Estrada signs law amending General Banking Act

President Estrada signed into law yesterday a bill that amends the country's 52-year-old General Banking Act by widening the supervisory powers of the Bangko Sentral ng Pilipinas (BSP) and opening the banking sector to more foreign investment.

The long-delayed bill will take effect next month.

"I see this new law as very significant in our efforts to sustain the positive growth of our economy," the President said in a speech after signing the bill into law at Malacañang.

Mr. Estrada said the Revised General Banking Act (RA 8791) will give the BSP more flexibility in supervising the banking industry, improve business practices, and upgrade the country's banking laws to meet global standards.

He said the banking sector continues to attract significant foreign interest, noting the entry of the Bank of China into the domestic market and an investment by the International Finance Corp. in Planters Development Bank.

BSP Gov. Rafael Buenaventura said the law will prevent a recurrence of the recent bank withdrawal scare triggered by the Urban Bank holiday.

"This is a complete overhaul of existing laws governing the banking system," Buenaventura said. "Under the Revised General Banking Act malpractices by banks will be checked even more tightly."

The new law gives the policy-setting Monetary Board the power to suspend erring bank officials and regulate the amount of loans and guarantees extended to bank directors, officers and stockholders.

House Speaker Manuel Villar said the new law will strengthen Philippine banks and financial institutions as they continue to play an optimal role in the country's economic development.

"Hopefully, it will work to strengthen these institutions and prevent their financial collapse," Villar said in a statement.

He said the passed measure will prevent unfortunate scenarios by promoting a more stable banking system and strengthen the industry as a whole.

Pending in Congress since 1997 and passed early this year, the law is expected to invigorate the banking sector, which is still hobbled by the effects of the Asian financial crisis.

The amended General Banking Act is one of several priority legislative measures pushed by the Estrada administration to reform the economy and attract more foreign investment.

Still pending in Congress are the Omnibus Power Bill that deals mainly with the privatization of the National Power Corp. and a new Securities Regulation and Enforcement Act.

The new banking law allows a foreign bank to own the entire voting stock of one existing local bank.- With AP, Reuters