MANILA, Philippines – Administration lawmakers urged the Bangko Sentral ng Pilipinas (BSP) to enhance the incentives currently being offered to financial institutions that will acquire troubled rural banks to encourage mergers and prevent more closures of banks in the countryside.
Cagayan de Oro Rep. Rufus Rodriguez and Abante Mindanao party-list Rep. Maximo Rodriguez Jr. filed House Resolution 2222 calling on the BSP 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.
They said bank closures entail cost for the government, particularly to state-owned Philippine Deposit Insurance Corp. (PDIC), given the need to pay deposit insurance claims.
The Cagayan de Oro lawmaker 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.
He 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.”
He said 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.
He 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 country’s 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 said.
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