Program on bank mergers, acquisitions to be extended

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

On the sidelines of the economic forum organized by the Economic Journalists Association of the Philippines (EJAP), BSP Governor Nestor Espenilla Jr. said they are now talking with state-run Philippine Deposit Insurance Corp. (PDIC), Land Bank of the Philippines  and the Countryside Financial Institutions Enhancement Program (CFIEP) for the extension of the Consolidation Program for Rural Banks (CPRB).

“Most likely we will extend it. The decision for the extension will not only come from BSP so we will have to work with PDIC and Landbank,” he said.

The program was launched in August 2015 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.

It is valid for two years and it expired last Friday.

“I will be surprised if we will not extend it because it is working very well,” Espenilla said.

According to Espenilla, there is a very good chance that the pending applications of three groups under the CPRB would materialize within the year.

The BSP and PDIC earlier relaxed the guidelines of the CPRB to accommodate applicants.

PDIC president Roberto Tan earlier issued bulletin no. 2017-06 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 whose 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 BSP has so far ordered the closure of six problematic banks this year.  It shut down 22 banks last year as it continued to weed out weak players in the industry.

Banks ordered closed by the BSP’s Monetary Board and placed under the supervision of the PDIC include the Countryside Cooperative Rural Bank of Batangas, Rural Bank of Barotac Viejo (Iloilo), Rural Bank of GOA (Camarines Sur), Rural Bank of Ragay (Camarines Sur), Rural Bank of Iligan City, and World Partners Bank Inc.