Banks may now open branches anywhere except 8 MM cities

The Bangko Sentral ng Pilipinas (BSP) said banks are now allowed to open offices and branches anywhere in the country, except for eight cities in Metro Manila considered as adequately served.

The Monetary Board, the BSP’s policy-setting body approved the issuance of two circulars amending the BSP’s branching policy and guidelines by rationalizing existing regulations on the establishment of banking offices.

BSP officer-in-charge Nestor Espenilla said the new regulation allowed the establishment of branches and other banking offices anywhere in the country.

The geographical exception would be in the eight cities within Metro Manila, namely: Makati, Mandaluyong, Manila, Paranaque, Pasay, Pasig, Quezon and San Juan.

“This amended branching policy is meant to promote healthy competition in the banking system and improve the delivery of efficient banking services,” Espenilla said.

He said the new policy would also boost the micro-enterprise sector by allowing the establishment of microfinance-oriented banks as well as microfinance-oriented branches of other banks anywhere in the country subject to certain conditions.

Espenilla said this policy would apply on microfinance-oriented banks even in the aforementioned eight cities within Metro Manila, saying that banks of this type would be exempted from the restriction.

Espenilla said the circular has also reduced the prerequisites for the establishment of banking offices without sacrificing prudential concerns.

In particular, he said the circular limits the prerequisites for the establishment of banking offices other than branches to the requirements that include compliance with minimum capital requirement but not lower than P10 million in the case of rural banks and cooperative banks and the 10 percent risk-based capital adequacy ratio.

Espenilla said banks are also required to have a CAMELs composite rating not lower than “3”; and be fully compliant with the ceiling on total investments in real estate and improvements.

In the circular, the BSP removed the 200-meter minimum distance requirement from an existing office in the establishment of branches.

The BSP also now allows thrift banks (TBs) or rural banks (RBs) with combined capital accounts of at least P500 million to establish one branch in the “restricted areas” for TBs or in Metro Manila including the “restricted areas” for RBs, if they do not have one  yet, to complete their nationwide market presence.

The MB also approved another circular that provided the implementing regulations for the recently passed law, Republic Act 9501, which amended the Magna Carta for Micro, Small and Medium Enterprises.

Under the amendatory Act, the mandatory credit allocation to micro and small enterprises has been increased from 6 percent to 8 percent while the requirement for medium enterprises has been maintained at two percent.

Moreover, compliance with the mandatory allocation of credit resources has been limited to actual extension of loans to micro, small and medium enterprises (MSMEs) and subscription to and purchase of preferred shares of stocks and liability instruments to be issued by the SB Corp.

The circular provided for a P500,000 penalty for zero compliance. Under-compliance, on the other hand, would be penalized proportionately against  a  base  amount of P400,000  (for the 8 percent allocation  for micro and small enterprises) and P100,000 (for the 2 percent allocation for medium enterprises), respectively.

The two circulars are expected to broaden the delivery of banking services through the branching network of banks while providing further policy support for the growth and development of MSMEs through the provision of credit.