PDIC eases rules on bank mergers

MANILA, Philippines - State-run Philippine Deposit Insurance Corp. (PDIC) has relaxed its guidelines to encourage mergers and consolidations of rural banks to further strengthen the country’s banking industry.

PDIC president Roberto Tan has issued Bulletin No. 2017-06 revising the implementing guidelines on the Consolidation Program for Rural Banks (CPRB).

“Consistent with the objectives to encourage mergers and consolidations of rural banks, the CPRB Implementing Guidelines was amended to allow groups composed of less than five proponent banks to avail of the program’s incentives,” Tan stated in the notice.

The CPRB, valid until Aug. 25 this year, seeks to encourage consolidations and mergers among rural banks to bring about a less fragmented banking system by enabling rural banks to improve their financial strength, enhance their viability, strengthen management and governance as well as generate synergies and economies of scale through common infrastructure, systems and resources.

Originally, the CPRB welcomed any group of at least five rural banks whose head offices or majority of the branches are located in the same region or area.

However, the number was lowered to a group composed of less than five proponent banks as long as the surviving bank should have a risk-based capital adequacy ratio of at least 12 percent and a combined unimpaired capital of at least P100 million.

Bangko Sentral ng Pilipinas Deputy Governor Nestor Espenilla Jr. said authorities decided to relax the implementing rules and regulations of the CPRB to give more flexibility to applicants.

“The policy was just to allow flexibility,” he said.

 The CPRB through Land Bank of the Philippines would provide funding assistance for financial advisory services, business process improvement services, and capacity-building support services.

These include training on credit evaluation and administration, audit and internal control, personnel management, accounting or record keeping, treasury, information technology, and governance.

The central bank would also provide regulatory incentives as part of CPRB’s program support.

 The BSP has so far ordered the closure of five problematic banks this year after shutting down 22 banks last year as it continued to weed out weak players in the industry.

Banks ordered closed by the BSP’s Monetary Board and placed under the supervision of the PDIC include the Countryside Cooperative Rural Bank of Batangas, Rural Bank of Barotac Viejo (Iloilo), Rural Bank of GOA (Camarines Sur), Rural Bank of Ragay (Camarines Sur), and Rural Bank of Iligan City.