International Finance Corp. backs further consolidations among RP banks

MANILA, Philippines - The International Finance Corp. (IFC) is in favor of further consolidations among local banks. The IFC is the private investment arm of the World Bank (WB).

“The (Philippine) banking sector must consolidate, there are too many banks,” Jesse Ang, IFC resident representative, said on the sidelines of the formal presentation of the UN World Investment Report 2010 last July 22 at the NEDA sa Makati.

Ang said the country’s commercial banks should consolidate down to 15-17 from the present 38.

“Do you know that there a medium-sized commercial bank in China that has resources which is as big as the Philippine’s entire banking system?” the IFC representative said.

Meeting the risk-weighted capital framework of Basel II, and soon Basel III, dictates that banks increase their capital against the amount of “risks” or products it offers the banking public.

The IFC is poised to assist in capital buildup for Philippine banks mainly on the equity side, similar to what it undertook with Banco de Oro Unibank Inc. (BDO) and the Planters Development Bank (Planters Bank).

It has an equity exposure of a combined six percent with BDO and P1-billion worth of equity, grants and loans with Planters Bank.

Likewise, it entered into arrangements with the Bank of the Philippines Islands (BPI) and BDO for funding or guarantees for financing of green energy technology or sustainability.

The Bangko Sentral ng Pilipinas (BSP) cited significant numbers among the rural banks moving in that direction. “The number of rural banks dropped by four percent in 2009 – from 658 to 631 but the branching network increased significantly by 45 percent from 1,362 to 1,974,” BSP Gov. Amando Tetangco said in one of his speeches before the Rural Bankers Association of the Philippines (RBAP).

The rural banks have likewise installed 119 ATM units while another 52 are practicing mobile phone and electronic banking to increase their reach in the countryside. There are more mobile phone users in the Philippines than there are adults with formal bank accounts.

Meanwhile, the Monetary Board (MB) reportedly approved last week the infusion of P2.5 billion as counterpart to the P5-billion strengthening program for rural banks (SPRB) financial assistance and regulatory support facility.

The Philippine Deposit Insurance Corp. (PDIC) had earlier committed to P2.5 billion counterpart contribution of the SPRB.