BSP, PDIC approve enhanced P5-billion program for rural banking industry

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) and the state-run Philippine Deposit Insurance Corp. (PDIC) approved the enhanced and extended version of a P5-billion program aimed at strengthening the rural banking industry for faster consolidation in the banking industry through mergers and acquisition.

In a statement, the BSP and the government-owned deposit insurer approved an enhanced version of the Strengthening Program for Rural Banks (SPRB) launched in 2010 by now offering incentives to commercial banks and well-managed thrift banks intending to acquire ailing rural banks.

The enhanced program dubbed as the Strengthening Program for Rural Banks Plus (SPRB Plus) now includes strong and well-managed commercial banks and thrift banks as among eligible Strategic Third Party Investor (STPI) or so-called “white knights” that would be entitled to incentives when investing in problematic country-side based banks.

In the original SPRB that is scheduled to expire in August this year, only strong rural banks were allowed to act as white knights of other rural banks and with a more limited incentive package.

 “This program is envisioned to further strengthen the rural banking system, boost confidence, and improve the delivery of financial services to rural communities,” the BSP and PDIC said in the joint statement.

SPRB Plus offers a variety of financial and regulatory relief and incentives to improve the prospects for success of new banking partnerships. It would take effect until end next year.

Under the enhanced program, PDIC could extend financial assistance to augment capital shortfalls and attract new investors while the BSP has also put on the table an expanded package of regulatory relief and branching incentives for commercial, thrift, and rural bank that step forward as “white knights.”

The SPRB Plus expects eligible “white knights” not only to sustain and strengthen the financial condition of resulting banks but also to improve their quality of corporate governance and management.

Both BSP and PDIC have received strong expressions of interest from a number of players in the industry to take part in the SPRB Plus indicating the strong buy-in of the banking sector to strengthen the system.

PDIC has received 17 applications for the current SPRB involving 31 rural banks as of end-March this year. Four of these applications have been approved by the PDIC Board and two are in process.

The state-run deposit insurer took over 29 banks last year led by the Aguirre-controlled Banco Filipino Savings and Mortgage Bank and LBC Development Bank of the Aranata clan as more problematic banks were ordered closed by the BSP. A total of 25 rural banks ceased to operate in 2011.

On the other hand, four consolidations were completed last year including Bangko Buena and Rural Bank of Dao; Rural Bank of Guimba and Rural Bank of Hamtic; Rural Bank of Alabang and Rural Bank of Mansalay; and One Network Rural Bank and Rural Bank of New Corella.