BSP expects more mergers among rural, co-op banks

MANILA, Philippines - A number of rural and cooperative bank merger and consolidations is expected to occur this year, a Bangko Sentral ng Pilipinas official said.

“So many deals are cooking now in the pipeline including cooperative banks consolidating and rural banks being absorbed or consolidated,” BSP Deputy Governor Nestor A. Espenilla Jr. told reporters.

The central bank has been supporting mergers, acquisitions, and consolidations especially for small banks to create stronger institutions and also to weed out problematic lenders.

“The consolidation process is the challenge for small banks as they need to have some scale,” Espenilla said.

Espemilla said that creating a larger and stronger entity results in being able to hire the right people to run the business and also afford better equipment.

The BSP in December revived its Strengthening Program for Cooperative Banks (SPCB) and renamed it as SPRB Plus. 

The new program expands the list of eligible investors that can inject capital to ailing cooperative banks, and also adds a number of reliefs and incentives for white knights or strategic third party investors to encourage more mergers and consolidations.

The SPRB Plus, meanwhile, was extended for another year until end-2014.

Both programs dangle incentives to investors for them to rescue problematic cooperative, rural, and thrift banks to minimize bank closures and, by its names, strengthen the small banks.

Last year, 18 banks were ordered closed and placed under the receivership of the Philippine Deposit Insurance Corp. after being found illiquid.