Guidelines for a program to encourage rural bank mergers and consolidations have been released by the Bangko Sentral ng Pilipinas (BSP), which cited the need to further strengthen and enhance the sector’s viability.
The central bank, in a circular, said the Consolidation Program for Rural Banks’ (CPRB) implementing guidelines were released after joint approval with the Philippine Deposit Insurance Corp. (PDIC), Land Bank of the Philippines and the Countryside Financial Institution Enhancement Program.
“The implementing guidelines set out the eligibility requirements for proponent banks, the procedures for application and the related documentary requirements, the program supports and regulatory incentives,” it said.
The CPRB, which has a two-year timeframe running from August 25, 2015 to August 25, 2017, is aimed at enabling rural banks to improve their financial strength; enhance their viability; strengthen management and governance; generate synergies and economies of scale through common infrastructure, systems and resources; and expand their market reach.
To avail of the program, proponent banks or participating rural banks must submit letters of intent/application certified by their boards and shareholders to PDIC
Any group of at least five proponent banks — the head offices or majority of the branches of which are preferably be located in the same region or area, and whose consolidation or merger would result in a surviving bank with a capital adequacy ratio of 12 percent and a combined unimpaired capital of at least P100 million – are eligible.
“Rural banks whose head office is located in a nearby region may be included, provided that the program objectives shall be met,” the central bank added.
Proponent banks may avail of funding assistance for financial advisory services, business process involvement services and capacity building support.
In terms of approval of the consolidation or merger, proponent banks should secure a final plan approved by their respective boards of directors and shareholders.
“Within 60 days from receipt of the financial advisers’ final report, the proponent banks shall secure the regulatory consents and/or approval of the PDIC, the BSP and the Securities and Exchange Commission (SEC) as provided under existing laws for all banks on consolidations or mergers,” it said.
Upon the central bank’s issuance of a Certificate of Authority to operate as the surviving bank, proponent banks should secure a Certificate of Registration for the surviving bank from the SEC.