BSP adds more perks for rural bank mergers

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has issued the guidelines of a new program further sweetening the incentives as well as financial package to encourage mergers and consolidations among rural banks.

BSP Deputy Governor Nestor Espenilla Jr. has issued Circular Letter 2015 – 050 laying down the incentives and implementing guidelines for the Consolidated Program for Rural Banks (CPRB).

The CPRB was conceptualized by the BSP, Philippine Deposit Insurance Corp. (PDIC), and Land Bank of the Philippines and is intended to strengthen rural banks that play a major role in financial inclusion.

“The CPRB aims to promote mergers and consolidations among rural banks to bring about a less fragmented banking system by enabling them to improve financial strength, enhance viability, strengthen management and governance, and expand market reach, among others,” Espenilla said.

To qualify, the guidelines state that proponents should be at least five rural banks, the head offices or majority of the branches of which, shall preferably be located in the same region or area.

The rules added rural banks whose head office is located in a nearby region could be included as long as the program objectives are met.

The BSP said the resulting bank should meet a risk-based capital adequacy ratio of at least 12 percent and a combined unimpaired capital of at least P100 million.

Interested banks should submit a letter of intent from the proponent banks together with Board Resolutions manifesting their interest to consolidate with other banks as well as a memorandum of agreement (MOA) from the proponent banks.

Qualified banks would be entitled to financial advisory services to be funded through the Countryside Financial Institutions Enhancement Program (CFIEP) that has set aside P25 million for the CPRB. 

The CFIEP would also finance business process improvement such as integration process, development and updating of manuals, and guidance on automation as well as provide capacity building support including training and governance.

The program which is effective for a period of two years also provides possible equity participation by Landbank.

The central bank would also observe full flexibility in granting regulatory and other incentives allowable under existing banking laws and regulations.

Data from the BSP showed there are 512 rural banks operating nationwide.

The CPRB is different from the Strengthening Program for Rural Banks (SPRB) Plus that is aimed to strengthen the banking system and to minimize bank closures. The SPRB Plus was extended until December this year with certain operational refinements after banking industry associations pushed for the program’s extension.

The SPRB Plus is an enhanced version of the original SPRB launched in 2010 exclusively for rural banks.

The BSP and PDIC have approved seven merger/consolidation applications involving 14 banks as of end December last year.