BSP lifts limit on number of branches for banks

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has given banks operating in the Philippines the greenlight to establish as many branches all over the country as long as their capital could support as part of the government’s efforts to serve the unbanked sector.

BSP Governor Amando Tetangco Jr. issued Circular 759 last May 30 lifting the limit on the branches that banks could establish nationwide by amending the branching policy and guidelines under the Manual of Regulations for Banks (MORB).

Tetangco said the limit set on the number of branches allowed to be applied by a bank for establishment at any time was removed.

“A bank may apply to establish as many branches as its qualifying capital can support consistent with the theoretical capital requirement,” he stated in the three-page circular.

Latest data from the BSP showed that the banking system’s physical landscape continued to increase as the overall physical network expanded by 181 banking offices to 9,050 last year from 8,869 in 2010. The number consisted of 726 head offices and 8,324 branches from 758 head offices and 8,111 branches in 2010.

Under the revised guidelines, Tetangco said banks would no longer be allowed staggered payment for the total branch processing fee for all branches and extension offices that would be charged against the demand deposits of banks.

The BSP chief added that the branch processing fee paid would be forfeited if the bank fails to open an approved branch within three years from the date of approval.

He explained that the BSP through the central bank’s Supervision and Examination Sector (SES) could suspend or revoke an approved branch if the bank’s qualifying capital is no longer sufficient to support the remaining unopened branches and if the bank has major supervisory concerns outstanding on safety and soundness.

An approved branch could also be revoked or suspended if the bank or any of its subsidiary is initiated under prompt corrective action (PCA) by the BSP.

The BSP adopted a two-phased liberalization program through Circular 728 in June last year, initially opening a window for banks to apply for and open branches in restricted areas that included the cities of Makati, Mandaluyong, Manila, Parañaque, Pasay, Pasig, Quezon, and San Juan

The BSP’s Monetary Board gave state-run Development Bank of the Philippines, Land Bank of the Philippines, Security Bank, East West Bank, Bank of Commerce, Planters Bank, and Philippine Business Bank the greenlight to establish 162 branches in the restricted cities.

The liberalization approach would fully lift the bank branching restriction in key cities in Metro Manila starting 2014. Under the first phase, second-tier universal and commercial banks and thrift banks that have less than 200 branches in restricted areas as of December 2010 would be allowed to apply and establish branches in the restricted areas until June 30, 2014.

To qualify for restricted area branches, a universal or commercial bank must have a combined capital accounts of at least P10 billion while a thrift bank should have at least P3 billion. Banks with lower combined capital accounts would still be allowed to establish branches as long as they execute an undertaking to build up capital for a maximum period of not later than end June 2014.

The BSP would impose a non-refundable special licensing fee of P20 million per universal and commercial bank and P15 million per thrift bank and applicant banks should comply with standard requirement in the grant of authority to establish a branch under existing regulations.