Rural banks given more options to enhance operations

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is giving rural banks more options to enhance their operations, capacity and competitiveness as these entities play a crucial role in promoting countryside development and inclusive economic growth.

BSP Governor Benjamin Diokno said that the Rural Bank Strengthening Program approved by the Monetary Board on March 3 is now in place with the issuance of the guidelines developed by an Interagency Working Group (IAWG).

Diokno, through Memorandum 2022 – 024, said the RBSP is available for a period of three years.

“The RBSP is a structured program anchored on the principle that a safe and sound bank is well-capitalized,” the BSP chief said.

To strengthen capital base, the regulator is giving rural banks five options including merger or consolidation, acquisition or third party investor, voluntary exit or upgrade of license, capital build up program and supervisory intervention.

“A stronger capital base will enable rural banks to enhance their risk management systems, upgrade resources and manage operational costs, meet prudential standards and accelerate digital transformation,” the central bank said.

The RBSP offers a refreshed merger, consolidation, and acquisition or third-party investment or the MCA tracks to be implemented in phases to promote parties’ commitment until the completion of the program.

Likewise, the regulator is offering a facilitated voluntary exit option via voluntary dissolution and cessation of their banking business, subject to certain conditions and guidelines.

“The key requirement is that applicant banks have no ground for closure and must also be solvent, with sufficient liquid assets to fully repay all its depositors and creditors in a timely manner,” the BSP said.

Once approved, applicants may receive incentives in the form of waiver of penalties or facilitated settlement of deposit liabilities.

Likewise, the central bank said rural banks may also opt to apply for the upgrade of their banking license, wherein approved applications may be entitled to incentives and capacity-building interventions similar to those available under the MCA Tracks.

Under the capital build up program, the BSP requires rural banks to meet the new prescribed capital levels in line with the RBSP’s goal to strengthen the capital base of rural banks.

The small banks that will successfully complete this track will be entitled to certain incentives similar to those under the MCA tracks.

On the other hand, rural banks with serious supervisory concerns will be subject to strict, time-bound, and milestones-based supervisory intervention to mitigate further losses and protect the interest of depositors.