The Bangko Sentral ng Pilipinas (BSP) has approved the takeover of Al Amanah Islamic Investment Bank by the Development Bank of the Philippines (DBP) pending the submission of regulatory requirements.
BSP Governor Amando M. Tetangco Jr. told reporters over the weekend that the Monetary Board (MB) agreed in principle to DBP’s plan to take over the country’s only Islamic bank after the government failed to privatize it earlier this year.
According to Tetangco, the DBP’s plan was acceptable to the BSP and the MB only required the DBP to comply and submit certain requirements before the takeover is approved with finality.
“In principle it is a plan that is acceptable to us,” he said. “We just need to work out the rest of it.”
DBP officials said last week that the plan to take over Al Amanah bank was approved by the Privatization Management Office which had tried but failed several times to sell the bank off to interested buyers.
What made the privatization more difficult was the expiration of the law that allowed foreign interests in owning 100 percent of any bank operating in the country.
This meant that foreign banks interested in acquiring the Al Amanah Islamic Bank would have to look for Filipino partners as its privatization failed to beat the June 12 deadline set under the law.
Despite initial optimism over investor interest and lucrative prospects in the banking industry, last May’s auction for the Al Amanah Islamic Bank failed with only Banco de Oro making a bid. Although an undisclosed number of bidders were pre-qualified for the auction, only BDO actually dropped a bid into the box and officials were forced to declare the auction a failure, leaving the bid envelope sealed.
Al Amanah Islamic Bank was put on the block with the floor price set at P900 million for the government’s share representing up to 90 percent.
Finance officials originally expected the auction attract foreign Islamic bankers that have been waiting for the bank to be on sale as well as local business groups.
The bank’s prospects were dramatically improved by the decision to allow it to operate as a regular bank as the BSP approved the proposal to let it perform conventional banking functions for at least five years after it is privatized.
The decision of the BSP’s Monetary Board paved the way for the bank’s privatization, making it more attractive to prospective buyers that have been waiting for the bank to hit the auction block.
Despite the perk, however, only the Sy-owned BDO materialized at the auction, making it twice in a row that the government has failed to privatize two of its big-ticket items for sale this year.
Traditional Islamic banking laws prohibit Islamic banks from charging interests on loans but the BSP earlier said that if Al Amanah would be able to do regular banking, it would realize some income in the meantime.
After the prescribed period, however, the BSP said Al Amanah would revert to a purely Islamic bank, performing banking operations according to Islamic banking laws.