BSP okays additional support to rural banks

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. yesterday said they approved-in-principle a

Consolidation Program for Rural Banks (CPRB) to speed up the mergers of the small banking sector.

The fund is an additional support on top of the existing Strengthening Program for Rural Banks Plus and it will come from the Countryside Financial Institutions Enhancement Program. The BSP is joined by the Philippine Deposit Insurance Corp. and Land Bank of the Philippines in the latest support program.

“It’s (part of the) strengthening program, it aims to reduce fragmentation,” said Tetangco. “In a way this supports our view that the rural banking industry has a role to play, particularly in financial inclusion since rural banks have a presence in the grassroots level.”

“The idea is to enable them to improve their financial strength through consolidation (and) to enhance their viability, governance and market reach,” added Tetangco.

The BSP, at the moment, supervises 512 rural banks.

The CPRB covers areas not included in the SPRB Plus such as financial advisory, business process improvement and capacity-building support services. “This is really meant to encourage consolidation and mergers,” said Tetangco.

The million will be available for two years once the Memorandum of Agreement has been signed by the BSP, PDIC, and Landbank.

The SPRB Plus, in the meantime, was first established in 2010 and has been revised twice, and then its validity extended three times.

As of end-2014, the central bank and PDIC approved seven merger/consolidation applications involving fourteen 14 banks. Four strategic third party investor banks have been granted branching perks but without financial assistance from PDIC while two more applications for acquisition deals are being reviewed by the co-regulators.