Davao-based banks seek BSP perks

Another group is seeking incentives from the Bangko Sentral ng Pilipinas (BSP) for an impending consolidation as part of the strengthening of the country’s banking industry.

BSP Deputy Governor Chuchi Fonacier said the group consisting of two banks from Davao has inquired about possible incentives available to merging and consolidating rural banks to further strengthen and enhance the viability of the banking system.

She said there are currently three groups – one from Iloilo, one from Cavite and one from Cebu – that have pending applications under the Consolidation Program for Rural Banks (CPRB).

Roberto Tan, president of state-run Philippine Deposit Insurance Corp. (PDIC), earlier issued Bulletin 2017-14 announcing the BSP and the Land Bank of the Philippines have approved the relaunching of the CPRB.

“This is consistent with the objectives to bring about more resilient rural banks and a less fragmented banking system by encouraging rural banks to merge or consolidate,” he said.

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

“Under the CPRB, merging or consolidating banks may avail of support for financial advisory and business process improvement services, capacity building, and other program support,” he said.

Rural banks play an important role in providing essential financial services to the community, particularly in their specialized or niche markets, and in promoting financial inclusion and financial stability.

The program aims to improve financial strength, enhance viability and generate better return to shareholders; strengthen management and governance; generate synergies and economies of scale through common infrastructure, systems and resources; as well as expand the market reach of rural banks.

To qualify, the resulting bank of less than five proponent banks should have a capital adequacy ratio of 12 percent and a combined unimpaired capital of at least P100 million.

Proponent banks are entitled to funding support subject to the subsidy limits set by the Countryside Financial Institutions Enhancement Program (CFIEP), capacity building support services, possible equity participation by Landbank, regulatory incentives and other CPRB support.

Under the guidelines, proponent banks should infuse additional fresh capital in case the resulting CAR and unimpaired capital of the resulting bank are below 12 percent and P100 million, respectively.

The fresh capital could be infused through the combination of existing shareholders of the proponent banks or from a third party investor.

On the other hand, the resulting bank could opt to avail of Landbank’s equity investment facility to meet the minimum CAR requirement of 12 percent.