MANILA (REUTERS) - The Philippine senate has approved a bill that will open the country's restricted banking sector to more foreign financial institutions.

The passage paves the way for a change in the law ahead of a goal for economic integration of the Association of Southeast Asian Nations bloc of countries in 2015.

It amends a 20-year old foreign banking act, permitting foreign ownership of domestic banks to rise to 100 per cent from 60 per cent, a statement posted on the senate's website said.

Current limits to the number of foreign banks operating in the country will be eliminated, it said. The existing Republic Act 7721, which liberalised the entry of foreign lenders in 1994, allowed the entry of only up to 10 banks fully-owned by foreigners to operate in the country.

The bill provides for the entry of "established, reputable and financially sound foreign banks" in the country and also grants Philippine incorporated subsidiaries of foreign banks same banking privileges as homegrown lenders.

A counterpart bill was approved in the lower chamber of congress last month. The two bills will need to be reconciled in a bicameral conference committee before it is sent to President Benigno Aquino for his approval.

"Greater foreign participation in the banking and financial sectors is expected to augment the financial resources to which the Philippine economy may have access," Senator Sergio Osmeña III, who heads the senate banks committee, said in the statement.

He said the bill's passage would allow the country to "take advantage of economic integration of the ASEAN region."