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INDUSTRY SPECIFIC REGULATIONS
Government policies in the Philippines and decisions of the Supreme Court tilt heavily toward the protection of an individual’s right to privacy of communications. However, the Philippines also recognizes that the free flow of information is vital to promote innovation and growth. Thus, the recent trend in cases of conflict is to balance the interests of the business sector and that of an individual’s right to privacy.
The Philippines also enacted a Data Privacy Act (DPA) which became effective on September 8, 2012. The DPA modeled after the European Union General Data Protection Regulation and the Asia-Pacific Economic Cooperation Privacy Framework. The National Privacy Commission (NPC) enforces the DPA and has issued the law’s Implementing Rules and Regulations which took effect on 9 September 2016.
Under Philippine laws, banks are entities that engage in the lending of funds obtained in the form of deposits. An entity intending to engage in banking in the Philippines must obtain an authority or secondary license to operate (such as a commercial banking license) from the BSP.
Philippine law classifies banks into:
Thrift banks, composed of: (i) savings and mortgage banks, (ii) stock savings and loan associations, and (iii) private development banks;
Islamic banks; and
Other classifications of banks as determined by the BSP.
Philippine law provides that foreign individuals and non-bank corporations may own or control up to 40% (individual or aggregate) of the voting stock of a universal bank, commercial bank, thrift bank or rural bank.
By way of exception, foreign banks may own up to 100% of the voting stock of a universal bank, commercial bank, thrift bank or rural bank with prior approval from the BSP. In determining whether or not approval will be issued, the BSP will consider whether reciprocity rights are enjoyed by Philippine banks in the country of the foreign bank.
Under Philippine law, financing companies are corporations, except banks, investments houses, savings and loan associations, insurance companies, cooperatives, and other financial institutions organized or operating under other special laws, that are primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial, or agricultural enterprises, by direct lending or by discounting or factoring commercial papers or accounts receivable, or by buying and selling contracts, leases, chattel mortgages, or other evidences of indebtedness, or by financial leasing of movable as well as immovable property. An entity intending to engage as a financing company must obtain an authority or secondary license to operate as a financing company from the Securities and Exchange Commission (SEC). If the entity intends to perform quasi-banking functions, such entity must secure a quasi-banking license from the BSP.
Under the Financing Company Act, as amended, a financing company must have a paid-up capital ranging from at least PHP2,500,000 to PHP10,000,000 million, depending on where the financing company will set up its office in the Philippines. Foreign citizens may own up to 100% of the shares in a financing company subject to certain conditions.
Under Philippine law, lending companies refer to corporations engaged in granting loans from its own capital funds or from funds sourced from not more than 19 persons. The term “lending companies” exclude banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives and other credit institutions already regulated by law.
A company intending to perform activities as a lending company must obtain an authority or secondary license to operate as a lending company from the SEC.
Under the Lending Company Act, as amended, a lending company must have a minimum paid-up capital of PHP1,000,000. Foreign citizens are allowed to own up to 100% of the shares in a lending company subject to certain conditions.
However, no foreign national may be allowed to own shares in a lending company unless the country of which such person is a national accords reciprocal rights to Filipinos.
Credit Card Issuers and Acquirers
Under the Credit Card Industry Regulation Law (Credit Card Law), a credit card issuer is a bank or a corporation that offers the use of its credit card. On the other hand, a credit card acquirer refers to an institution that accepts and facilitates the processing of credit card transactions initially accepted by the merchant.
The Credit Card Law vests the authority to supervise all credit card issuers and acquirers on the BSP. However, the Credit Card Law does not provide any BSP licensing requirement for credit card issuers and acquirers. The Credit Card Law took effect on 16 August 2016 and its implementing rules and regulations have not been issued to date. The implementing rules and regulations may impose BSP licensing requirements on credit card issuers and acquirers.
Digital Payment Services
The BSP recently issued the regulatory framework for entities engaged in digital payment services including remittance and transfer companies and virtual currency exchanges.
Remittance and transfer companies
The BSP regulates remittance and transfer companies (such as remittance agents, remittance platform providers and e-money issuers) or entities that provide money or value transfer service. Remittance and transfer companies are required to register with the BSP.
Foreign citizens are allowed to own up to 100% of the shares in a remittance and transfer company. Based on BSP regulations, remittance and transfer companies must meet benchmark capital requirements ranging from PHP 10,000,000 to PHP 100,000,000, depending on the category.
Virtual currency exchanges
BSP regulations define virtual currency as any type of digital unit that is used as a medium of exchange or a form of digitally stored value created by agreement within the community of virtual currency users. Virtual currencies are broadly construed to include digital units of exchange that have a centralized repository or administrator, are decentralized and have no centralized repository or administrator, or may be created or obtained by computing or manufacturing effort.
The BSP regulates virtual currency exchanges or entities that offer services or engages in activities that provide facility for the conversion or exchange of fiat currency to virtual currency or vice versa. A virtual currency exchange must obtain a certificate of registration to operate as a remittance and transfer company from the BSP.
The BSP does not impose nationality requirements on a virtual exchange.
The Securitization Act provides the legal and regulatory framework for asset securitization, and grants tax exemptions and other incentives in favor of securitization transactions in the Philippines. It is designed to create a favorable capital market environment for asset-backed securities (ABS) and to facilitate the development of a secondary market for residential mortgage-backed securities.
In the securitization process, loans, receivables or similar financial assets with an expected cash payment stream (Assets) are sold on a without recourse basis by a seller to a special purpose entity (SPE). The SPE issues to investors ABS that depend, for their payment, on the cash flow from the Assets. The issuance of the ABS must be in accordance with the plan for securitization approved by the SEC.