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MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) on Wednesday, December 16, laid down the eligibility requirements for a sweetened incentive package that will encourage mergers and consolidations among rural banks.
BSP Deputy Governor Nestor Espenilla Jr issued Memorandum No. M – 2015 – 043 containing the implementing guidelines for the Consolidation Program for Rural Banks (CPRB) launched in August. (READ: BSP approves sweetened perks for rural bank mergers)
The implementing guidelines set out the eligibility requirements for proponent banks, the procedures for application, and the related documentary requirements, he said.
BSP, the state-run Philippine Deposit Insurance Corporation (PDIC), and the Land Bank of the Philippines jointly conceptualized the program.
Espenilla said the program would be available until August 25, 2017.
The memorandum stated that 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 and financial stability in the economy.
The program also seeks to encourage consolidations and mergers among rural banks to bring about a less fragmented banking system.
Entitled to the incentives are any group of at least 5 proponent banks with head offices or majority of branches located in the same region or area that consolidate, resulting in a surviving rural bank with a capital adequacy ratio (CAR) of at least 12% and a combined unimpaired capital of at least P100 million.
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 3rd-party investor.
Qualified rural banks would be entitled to funding assistance such as financial advisory services, business process improvement services, and capital building support services.
He added that banks would be entitled to regulatory incentives.
The Countryside Financial Institutions Enhancement Program (CFIEP) has set aside P25 million to support the financial advisory, business process improvement, and capacity-building support services necessary to ensure the attainment of the program’s objectives.
CPRB versus SPRB
The CPRB though is different from the Strengthening Program for Rural Banks (SPRB) Plus.
The SPRB Plus is an enhanced version of the original SPRB launched in 2010 exclusively for rural banks. BSP and PDIC approved the extension of the SPRB Plus to end-December 2015 from end-December 2014, with certain operational refinements after banking industry associations pushed for the program’s extension.
The one-year extension would accord opportunity and encourage more mergers, consolidations and acquisition of eligible rural banks and thrift banks by strategic 3rd party investors (STPIs).
Under the SPRB Plus, the scope was broadened and enhancements were made, such as the inclusion of thrift banks.
BSP showed a total of 503 rural banks with 1,922 branches operating as of end-June.
The central bank has so far ordered the closure of 14 banks nationwide. (READ: Senate passes bill protecting bank clients from closures) – Rappler.com