BSP to relaunch incentives to encourage rural banks’ merger

The Bangko Sentral ng Pilipinas, Land Bank of the Philippines and state-run Philippine Deposit Insurance Corp. approved the relaunch of the Consolidation Program for Rural Banks, an incentive program designed to encourage mergers and consolidation among rural banks.

The program was set up to strengthen the rural banking industry, in recognition of the major role that rural banks play in providing essential financial services to communities, especially in their specialized or niche markets.

The Bangko Sentral said the relaunched CPRB would be available for two years, from Oct. 26, 2017 to Oct. 26, 2019. The program, however, contains some enhancements.

For one, the eligibility to avail of the CPRB was relaxed by allowing proponent banks, even if less than five, to avail of the program provided that the resulting bank will have capital adequacy ratio of at least 12 percent and a combined unimpaired capital  of at least P100 million.

The previous CPRB required at least five proponent banks with a combined capital of P100 million.

The qualifications of possible financial advisers that may be engaged under the program was expanded.

BSP Deputy Governor Chuchi Fonacier earlier said despite the amendment, the primary aim of the program remained, which was to consolidate weaker banks that could result in a new bank. 

She said the relaunched CPRB would be effective for two years, starting from the signing of the memorandum of agreement between BSP, PDIC and Land 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 niche markets and in promoting financial inclusion.

Aside from encouraging mergers and consolidation, CPRB is also expected to enable rural banks to improve their financial strength, enhance viability and generate better return to shareholders.

The program is also expected to strengthen management and governance, generate synergies and economies of scale thru common infrastructure, systems and resources, and expand market reach.

Fonacier said three groups of rural banks had previously applied to avail of the program but only one group might be approved within the year.

The Bangko Sentral said it was studying the possibility of unifying CPRB and the Strengthening Program for Rural Banks Plus because of their almost similar objectives.

The SPRB Plus expired on Dec. 31, 2015. Meanwhile, the guidelines of CPRB, approved by Bangko Sentral, PDIC and Land Bank expired on Aug. 25, 2017. Julito G. Rada

The Monetary Board closed a total of 22 financially-ailing rural banks in 2016, 14 in 2015 and 14 in 2014.

Under the law, a bank that was placed under liquidation shall in no case be re-opened and permitted to resume banking business. Banks closed by the Monetary Board shall no longer be rehabilitated.


Topics: BSP , Land Bank , PDIC , Consolidation Program , Rural Banks , CPRB
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