BSP to extend consolidations of rural banking sector

MANILA, Philippines -  The Bangko Sentral ng Pilipinas (BSP) is seen further extending the validity of a program that encourages mergers and consolidations of rural banks to further strengthen the country’s banking industry. 

BSP Deputy Governor Nestor Espenilla Jr. said the deadline of the Consolidation Program for Rural Banks (CPRB) could be extended after it lapses on Aug. 25. 

“The whole point is not the deadline but getting the banks to combine,” he said. 

Espenilla, who is set to succeed BSP Governor Amando Tetangco Jr. starting July 3, said a total of three groups have pending applications under the CPRB.

He explained applicants are having difficulty in complying with documentation requirements involving several banks. 

“The problem is the documentations since this is a multiple partnership, four to five banks,” he said. 

The CPRB seeks to encourage consolidations and mergers among rural banks to bring about a less fragmented banking system by enabling rural banks to improve their financial strength, enhance their viability, strengthen management and governance as well as generate synergies and economies of scale through common infrastructure, systems and resources.

The BSP and state-run Philippine Deposit Insurance Corp. (PDIC) has relaxed the guidelines of the CPRB to accommodate applicants. 

PDIC president Roberto Tan earlier issued a bulletin revising the CPRB implementing guidelines. 

“Consistent with the objectives to encourage mergers and consolidations of rural banks, the CPRB Implementing Guidelines was amended to allow groups composed of less than five proponent banks to avail of the program's incentives,” Tan stated in the notice. 

Originally, the CPRB welcomed any group of at least five rural banks which head offices or majority of the branches are located in the same region or area. 

However, the number was lowered to a group composed of less than five proponent banks as long as the surviving bank should have a risk-based capital adequacy ratio of at least 12 percent and a combined unimpaired capital of at least P100 million.  

The CPRB through Land Bank of the Philippines would provide funding assistance for financial advisory services, business process improvement services, and capacity-building support services.

These include training on credit evaluation and administration, audit and internal control, personnel management, accounting or record keeping, treasury, information technology, and governance.  

The central bank would also provide regulatory incentives as part of CPRB’s program support.