BSP wants more mergers, consolidation for rural banks for rural banks

MANILA ,Philippines —The Bangko Sentral ng Pilipinas (BSP) is preparing a program to encourage more mergers and consolidation among major stakeholders in the rural banking sector to further strengthen the country’s banking industry.

BSP Deputy Governor Chuchi Fonacier said the Consolidation Program for Rural Banks (CPRB) expired last Oct. 26.

“The CPRB was not extended and we are still considering a new program,” Fonacier said in a text message.

The two-year program was launched together with the state-run Philippine Deposit Insurance Corp. (PDIC) in August 2015 and was re-launched and extended for another two years when it expired in August 2017.

The program urged rural banks to merge and consolidate to avail of support for financial advisory and business process improvement services, capacity building, and other program support with the help of the state-run Land Bank of the Philippines.

The CPRB aims to improve financial strength, enhance viability and generate better return to shareholders; strengthen management and governance; generate synergies and economies of scale through common infrastructure, systems and resources; as well as expand the market reach of rural banks.

Rural banks play an important role in providing essential financial services to the community, particularly in their specialized or niche markets, and in promoting financial inclusion and financial stability.

The BSP’s Monetary Board has approved only one application under the CPRB.

The regulator has approved the consolidation of Rural Bank of General Trias, Rural Bank of Maragondon, Bangko Noveleta and Sto. Niño Rural Bank (Ternate, Cavite).

The Rural Bank of General Trias is the country’s 73rd largest rural bank in terms of assets with P624.31 million while the Rural Bank of Maragondon is ranked 91st with P482 million.

To qualify under the CPRB, the resulting bank of less than five proponent banks should have a capital adequacy ratio of 12 percent and a combined unimpaired capital of at least P100 million.

Proponent banks are entitled to funding support subject to the subsidy limits set by the Countryside Financial Institutions Enhancement Program (CFIEP); capacity building support services; possible equity participation by Landbank; regulatory incentives; and other CPRB support.

The BSP has so far ordered the closure of eight problematic banks this year. They are the Rural Bank of Larena (Siquijor), East Coast Rural Bank of Hagonoy, Rural Bank of Guihulngan (Negros Oriental), Rural Bank of Basey (Samar), Valiant Bank, The Palawan Bank (Palawan Development Bank), Rural Bank of Mabitac (Laguna), and the Bagong Bangko Rural ng Malabang (Lanao del Sur).