BY Maricel E. Burgonio SENIOR REPORTER

The Rural Bankers Association of the Philippines (RBAP) will push for amendments to the law to allow foreign ownership in the industry.

“The major issue is the amendment of Rural Bank Act of 1992 to allow foreign equity infusion,” Joseph Omar Andaya, RBAP spokesman said in an interview.

He said the industry wants to allow foreign ownership of up to 40 percent in a rural bank to boost its capital.

The group will lodge its proposal with the next Congress.

“We’re expecting more rural banks to merge next year. About six to eight banks are consolidating,” Andaya said, following the creation of a state fund that would provide incentives to third parties wanting to acquire banks.

Recently, the Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corp. (PDIC) put up a P5-billion fund under the Strengthening Program for Rural Banks (SPRB) to encourage mergers, consolidations and acquisitions.

This will grant financial assistance to eligible strategic third party investors wanting to merge with or acquire eligible rural banks, mainly those that are capital deficient.

The financial assistance will be a combination of direct loans and subscription to preferred shares to provide additional capital to reinforce the capital position of the investors.

The regulatory bodies have yet to issue the implementing rules and regulation of the SPRB.

Andaya said the SPRB fund could be expanded if there would be more investors willing to acquire troubled banks.

State-owned PDIC had said about 103 rural banks were undercapitalized as of June this year. These lenders accounted for 15 percent of the total 690 in the country, and hold P11 billion in deposits, or 10.3 percent of the industry’s combined deposit liabilities.

The combined assets of these banks make up 8.8 percent of the industry. The industry had a capital adequacy ratio of 18.3 percent in the first half of this year, way above the BSP minimum.

RBAP has 645 member rural banks of the total 690 rural banks.