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15 Rural banks set to merge, consolidate

The central bank reported that at least 15 rural banks are slated for merger or consolidation under the Strengthening Program for Rural Banks (SPRB) Plus initiative.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said that as of June 30, 2014, seven merger/consolidation applications involving 15 banks have received regulatory approval by the Philippine Deposit Insurance Corp. (PDIC) and were being processed by the central bank.

“Launched in 2010 to strengthen rural banks and to minimize bank closures, the program has been extended as SPRB Plus until December 2014 to encourage more mergers, consolidations and acquisition of eligible rural banks and thrift banks by strategic third party investors,” Tetangco said in a speech before the members of Rural Bankers Association of the Philippines (RBAP) earlier this week.

In addition, there are five other applications for consolidation/acquisition that are in the pipeline of the program, Tetangco said.

SPRB Plus is an enhanced version of the original SPRB, which initially covered only rural banks. Its scope was broadened in August 2012 to include thrift banks with rural banks under the “eligible banks” classification, and rural, thrift, universal, and commercial banks as well as non-bank corporations and groups of companies under the classification of “eligible strategic third-party investors” (STPIs).

The BSP governor said that the central bank’s reform agenda in the past 20 years has been structured to strengthen local banks and to be more responsive to the needs of stakeholders.

“In particular, our efforts to bolster risk management systems, enhance corporate governance standards, build-up capital and adopt international best practices are intended to improve the efficiency and competitiveness of our banks,” he said.

A key part of the rationale behind the SPRB Plus program is to bolster rural bank stability and reduce the number of bank closures, while maintaining some flexibility in applying capitalization and regulatory standards.

“The Bangko Sentral is mindful that in aligning ourselves with global best practices, we at the same time should take local conditions into consideration.

Thus, while commercial banks are required to be Basel III compliant starting January 2014, the BSP’s requirement for rural banks is the less stringent Basel 1.5,” Tetangco explained.

Tetangco also pointed out that administrative and management capacity building for rural banks has been another area of focus for the BSP. In particular, he said the BSP’s Supervision and Examination Sector developed a completely new four-day training program for the Boards of Directors and senior officers of rural banks, called the Rural Bank Management Course.

“The BSP worked with RBAP on the coverage of such a program. After a series of pilot and early runs . . . we are now ready to hand over to RBAP the course materials and the conduct of this well-received and highly rated course. If needed, the BSP is prepared to extend further assistance on this program to RBAP,” he said.

Tetangco also highlighted growth of the Philippine rural banking sector, as indicated by the key performance indicators of consolidated assets, deposits, and loans. As of the end of the first quarter, rural banks had total assets of P209.4 billion, representing year-on-year growth of 8.8 percent. Deposits recorded double-digit growth of 10.6, reaching P145 billion, while gross loan portfolios grew to P138 billion, a 6.5 percent increase over the previous year.

“That these figures were achieved even as natural calamities devastated wide areas in the Visayas is unquestionably commendable,” Tetangco added.

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