BSP regulation hikes capital requirement of stand-alone rural banks

CEBU, Philippines - Rural banks in the country that are not subsidiaries of universal and commercial banks will have to increase their capital adequacy by January 1, 2012 in compliance to the revised risk-based capital adequacy framework for thrift, rural and cooperative banks approved by the Bangko Sentral ng Pilipinas.

This is why rural banks in Cebu will start discussing the issues related to this policy as soon as possible, Cebu Federation of Rural Banks president Ismael Carolino said.

“We just had our (rural banks) national convention. I have called our members for a meeting (to discuss on this),” he told The Freeman.

The new regulation requires stand-alone thrift, rural and cooperative banks to set aside funds for operational risks such as fraud, system failures, natural calamities, among others. This is implemented to make sure that the risk management systems are in place.

BSP Governor Amando Tetangco Jr. earlier said in a report that thrift, rural and cooperative banks in the country are well-equipped to comply with stricter regulations in meeting capitalization requirements.

“As it is, the rural banking sector… as a whole… is already on the right track, as far as operational bottom line is concerned. I base this on 2009 consolidated figures. In fact, even with the global financial crisis and isolated closures of some banks,” Tetangco stressed.

He said that the consolidated return on equity of the rural banking sector last year is at 12.12 centavos for every P1 equity on investment. This is better that the commercial banking sector that posted an aggregate return on equity of 11.38 centavos per peso of equity.

Total assets of the rural banking sector also rose to P157.4 billion last year from P146 billion in 2008 while its gross total loan portfolio amounted to more than P98 billion and deposits stood at over P105 billion.