BSP pushes more rural bank mergers

Unified incentives to strengthen industry

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is planning to consolidate its incentives programs to entice mergers among smaller banks.

BSP Deputy Governor Nestor Espenilla Jr. said the bank regulator is studying possible modifications to the Strengthening Program for Rural Banks (SPRB) Plus so that it could be folded into the Comprehensive Program for Rural Banks (CPRB).

“There could be possible modifications (to the SPRB Plus) because of the CPRB. What could happen is instead of extending it maybe it could be unified into that. This is now being discussed,” he said.

The SPRB Plus is an enhanced version of the original SPRB launched in 2010 exclusively for rural banks. It expired last December after a one-year extension approved by the BSP and the state-run Philippine Deposit Insurance Corp. (PDIC) with certain operational refinements after banking industry associations pushed for the program’s extension.

Last month, the BSP issued the implementing guidelines for the CPRB, setting the eligibility requirements for proponent banks, the procedures for application and the related documentary requirements.

The BSP, PDIC, and the Land Bank of the Philippines jointly conceptualized the program that is available until Aug. 25 next year.

“The CPRB was established in recognition of the need to further strengthen and enhance the viability of rural banks given their importance in providing essential financial services to the community, particularly in their specialized niche markets, and in promoting financial inclusion and financial stability in the economy,” Espenilla said.

The CPRB seeks to encourage consolidations and mergers among rural banks to bring about a less fragmented banking system by enabling rural banks to improve their governance and financial strength; enhance their viability; strengthen management; generate synergies and economies of scale through common infrastructure, systems and resources, as well as expand their market reach.

A group of at least five proponent banks with head offices or majority of branches located in the same region or area that consolidate resulting in a surviving rural bank with a capital adequacy ratio (CAR) of at least 12 percent and a combined unimpaired capital of at least P100 million would be entitled to incentives.

If the minimum CAR and unimpaired capital are not met, existing shareholders of the proponent banks or from a third party investor should infuse additional fresh capital to meet the program’s minimum capital requirement.

Qualified rural banks would be entitled to funding assistance such as financial advisory services, business process improvement services, and capital building support services.

Banks would also be entitled to regulatory incentives.