PHILIPPINES Law and Practice Contributed by: Kerwin K. Tan, Veronica S. Balbin and Jose Maria B. Buenagua, Tan Hassani and Counsels
dominated the outsourcing landscape, the Philippine Economic Zone Authority (PEZA) has reported grow - ing diversification and growth in regional talent pools in Cebu, Clark, Iloilo, Bacolod, Davao, and Cagayan de Oro. The near-term outlook for the industry, there - fore, remains positive. 2. Regulatory Environment 2.1 Restrictions on Technology Transactions or Outsourcing Generally, there are no statutory or regulatory restric - tions on technology transactions or outsourcing in the Philippines. However, there are some industries that have restrictions as to what activities can be out - sourced by a company, which are discussed in differ - ent sections of this chapter. 2.2 Industry-Specific Restrictions Where foreign companies outsource specific business processes to the Philippines, there are generally no industry-specific restrictions imposed by Philippine law. Any limitations are more likely to stem from the regulations of the country or jurisdiction where the foreign company is based, which may govern what tasks can be outsourced, how they are outsourced, and where they can be performed. However, within the Philippines itself (ie, intra-country outsourcing), there are some industry-specific restric - tions such as those for Philippine banks, insurance companies, and securities brokers/dealers. For Banks The Manual of Regulations for Banks (MORB) issued by the Central Bank of the Philippines ( Bangko Sentral ng Pilipinas , BSP) provides that a bank may outsource to third parties or to related companies in the group, in accordance with existing Central Bank regulations, certain services, or activities to have access to certain areas of expertise or to address outsource constraints, as long as it has appropriate processes, procedures, and information systems that can adequately identify, monitor, and mitigate operational risk arising from out - sourced activities, and provided that the bank’s board of directors or senior management remain responsible for ensuring that outsourced activities are conducted
in a safe manner and in compliance with applicable laws, rules and regulations. The MORB also provides that the following inherent banking functions cannot be outsourced: • accepting deposits from the public; • granting loans or extending other credit exposures; • managing risk exposures; and • general management. Section 112 of the MORB also sets the framework for bank outsourcing. The MORB permits banks to engage in outsourcing in three ways: as a service provider, through intra-group outsourcing, and via offshore outsourcing. As a service provider, a bank may enter into outsourc - ing agreements outside its corporate group, provided that it complies with BSP guidelines, relevant laws, and applicable regulations. The bank may also offer services to its depositors in its capacity as a deposi - tory institution. In intra-group outsourcing, banks may enter into out - sourcing agreements without BSP approval if three conditions are present: • The service is in the ordinary course of business. • The provider is a regulated financial institution. • The recipient is a subsidiary, affiliate, or a company under common ownership. The intra-group service provider may enter into a sub - contracting agreement provided that said arrange - ment is regulated and authorised, as applicable, by the intra-group service provider’s relevant regulatory authority. The bank should ensure that the service provider has a sound financial condition and has the necessary competency to provide such service. Lastly, the bank may enter into offshore outsourcing provided that the service agreement defines counter - parties’ rights and responsibilities on confidentiality and data privacy and the service provider operates in jurisdictions with existing confidentiality and/or data privacy laws that are not in conflict with existing Phil - ippine laws and relevant regulations.
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