Bangko Sentral ng Pilipinas, state-run Philippine Deposit Insurance Corp. and Land Bank of the Philippines approved the implementing guidelines for the consolidation and mergers of rural banks.
CPRB was established to strengthen and enhance the viability of rural banks through mergers and consolidation.
The program is also expected to enable rural banks to improve their financial strength, enhance viability and generate better return to shareholders. It aims to strengthen management and governance, generate synergies and economies of scale through common infrastructure, systems and resources and expand market reach.
“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,” Bangko Sentral said in a statement Wednesday.
“For proponent banks that wish to avail of the Equity Investment Facility from the LBP under the program, their eligibility shall be subject to the guidelines on the LBP Equity Investment Facility,” it said.
It said to avail of the program, letters of intent or application duly supported by the certification of board and shareholders’ approvals of proponent banks should be duly submitted to and received by PDIC by Aug. 25, 2017.
Proponent banks may avail of funding assistance for financial advisory services and business process improvement services. Proponent banks must submit three sets of documents to PDIC, such as letter to PDIC and Bangko Sentral indicating their intention to consolidate or merge
under the program; duly accomplished application form; and resolution of the board of directors of the respective proponent banks approving the consolidation or merger.
“The proponent banks shall secure the approval of their respective board of directors and shareholders on the final plan of consolidation or merger. Within 60 days from receipt of the financial adviser’s final report, the proponent banks shall secure the regulatory consent of PDIC, BSP and SEC as provided under existing laws for all banks on consolidations or mergers,” it said.
Upon issuance of the certificate of authority to operate as the surviving bank, the proponent banks shall secure from the SEC the certificate of registration of the surviving bank.
Bangko Sentral said in an earlier circular proponents should be at least five rural banks, the head offices of majority of the branches of which shall preferably be located in the same region or area.
Rural banks whose head office is located in a nearby region may be included, if the program objectives shall be met.
The resulting bank, however, should meet a risk-based capital adequacy ratio of at least 12 percent, and combined unimpaired capital of at least P100 million.
As of Dec. 10, 2015, Bangko Sentral ordered the closure of 14 rural banks due to unsound financial condition. This matched the total number of rural banks placed under the custody of PDIC in 2014.