Booty Capitalism: The Politics of Banking in the Philippines

By Paul D. Hutchcroft | Go to book overview

During Cuaderno's twelve-year tenure, there were nine new private domestic commercial banks, of which seven were established by families that would popularly be labeled Filipino, and two by families generally considered Chinese-Filipino. Ownership links to new industrial ventures probably contributed to marked increases in the percentage of total credit allocated by private commercial banks to industry, from 9.5 percent in 1954 to 26 percent in 1959.44

Third, private domestic banks emerged as a much more central element of the banking system even as government banks remained major players. In 1955, Congress increased the authorized capital of the PNB--the first such increase since 1924. Increases in capitalization were supported by government bonds, and further support came both from Central Bank rediscounting and from placements of government deposits. The Rehabilitation Finance Corporation, which had long suffered from limited resources, was transformed into the better-capitalized Development Bank of the Philippines in 1958. Fresh infusions of funds came from Japanese reparations and the government insurance systems.45 Despite these changes, the importance of government banks declined relative to that of private banks: by 1958, the total assets of private domestic banks began to exceed the total assets of the largest government financial institution, the PNB.46 As will be discussed in the following chapter, the experience of the first Philippine-owned private domestic bank, the Philippine Bank of Commerce, provides the earliest insights into deeply divisive interfamily and intrafamily feuds that have often hampered the operations of private banks throughout the postwar era.


Conclusion

As we have seen, the prewar banking system was dominated by foreign banks, government banks (especially PNB), ecclesiastical banks, and local

____________________
compilation of speeches from a 1963 seminar] (n.p., n.d.), 172. During this time, one finds no reports of foreign investors seeking to own 40 percent of a Philippine-chartered bank, as permitted by the 1948 law. In fact, the regulation specifically targeted naturalized Filipinos (the vast bulk of whom were of Chinese descent) by stipulating that "the ownership of banks established thereafter be limited to natural-born citizens" ( Golay et al., 48, emphasis added). The 1957 regulation was promulgated about one year prior to the advent of the "Filipino First" movement of President Garcia.
44
Edita A. Tan, "Philippine Monetary Policy and Aspects of the Financial Market: A Review of the Literature." in PIDS Survey of Development Research I ( Metro Manila: Philippine Institute for Development Studies, 1980), 181.
45
Philippine National Bank, 14; Cuaderno, Problems of Economic Development, 41; Golay, The Philippines, 246.
46
Extrapolated from Central Bank and Sycip Gorres, & Velayo (hereafter SGV) data. By the end of 1959, "the total loans of the private domestic banking sector for the first time exceeded those of the Philippine National Bank as a percentage of total loans outstanding." Jose B. Fernandez Jr., "Banking Trends in 1960," Progress, 1960: 42-46.

-79-

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