Three groups of rural banks are seeking the approval of the Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, to merge under the Consolidation Program for Rural Banks, Deputy Governor Nestor Espenilla Jr. said.
“There are currently three applications… and they are really moving ahead. I think these would be approved within this year…,” Espenilla said in a statement.
Espenilla said the Monetary Board recently amended the implementing guidelines of CPRB to give chance to everyone seeking to avail of the program.
Under the original CPRB guidelines, the combining banks should be at least five with a combined unimpaired capital of at least P100 million.
The revised guidelines said that if the proponent banks were less than five but if the surviving bank would have a risk based capital adequacy ratio of at least 12 percent and a combined capital of at least P100 million, the application might be accepted, provided that the Countryside Financial Institutions Enhancement Program Technical Committee would favorably endorse the said application.
Espenilla said of the three groups applying for merge, one of them had only four banks but their capital was above P100 million.
“Our [original] requirement is a combined capital of at least P100 million and at least five banks. One of those groups has more than a hundred [million pesos] but four [banks]. The [new] policy was just to allow that flexibility,” Espenilla said.
“We amended the guidelines to accommodate that… What the board did was to approve for that particular group and then generalize the rules,” he said.
CPRB started on Aug. 25, 2015 and gave rural banks until Aug. 25 this year to avail of the program. The head offices or majority of the branches of merging banks should also be located in the same region or area.
Rural banks whose head office is located in a nearby region may be included, provided that the objectives of the consolidation program sare met. Proponent banks may avail of funding assistance for financial advisory services, business process improvement services and capacity building support services.
To avail of the incentives, banks must submit a letter addressed to the Philippine Deposit Insurance Corp. and BSP.
In case the resulting RBCAR and the unimpaired capital of the surviving bank are below 12 percent and P100 million, respectively, the proponent banks shall infuse additional fresh capital to meet the minimum capital requirements.
In the event that the resulting RBCAR of the surviving bank falls short of the 12-percent requirement but is at least 10 percent, the surviving bank may avail of the equity investment facility of the Land Bank of the Philippines to bring the RBCAR to the required 12 percent.
Upon BSP issuance of the certificate of authority to operate as the surviving bank, the proponent banks shall secure from the Securities and Exchange Commission the certificate of registration of the surviving bank.
CPRB 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 or niche markets, and in promoting financial inclusion and financial stability in the economy.
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 financial strength, enhance their viability, strengthen management and governance, generate synergies and economies of scale through common infrastructure, systems and resources and expand their market reach.