‘Small rural banks may still merge’


Small banks who wanted to merge under the central bank’s Consolidation Program for Rural Banks (CPRB) but did not meet the prescribed number of members per group may still be allowed to consolidate, provided their capital reaches the required minimum amount of P100 million.

This flexibility was made possible by the regulators after the revision of the CPRB implementing guidelines.

Under the original guidelines, any group of at least five proponent banks, the head offices or majority of the branches of which, shall preferably be located in the same region or area, and whose consolidation or merger would result to a surviving bank with rural bank capital adequacy ratio (RBCAR) of 12 percent and a combined unimpaired capital of at least P100 million.

However, under the revised guidelines, if the proponent banks are less than five but based on the submitted documents, the surviving bank will have RBCAR of at least 12 percent and a combined unimpaired capital of at least P100 million, “the application may be accepted, provided the Countryside Financial Institutions Enhancement Program Technical Committee will favorably endorse the said application, taking into consideration the objectives of the Program.”

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor Espenilla Jr. explained that the rationale behind the guidelines revision is that there are three groups now actively applying under the program and its turns out that one of those groups have only four but their capital is above P100 million.

“The requirement is combined capital is at least P100 million and at least five banks. But they have more than a hundred million but four,” he said.

“The policy was just to allow that flexibility,” he added.

Going forward, Espenilla said he expects approvals within this year.

CPRB is a tripartite program of the Philippine Deposit Insurance Corp., BSP, and Land Bank of the Philippines which was launched in August 2015 to encourage consolidation among rural banks to improve financial strength and enhance their viability.

It 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 or niche markets, and in promoting financial inclusion and financial stability in the economy.

The program seeks to encourage consolidations and mergers among rural banks to bring about a less fragmented banking system by 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.

Rural banks that avail of CPRB will receive assistance in financial advisory, business process improvement, and capacity building.

These include training on credit evaluation and administration, audit and internal control, personnel management, accounting/record keeping, treasury, information technology, and governance.

Equity participation may also be provided by the LandBank, while the BSP will observe full flexibility in the grant of incentives to participating banks.



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