BSP removes bank branch restrictions

The Bangko Sentral ng Pilipinas (BSP) removed more of its restrictions on bank branching, specifically to encourage credit retailing to small borrowers and to allow large banks more flexibility in their non-banking services.

The Monetary Board (MB) approved a set of measures extending the scope of the BSP’s bank branching liberalization to small banks catering to small and medium-scale borrowers as well as those engaged in micro-financing.

The MB also eased rules on bank branching for large high-rated and well-capitalized banks by waiving requirements not related to prudential regulations and making it easier for them to outsource some of their backroom services.

BSP Deputy Governor Nestor Espenilla Jr. told reporters that the MB has allowed microfinance-oriented rural banks to establish branches in Metro Manila and other urban center to service low-income retail borrowers in the cities.

“We realize that there are small borrowers in the cities too, that the bigger banks don’t normally serve,” Espenilla said. He said the MB also decided to allow rural banks and thrift banks to open one branch even in areas classified as restricted.

“This is just to complete the network,” he said, adding that these banks would be allowed to open new branches even without meeting the increase in capitalization that would normally be required when opening branches in restricted urban centers.

“The only condition here is that these bank must keep their main business in their main offices,” Espenilla said.

Moreover, Espenilla said the MB also relaxed its rules on non-branch banking units if the bank concerned is well-capitalized and rated at least a three on the so-called CAMEL rating (Capital adequacy, Asset quality, Management quality, Earnings, Liquidity and Sensitivity to market risk).

“From hereon, these banks would no longer need prior MB approval if they want to open non-branch outlets,” he said. “These are outlets that basically provide brochures or various information on their services as long as they are not engaged in deposit-taking and servicing of withdrawals.”

Espenilla said these off-branch sites have become necessary for banks competing for market share by reaching out to consumers and prospective clients.

“This is a recognition that banks are moving into business models more responsive to the lifestyles of their clientele,” he said. “Malls, for example, have become hubs that banks want to use to bring their services closer to their clients.”