MAY 1, 2012 DATE

NR # 2726
REF. NO.

House urges BSP to enhance incentives being offered to banks that will acquire troubled rural banks
Lawmakers have urged the Bangko Sentral ng Pilipinas (BSP) to enhance the incentives currently being offered to banks that will acquire troubled rural banks in a bid to encourage mergers and prevent more closures of banks in the countryside. Reps. Rufus Rodriguez (2nd District, Cagayan de Oro City) and Maximo Rodriguez, Jr. (Party-list, Abante Mindanao), authors of House Resolution 2222, said it is imperative to strengthen and enhance the incentives package in order to encourage big banks to acquire capital-deficient rural and cooperative banks in a bid to prevent more costly closures, which entail cost for the government, particularly to state-owned Philippine Deposit Insurance Corp. (PDIC), given the need to pay deposit insurance claims. Rodriguez said the Monetary Board (MB) of the BSP is currently implementing the Strengthening Program for Rural Banks (SPRB), a milestone project jointly conceptualized by the BSP and the PDIC to encourage mergers, consolidations and acquisitions (MCAs) via the grant of financial assistance (FA) to eligible strategic third party investors (STPI) desiring to enter into MCA with eligible rural banks (RBs), mainly those that are capital deficient. The SPRB recognizes the vital role of rural banks in providing financial services to the community, particularly to their specialized or niche markets and intends to promote the merger, consolidation and acquisition between or among eligible STPIs and eligible RBs, to create a stronger rural banking system that can more effectively serve the countryside and better contribute in ensuring balanced and sustainable economic growth in our country, Rodriguez said. Rodriguez said while the intention of the BSP in implementing the SPRB is very laudable, there seems to be a lack of takers considering the perceived insufficient incentives to be provided. According to Rodriguez, the existing incentives package at present under the SPRB allows the state-run PDIC and the central bank to extend loan support and to grant regulatory relief to banks that will acquire rural banks suffering from capitalization problems. Rodriguez said industry players believed that banks did not find the incentives attractive enough to agree to take on the burden of acquiring a troubled rural bank, including all its debts and other liabilities. Although the BSP considers the countrys overall banking sector in good shape, driven by the strong financial performance of universal, commercial and thrift banks, some rural and cooperative banks are facing capitalization and management problems which make the SPRB more important in order to strengthen the overall rural and cooperative banking sectors, Rodriguez stressed. (30) lvc