More bank mergers, acquisitions loom — PDIC

State-run Philippine Deposit Insurance Corp. (PDIC) said more rural banks have expressed interest in a program that grants incentives for mergers and consolidation recently relaunched by the government.

PDIC president Roberto Tan said more rural banks are considering mergers or consolidations under the Consolidation Program for Rural Banks (CPRB) in view of their continuous expression of interest to strengthen their respective banks and the rural banking industry.

Tan said the enhanced CPRB guidelines outlined more flexible terms to be able to create better opportunities for rural banks to further strengthen and enhance their viability.

He also underscored the importance of rural banks in providing essential financial services to the community, citing that their specialized or niche markets are valuable in promoting financial inclusion and financial stability.

The CPRB was launched in August 2015 but expired in August this year. Under the relaunched program, it would be available for two years until Oct. 26, 2019.

Since the launch of the program, three bank groups involving 13 rural banks have availed of the CPRB financial advisory support – two of which are completing the financial advisory phase while one has already advanced to the next phase of seeking approval from the regulators.

Under the enhanced Guidelines, the CPRB now accepts less than five participating rural banks provided the resulting bank would have a capital adequacy ratio of at least 12 percent and an unimpaired capital of at least P100 million.

It has also expanded the list of potential financial advisers that proponent banks may engage for financial advisory services. Rural banks may now choose a financial adviser from audit firms listed in the Top 1,000 Corporations in the Philippines and investment houses that are not subsidiaries, affiliates or units of banks.

It also offers a program support that includes funding support for financial advisory services and business process improvement services subject to the subsidy limits set under the CPRB.

The rural banking sector consists of 495 rural banks nationwide with 2,788 banking offices as of June 2017.

Combined, the rural banks have total deposits of P161.9 billion representing about 7.4 million accounts.

During a five-year period from 2013 to 2017, the number of deposit accounts grew by 35 percent from 5.4 million deposit accounts, mirroring the rural banking sector’s capability to grow and service the financial needs of its market; and reach the unbanked areas of the country.