BSP sets deadline for bank branches

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is giving universal, commercial banks, and thrift banks until Oct. 11 to file their applications to set up new branches in restricted areas that include the cities of Makati, Mandaluyong, Manila, Paranaque, Pasay, Pasig, Quezon, and San Juan.

BSP Deputy Governor Nestor Espenilla Jr. issued Circular Letter 2011 - 052 informing banks that the 90-day period for filing of branching applications under Phase 1 of the two-phased lifting of the moratorium on the establishment of bank branches in the eight “restricted areas” of Metro Manila started last July 14.

“The 90-day application window will remain open up to Oct. 11,” Espenilla stated in the circular letter dated July 22.

Last June, the BSP approved a two-phased liberalization approach that would fully lift the bank branching restriction in key cities in Metro Manila starting 2014 to promote a competitive market environment conducive to a better and improved quality of financial services delivery.

Under the first phase, second-tier universal and commercial banks and thrift banks that have less than 200 branches in restricted areas as of December last year would be allowed to apply and establish branches in the restricted areas until June 30, 2014.

To qualify for restricted area branches, a universal or commercial bank must have a combined capital accounts of at least P10 billion while a thrift bank should have at least P3 billion. Banks with lower combined capital accounts would still be allowed to establish branches as long as they execute an undertaking to build up capital for a maximum period of not later than end June 2014.

The BSP said applicant banks or any of its subsidiary banks should not be under prompt corrective action (PCA) while banks under PCA and are compliant with the guidelines would only be allowed to open branches as soon as their PCA status is lifted.

It added that the final number of branches in the restricted areas that may be established by qualified banks would be subject to adjustment by the BSP based on the total number of applications wherein the number of branches that could be established may be pro-rated.

The BSP would impose a non-refundable special licensing fee of P20 million per universal and commercial bank and P15 million per thrift bank and applicant banks should comply with standard requirement in the grant of authority to establish a branch under existing regulations. A significant portion of the special licensing fees would be used to fund projects that promote greater financial inclusion particularly of the unbanked and under-banked segments of the country.

The central bank said the second phase of the current liberalization approach would start on July 1, 2014 wherein branching in the restricted areas would be opened up to all banks except rural and cooperative banks that are not allowed to establish branches in Metro Manila.

The moratorium on the establishment of new banks and branches was first imposed in 1999.

However, the BSP implemented a partial easing of the moratorium in 2005 and 2008. Finally, the BSP narrowed the restricted areas to the eight major cities in Metro Manila in 2008.

Latest data from the central bank showed that the total number of banks operating in the Philippines was reduced by 33 to 746 in the first quarter of the year from 779 in the same quarter last year as the bank regulator stepped up its campaign against problematic banks while major players in the banking industry continued to consolidate.

Data showed that the number of universal and commercial banks was steady at 38 while the number of thrift banks was also unchanged at 73. However, the number of rural banks decreased to 635 in the first three months of the year compared to 667 in the same period last year and 647 as of end-December due primarily to the closure of weaker banks.