BSP ramps up program for small banks

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is ramping up its initiatives to further strengthen the rural banking sector to boost the resilience of small banks amid the global health crisis.

In his weekly press conference, BSP Governor Benjamin Diokno said the roll out of the Rural Bank Strengthening Program (RBSP) aims to enhance the operations, capacity, and competitiveness of the industry.

“We believe that the RBSP is necessary to boost the resilience of rural banks amid the evolving challenges in the banking system and to enhance their role in promoting inclusive growth,” Diokno said.

Since the imposition of the strictest and longest COVID-19 lockdowns in the world in March 2020, the central bank’s Monetary Board has ordered the closure of 21 rural banks nationwide while two small banks surrendered their banking licenses to the regulator.

“The impact of the pandemic varies from one bank to the other depending on the exposures and business models. This is true for all banks across all jurisdictions,” Diokno said.

According to Diokno, the Philippine banking system continues to be strong amid the COVID-19 pandemic because of the reforms that have been implemented in the past.

“These reforms are aimed at improving corporate governance, risk management systems, and the financial position of banks. The impact of these reforms is reflected in the comfortable margins hosted by the banking system over the minimum capital and liquidity requirements as well as in the manageable level of non performing loans,” Diokno said.

In support of the BSP’s goal to promote a safe, sound, and resilient financial system, Diokno said the RBSP would run for three years from the date of approval by the Monetary Board.

The RBSP is composed of four key elements, namely, a strengthened capital base; five time-bound tracks; incentives and capacity-building interventions; and review and enhancement of existing regulations. It features five time-bound tracks, namely, merger and consolidation; acquisition/third party investment; voluntary exit/upgrade of license; capital build-up; and supervisory intervention.

Qualified rural banks that successfully complete the first four tracks may avail of various incentives and capacity-building interventions as determined by the BSP.

Incentives may include support for digitalization, financial advisory, prudential relief or support measures, and fiscal incentives, which will be carried out in partnership with relevant agencies and multilateral development partners, such as the Asian Development Bank.

Diokno also revealed that the central bank is reviewing the minimum capital requirements for rural banks in line with the strengthening efforts under the BSP’s recently approved RBSP.

“Strengthening the capital base will enable rural banks to upgrade their resources, upskill their personnel, or hire more professionals,” Diokno said.

The BSP will soon release the exposure drafts of the enhanced minimum capital requirements for rural banks.

It would also conduct further stakeholder consultations to promote the RBSP and enable rural banks and interested parties to assess their willingness and capacity to adhere to the requirements of the program.

The BSP has processed 18 transactions for mergers, consolidations, and acquisitions since 2020. Half of the total number of transactions involved rural banks.