BSP shuts down 10 rural banks

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has closed down 10 rural banks in the first half of this year, affecting some 42,000 accounts.

According to state insurer Philippine Deposit and Insurance Corp. (PDIC), the main reasons for the closure of these banks had to do with capital or the inability of these institutions to raise capital.

The closed rural banks had deposit accounts amounting to roughly P1.6 billion.

The 10 affected rural banks are Apex Rural Bank in Bulacan, Rural Bank of Laoac in Pangasinan, Rural Bank of Ivisan in Capiz, Eurocredit Community Bank of Cagayan, Bani Rural Bank of Pangasinan, BMS Rural Bank of Pasig, Rural Bank of Ozamis City, Coop Bank of Camarines Sur, Coop Bank of Nueva Ecija and Rural Bank of Bangued in Abra.

PDIC president Jose C. Nograles lamented that banks placed under receivership, rehabilitation or closure generally favor the owners, putting the depositors and government at a disadvantage.

He explained that present regulations provide distressed banks a 90-day “bank holiday” before they are taken over by the government. “By that time, nothing is left for the administrator but loose change and empty desks,” he added.

“Small bank depositors lose their hardearned savings, government will have to spend million of pesos to protect these depositors, and the former bank owners walk out the door for their “inefficiencies or failure to save the bank.”

PDIC is proposing legislation that will allow government to temporarily take over or be directly involved before a bank gets in trouble. That will allow government to assist its recovery, rehabilitation, sale or consolidation without negative impact to the depositors.

The Rural Bankers Association of the Philippines (RBAP) said they intend to accelerate the natural consolidation process among rural banks.

RBAP said this consolidation of the country’s rural banking sector has been going on for the past three years.

“We want the process to accelerate but we need the help of the regulators,” RBAP said.

The group claims that there are a maximum of eight banks that consolidate or merge every year. The PDIC, on the other hand, said a little over 10 rural banks are placed under receivership every year.