Merging banks must infuse additional capital to qualify for incentives -BSP

Local banks that are planning to merge have to make sure to put in additional capital into the merged institution before the Bangko Sentral ng Pilipinas (BSP) allows the merging institutions to avail of the incentives earlier given to encourage such unions.

According to BSP Gov. Rafael B. Buenaventura, the BSP noted that some banks agree to merge without putting incremental value to the merged institution.

Instead, the BSP observed, the merging institutions appear only to take advantage of the incentives that the BSP had offered for such unions.

Last year the BSP had given the following incentives to entice banks to merge: 1) revaluation of their assets including bank premises and buildings; 2) staggered booking of their valuation reserves; and 3) an extended five year compliance of the two percent general loan-loss provisioning.

The new ruling, Buenaventura said, would affect the merger plans of Urban Bank and Pan Bank and that of Trader Bank and Bank of Commerce.

The BSP still wants local banks to merge, Buenaventura clarified, but the BSP wants to insure that additional capital is infused into the merged institution.

The purpose of the consolidation and merger policy of the BSP is to create bigger, better capitalized local banks that can compete regionally, if not globally.

The grant of the incentives has already led to some big unions.

These include that of Bank of the Philippine Islands and Far East Bank and Trust Co; Equitable Bank and Philippine Commercial International Bank, Pilipinas Bank and Prudential Bank, Asian Bank and Global Bank and Metropolitan Bank and Trust Co.'s still uncompleted acquisition of Solidbank.

Metrobank has already been able to secure 51 percent of Solidbank from the Madrigal Family and another stockholder.

However, Metrobank is still negotiating for the remaining 40 percent share of the Bank of Nova Scotia.

The BSP is also encouraging foreign banks to acquire distressed local banks, but so far there have been few takers.

Among them are Keppel Bank of Singapore which earlier acquired Monte de Piedad Savings and Loan Bank.