BSP approves sweetened perks for rural bank mergers
MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) has finalized a sweetened incentive package that will encourage mergers and consolidations among rural banks.
BSP Deputy Governor Nestor Espenilla Jr issued Circular Letter No. 2015 – 050 laying down the incentives and implementing guidelines for the Consolidated Program for Rural Banks (CPRB).
The CPRB was conceptualized by the BSP, Philippine Deposit Insurance Corporation (PDIC), and Land Bank of the Philippines and is seen to strengthen rural banks that play a major role in financial inclusion.
"The CPRB aims to promote mergers and consolidations among rural banks to bring about a less fragmented banking system by enabling them to improve financial strength, enhance viability, strengthen management and governance, and expand market reach, among others," Espenilla said in the new circular.
Starting this month, the two-year program is offering financial and regulatory perks to groups of rural banks serving similar areas to combine operations and create larger, more efficient institutions.
BSP announced its plan to formalize the sweetened incentives last month. The new circular showed that groups of at least 5 banks that have a minimum combined capital of P100 million, would be eligible for the perks under CPRB.
Interested banks should, according to the central bank, submit a letter of intent manifesting their interest to consolidate with other banks, as well as a memorandum of agreement from the proponent banks.
Qualified banks will be entitled to financial advisory services to be funded through the Countryside Financial Institutions Enhancement Program (CFIEP) that has set aside P25 million for the CPRB.
The CFIEP will also finance business process improvement such as integration process, development and updating of manuals, and guidance on automation. It will also provide capacity building support, including training and governance.
The BSP, PDIC, and Land Bank will subsidize 80% of the financial advisory cost for banks.
The new incentive program also provides possible equity participation by Land Bank.
The central bank would also observe full flexibility in granting regulatory and other incentives allowable under existing banking laws and regulations.
The BSP and PDIC have approved 7 merger and consolidation applications involving 14 banks as of end December 2014. — Rappler.com