Body formed to upgrade, review program for rural banks

MANILA, Philippines - A joint technical committee has been formed to include representatives from the Philippine Deposit and Insurance Corp. (PDIC), the Land Bank of the Philippines (LBP), and the Bangko Sentral ng Pilipinas (BSP) to review and upgrade the strengthening program for rural banks (SPRB) financial assistance and regulatory support facility.

The assistance and support facility was launched in 2010, and is set to expire in August this year.

BSP Deputy Governor Nestor A. Espenilla Jr. said the “new” assistance and support facility would be more liberal with emphasis on non-financial “incentives” to encourage consolidation of the country’s rural banking industry.

“There will be more non-financial incentives, and it will further liberalize the banking sector,” Espenilla said.

Some of the proposed features include allowing thrift banks to be part of the program of acquiring troubled rural banks as a “white knight” or eligible strategic third party investor (STPI).

In the existing SPRB, only rural banks were involved as the acquirer or white knight, and as the object of acquisition.

“We are even thinking of getting the commercial banks involved likewise,” Espenilla said.

A number of thrift and commercial banks are looking to expand their reach, and one of the options is to acquire other banks.

A pioneer in this process is the Rizal Commercial and Banking Corp. (RCBC) when it acquired Merchant Savings and Loan Association (classified as a thrift bank) in 2007.

In 2009, RCBC bought Pres. JP Laurel Rural Bank with its 10 branches located in Batangas, Laguna and Mindoro Oriental. It not only signified the commercial bank’s foray into buying a rural bank, but it opened the doors to the complex financial environment of microfinance.

One of the beneficiaries of the acquisition was RCBC Savings Bank, which got a share of the branches from the two acquisitions.

And last year, medium-sized commercial bank Security Banking Corp. bought the Premiere Development Bank, classified as a thrift and development bank with a strong base of small and medium enterprises (SMEs).

Espenilla explained that as the Philippine economy flourishes, more and more urban centers as well as other regions would experience economic growth and a lot of economic activities.