The Market Monitor Minding the Nation's Business
The Philippine Deposit Insurance Corp. (PDIC), Bangko Sentral ng Pilipinas (BSP) and Land Bank of the Philippines (Land Bank) recently relaunched the Consolidation Program for Rural Banks (CPRB) that would take effect from October 26, 2017 up to October 26, 2019.
An enhanced Program Guidelines has been issued to simplify and clarify the requirements and procedures. The Guidelines are posted in the PDIC website, www.pdic.gov.ph.
CPRB was originally launched in 2015 to promote bank mergers and consolidations that will bring about more resilient rural banks and a less fragmented banking system.
The program also underscores the continuous need to enhance the viability of rural banks, recognizing their crucial role in providing financial services to local communities.
Through mergers and consolidations, rural banks can improve their financial capacity and generate better value for shareholders, strengthen management and governance, develop synergies and economies of scale, and expand their market reach.
Under the enhanced guidelines, the program now accepts less than five participating rural banks provided the resulting bank will have a capital adequacy ratio of at least 12 percent and an unimpaired capital of at least P100 million.
The program has also expanded the list of potential financial advisers that proponent banks may engage for financial advisory services.
Rural banks may now choose a financial adviser from audit firms listed in the biggest 1,000 corporations and investment houses that are not subsidiaries, affiliates or units of banks.
The financial advisers should have the capability to do valuation of banks, capital and ownership structuring, and prepare the proponent banks for legal and operational integration.
CPRB offers program support that includes funding support for financial advisory services and business process improvement services subject to the subsidy limits set under the program.
PDIC President Roberto Tan said the enhanced CPRB guidelines outlined more flexible terms to be able to create better opportunities for rural banks to further strengthen and enhance theirviability.
Tan also underscored the importance of rural banks in providing essential financial services to the community, citing that their specialized or niche markets are valuable in promoting financial inclusion and financial stability.
Since the launch of the program in August 2015, three bank groups involving 13 rural banks have availed of the CPRB financial advisory support, two groups are completing the financial advisory phase while one has already advanced to the next phase of seeking approval from the regulators, PDIC, BSP and the Securities and Exchange Commission (SEC).
Tan is optimistic that more rural banks will consider mergers or consolidations under the CPRB in view of their continuous expression of interest to strengthen their respective banks and the rural banking industry. RIZA LOZADA