Up to 50 rural banks need to increase capital – BSP

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) said as many as 50 rural banks need to raise their capital in line with efforts of the regulator to further strengthen the industry.

BSP Monetary Board member Bruce Tolentino said during a Senate committee on finance briefing with the Development Budget Coordination Committee (DBCC) that there is a need to raise the minimum capital of small banks under the Rural Bank Strengthening Program (RBSP).

“A P10 million capital does not allow a rural bank to recover even its overhead in order to operate, serve its clientele base, generate deposits, and set up a loan program that is able to cater to the needs of the community,” Tolentino said.

This prompted the central bank’s policy-setting body to raise the minimum capital requirements for rural banks to P50 million for those with a head office and only up to five branches, P120 million for those with six to 10 branches, and P200 million for small banks with more than 10 branches.

Tolentino, who led a study that served as the basis of the RBSP, said rural banks that fall below the minimum capital requirement would need to submit a capital buildup plan to the central bank.

Out of the 400 or so rural banks currently operating, Tolentino explained that the end-result of the entire process would probably be affecting only about 30 to 50 rural banks.

“And it is these 30 to 50 rural banks that will need to hike their capital because the others have already adequate capital to continue operations. So it will only hit the minority who are at the moment relatively weak compared to the others,” Tolentino said.

He said the regulator would continue to work with rural banks as it pursues more inclusiveness in the rural sector by having a strong and well-capitalized rural banking sector.