Adapting to changing times

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The rural banking industry is changing with the times as local banks eye possible mergers and consolidations to strengthen operations and to cope with a shifting financial landscape and banking regulations.

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This adaptation comes after the Bangko Sentral ng Pilipinas (BSP), together with the Philippine Deposit Insurance Corporation, introduced a series of incentive programs promoting mergers and consolidations among rural banks.

In 2010, the BSP introduced its first incentive program, the Strengthening Program for Rural Banks (SPRB), which gives perks to healthy rural banks that will acquire their troubled peers. The program was then expanded to SPRB Plus in 2012, which included strong rural banks, thrift banks, universal and commercial banks, non-bank corporations, as well as group of companies.

Following these programs, the central bank and deposit insurer received and approved seven merger/consolidation applications involving 14 banks by end-2014.

Just last June, two Rural Bankers Association of the Philippines members—Rural Bank of Camalig (Albay) and the Rural Bank of Ocampo (Camarines Sur) Inc.—merged and are now known as Camalig Bank Inc.

Further, the central bank recently issued a framework for the Consolidated Program for Rural Banks (CPRB), a new incentive program that would support mergers with subsidized financial advisory cost by up to 80 percent and capacity-building support services at no cost.

According to BSP Deputy Governor Nestor Espenilla Jr., 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.”

With the continuation of the mergers and consolidations in the country, the industry is expected to consist of fewer but stronger rural banks.

Despite deriving a high sense of achievement from seeing their rural banking business thrive, some rural bankers remain reluctant to give up control of their banking operations.

But the current financial landscape and stiffer competition with larger banks encourage them to become open with the idea of merger and consolidation.

Numbering 503 head offices and over 1,000 branches, the rural banking industry serves with much familiarity the small- and medium-scale enterprises, fisherfolk and farmers across the country.

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