More mergers in rural banks

A “BIG number” of mergers and consolidations in the rural-banking industry is expected over the next couple of years now that a government-funded P5-billion program providing financial assistance to prospective buyers of weak rural banks is in place, an industry leader said on Tuesday.

Ma. Corazon Liamzon-Miller, president of the Rural Bankers Association of the Philippines (RBAP), said several members of her group are likely to avail themselves of the financial assistance and incentives provided under the newly launched Strengthening Program for Rural Banks (SPRB).

Philippine Deposit Insurance Corp. (PDIC) president Jose Nograles and Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. led the SPRB launching on Tuesday at the state deposit insurer’s office in Makati City.

Under the program, regulators will provide financial assistance to eligible strategic third-party investors desiring to merge or consolidate with or acquire other eligible rural banks, mainly those that are capital-deficient.

Liamzon-Miller said now is the rural banks’ turn to strengthen themselves through mergers and consolidations, noting the last decade saw some of the country’s big commercial banks go through the same process to become stronger and more competitive.

She sought, however, more financial support from the government for the rural-banking industry ahead of the implementation of stricter capital rules in 2012 under the Basel 1.5 capital-adequacy framework.

A “counterpart capital” was made available some years ago by the government for every rural bank under the original Rural Bank Act that was passed in 1952. “As rural banks are essential partners in the government’s countryside development, we would like to suggest that this counterpart capital still be made available also under the program to all rural banks,” said Liamzon-Miller.

She said some rural banks that do not want to merge with or acquire other banks may still want to avail themselves of such additional capital in addition to what is now available under SPRB.

“The program should be able to include all rural banks—eligible or ineligible—who feel a need for further capitalization in expanding their services to the countryside,” she said. “This is especially needed in the light of the Basel 1.5 changes that would soon be implemented in the computation of the capital-adequacy ratio.”

The BSP will extend a P2.5-billion loan to the PDIC, payable in 10 years, to augment the SPRB funding. The state deposit insurer will provide half of the P5-billion funding.

Nograles said the PDIC might consider extending the implementation of the program and even make more funds available to prospective buyers of weak rural banks “if it works. . .There’s a lot of interest [in the program], according to RBAP.”  

An “Investor-Investee Helpdesk” has been established to complement the PDIC-BSP initiative. It serves as a matchmaking facility for banks looking for possible acquisitions and the capital-deficient ones that may want to merge or to be acquired. –Erik de la Cruz / Reporter, Businessmirror