BSP issues guidelines on rural bank mergers

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has released the eligibility requirements for a program extending a financial package to encourage mergers and consolidations among rural banks.

BSP deputy governor Nestor Espenilla Jr. issued a memorandum containing the implementing guidelines for the Consolidation Program for Rural Banks (CPRB).

“The implementing guidelines set out the eligibility requirements for proponent banks, the procedures for application and the related documentary requirements, the program supports and regulatory incentives,” Espenilla said.

The BSP together with the state-run Philippine Deposit Insurance Corp. (PDIC) and the Land Bank of the Philippines jointly conceptualized the program.

Espenilla said the program would be available until Aug. 25, 2017.

“The PRB was established in recognition of the need to further strengthen and enhance the viability of rural banks given their importance in providing essential financial services to the community, particularly in their specialized niche markets, and in promoting financial inclusion and financial stability in the economy,” Espenilla said.

He added the program seeks to encourage consolidations and mergers among rural banks to bring about a less fragmented banking system by enabling rural banks to improve their governance and financial strength; enhance their viability; strengthen management; generate synergies and economies of scale through common infrastructure, systems and resources as well as expand their market reach.

Espenilla said any group of at least five proponent banks with head offices or majority of branches located in the same region or area that consolidate resulting to a surviving rural bank with a capital adequacy ratio (CAR) of at least 12 percent and a combined unimpaired capital of at least P100 million would be entitled to incentives.

If the minimum CAR and unimpaired capital are not met, Espenilla said proponent banks should infuse additional fresh capital to meet the program’s minimum capital requirement.

The fresh capital infusion could come from existing shareholders of the proponent banks or from a third party investor.

Qualified rural banks, he explained, would be entitled to funding assistance such as financial advisory services, business process improvement services, and capital building support services.

Furthermore, he added banks would be entitled to regulatory incentives.