow foreign banks to operate in the Philippine banking system by (1) acquiring, purchasing or owning up to 100 percent of the voting stock of an existing bank; (2) investing in up to 100 percent of the voting stock of a new banking subsidiary incorporated under the laws of the Philippines; or (3) by establishing branches with full banking authority. This act amends the May 1994 RA 7721, which capped foreign ownership on banks at 60 percent. It also abolishes the cap on the number of wholly-owned overseas lenders permitted to operate in the country, which was previously fixed at 10.
From Makati’s central business district, employees grouped together in BFU 268 (Banking and Financial Unions Against Central Bank Circular on outsourcing) expressed their “resounding strong opposition to the new banking law’s go signal to full entry of foreign banks in the country.”
On top of its inimical implications to the banking sector’s employees who are threatened, if not already suffering from the impact of R.A. 7721 to their jobs, wages and benefits, the BFU 268 warned that the banking public would also suffer further from shrinking benefits and choices in banking services.
Raymund Aceña, one of the secretariat of BFU 268, told Bulatlat.com that the new law opening up the banking sector is proof that chacha (charter change) is alive and kicking in the Philippines, though pulling its weight on the economy bit by bit and not in one fell swoop.
Bank employees’ jobs and security on the line
Mark Oliver Gonzales, President of Planters Development Bank Employees Association, said that as things stand today, R.A. 7721 or Act Liberalizing The Entry And Scope Of Operations Of Foreign Banks In The Philippines And For Other Purposes is already anti-worker. He said it would only worsen if we allow full foreign ownership of banks.
Gonzales explained that contrary to the selling point of R.A. 7721, which is supposedly to encourage competition, in reality, it has resulted in the closure of most of the smaller banks. Through mergers and acquisitions, players in the banking sector have decreased dramatically in the past 20 years, he said. In mergers, branches of two different banks in one area are being consolidated into just one (mostly retaining just the surviving bank). Bank employees lost their jobs as a result, while those who remained on the job have to do more work.
Gonzales said bank liberalization “did and will not encourage employment. Instead, termination (by way of redundancy) has plagued the employees in the sector.”
One of the stark examples of bank consolidation is the case of Banco de Oro (BDO), whose major shareholders are the SM Group and IFC (International Finance Corporation). BDO bought Dao Heng, Banco Santander, 1st E Bank, United Overseas Bank Philippines, Equitable PCI Bank, GE Money Bank Philippines and Export and Import Bank. The SM Group also owns ChinaBank.
The Ayala-controlled BPI has also been doing mergers and acquisitions (and it also has a partnership with IFC in providing loans). The BPI bought and merged with Peoples’ Bank and Trust Company, Commercial Bank and Trust Company, Ayala Investment Development Corporation, Makati Leasing and Finance Corporation, Family Bank and Trust Company, City Trust Banking Corporation, Ayala Insurance Holdings Corporation, Far East Bank and Trust Company, DBS Bank Philippines and Prudential Bank and Trust. It has also figured in an on and off merger talks with taipan Lucio Tan’s Philippine National Bank (PNB).
In the banks’ rush for “competitiveness” desired by banking liberalization since 1994, Gonzales said compensation has also shrunk in existing banks in the Philippines. Past interviews by Bulatlat.com with bank employees revealed that as banks in the Philippines merge and consolidate, its employees’ wages and benefits and unions also shrink with the number of competing banks.
Communications Secretary Herminio Coloma told reporters after the new banking law was signed that it is “in order to fast-track economic activity, where banks have a key role.” The bank employees under the BFU 268 fear the opposite is true, as they pointed to their experiences under R.A. 7721.
Less banking perks for the public
With fewer but bigger players in the banking sector, there is also lesser competition in the banking market. Kristel Esteban-Cabalhin of HBILU (Hongkong Shanghai Bank Independent Labor Union) said this is especially felt in interest rates of borrowed money. She said the public is adversely affected as there now exists very low interest rates on savings and deposits while interest on loans goes up. Credit Card interest at 3.5 percent monthly is 42 percent per annum when added up”, said Esteban-Cabalhin.
If these are the results of having allowed 60 percent foreign ownership of local banks, Cabalhin said, the impact of 100 percent ownership will likely be worse.
“It will be oligarchy in the financial system who will reap the benefit; for us, employees, it will be redundancy and lower wages and for the public it will mean more interest on borrowed money,” Cabalhin said.
The union leader in Hongkong Shanghai Bank warned that with the new banking law, foreign banks could dictate the rates and rules of doing business. She warned that it could result to the death of national industries and thus more jobs problem for Filipino workers.
CHA CHA still alive
Governments from former President Fidel V. Ramos to the current Aquino administration have attempted to push charter change (chacha), but were always foiled by public protests. Under Aquino, the proponents tried to placate some protesters by promising that they would only tinker with the economic provisions of the 1987 Charter. They proposed to remove the remaining restrictions to foreign entities in fully owning businesses, land and real estate in the Philippines.
With this newly signed banking law, Raymund Aceña of BFU 268 said, the Aquino government has circumvented the Philippine Constitution. He charged that the new banking law is in fact akin to the implementation of chacha.
“They (Aquino administration) are doing chacha by instalment to do away with public protests,” Aceña said. “The 1987 Constitution, in many provisions, reiterates the essence of national patrimony, but R.A. 10641 (the new banking law) utterly gives away the Philippine banking industry to foreign financial giants,” Aceña said.
In a statement, BFU says the full liberalization of banks is an insult to national patrimony and will eventually lead to the death of thrift and rural banks. The group is considering the application of a temporary restraining order and questioning the constitutionality of such a legislation before the Supreme Court.
BFU 268 or Banking and Financial Union against BSP Circular 268 and its Related Succeeding Circulars groups together employees’ union of banks and financial institutions. It was formed in 2007 as largest banks implemented outsourcing of bigger departments, and resorted to contractualization of employment. The group is the largest organization in the country’s banking labor sector with members coming from international and local banks.