PDIC pushes rural bank consolidation

State-run Philippine Deposit Insurance Corp. (PDIC) is urging rural banks to consolidate and innovate to survive the highly competitive banking sector.

In his speech during the 60th Charter Anniversary of the Rural Bankers Association of the Philippines (RBAP), PDIC president Roberto Tan cited the importance of consolidation and innovation for rural banks to become stronger and more competitive.

Tan pointed out rural banks play a crucial role in providing much needed financial services to the countryside.

He also encouraged rural banks to take advantage of the benefits provided by the Consolidation Program for Rural Banks (CPRB).

The CPRB was launched in August 2015 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 as well as generate synergies and economies of scale through common infrastructure, systems and resources.

The program expired last August.

Bangko Sentral ng Pilipinas Deputy Governor Chuchi Fonacier earlier said a new CPRB would be relaunched within the month.

Fonacier said the BSP is set to sign a memorandum of agreement (MOA) with PDIC, Land Bank of the Philippines, and the Countryside Financial Institutions Enhancement Program (CFIEP) for the relaunching of the program.

According to Fonacier, the program has been relaxed further as the number of banks involved that was fixed at five in the old program has been removed as long as the surviving bank would have a risk-based capital adequacy ratio of at least 12 percent and a combined unimpaired capital of at least P100 million.

She explained the pending applications of three groups under the old program that are now under different stages would still be processed.

The BSP has so far ordered the closure of seven problematic banks this year after shutting down 22 banks last year as it continued to weed out weak players in the industry.

Banks ordered closed by the BSP’s Monetary Board and placed under the supervision of the PDIC include the Countryside Cooperative Rural Bank of Batangas, Rural Bank of Barotac Viejo (Iloilo), Rural Bank of GOA (Camarines Sur), Rural Bank of Ragay (Camarines Sur), Rural Bank of Iligan City, World Partners Bank Inc., and the Cabanatuan City Rural Bank Inc.