Number of rural banks dwindles as central bank tightens rules

Rural banks (RBs) are fast disappearing, based on the Rural Bankers’ Association of the Philippines (RBAP) latest count, which showed that, within the last nine months, 23 small banks have closed shop, mainly as a result of stricter capitalization rules imposed by the Bangko Sentral ng Pilipinas (BSP).

The BSP’s policy-making Monetary Board (MB) increased in 2014 the minimum capital requirement for banks, including small banks, in line with efforts to further strengthen the banking system.

The upward revision in minimum capital levels was aside from compliance with risk-based capital adequacy ratios in accordance with Basel 3 requirements, as implemented by BSP Circulars 781 and 822.

The minimum capital requirement for universal and commercial banks has not changed since 1999, while that of thrift and rural banks’ were last increased in 2010 and 2011, respectively.

For thrift, rural and cooperative banks, both the location of the head office and size of the physical network are considered in tiering the minimum capital requirements from a minimum of P5 million for remote municipalities to P100 million in cities.

When RBAP President Enrique Abellana assumed his post last July 1, there were 534 RBs, but nine months later the number dwindled to 511, with 16 RBs during that period placed under the receivership of the Philippine Deposit Insurance Corp.

Abellana, who also serves as member of the audit committee of the Rural Bank of Barili (Cebu), had admitted that difficulties in finding new investors is the most common reason many RBs close.

At present, the Rural Bank of Barili is one of the top RBs in Region 7 (Central Visayas), with over P1 billion assets and a total loan portfolio of more than 60 percent of that amount. If the Rural Bank of Barili is one of the strongest RBs in the Visayas, the Rang-ay Bank is the strongest RB in Luzon.

Both banks denied earlier that they are for sale. Rang Ay Bank President and CEO Ives Nisce, also served as RBAP president. Abellana said its owners have more than three decades of proven track record in managing the bank and thinking of selling the bank is unwise at this moment. JERRY MAGLUNOG