BSP raises limit on small banks’ borrowings

The Bangko Sentral ng Pilipinas has increased the limit on the amount that small banks may borrow from and deposit to other banks, as part of its thrust to beef up credit and financial services in rural areas.

Under the amended rules on the single borrower’s limit (SBL) related to interbank exposures, accommodations—both loans and deposit services—that may be given to a small bank may reach as much as 25 percent of its net worth or P100 million, whichever is higher.

Previously, accommodations may only go up to the equivalent of 25 percent of the small bank’s net worth.

The old rule limited the capacity of cooperative, rural, and thrift banks to avail themselves of banking services from another bank.

“Small banks with limited capitalization like some rural banks, cooperative banks, and thrift banks faced difficulties in complying with the limit particularly with respect to their inter-bank deposits,” the BSP said in a statement.

With the amended rule, the BSP said small banks now have more flexibility in making transactions with another bank.

“Banks that will benefit from the amendment are small banks that play an important role in the government’s efforts to promote comprehensive rural development by making needed credit readily accessible in the rural areas not being served by bigger banks,” the central bank said.

The BSP said that the amendment was consistent with the goal of making financial services accessible to people in far flung areas.

If cooperative, rural, and thrift banks are able to engage in more interbank transactions, regulators said, then their ability to provide financial services will also be enhanced.

Regulators said that the relaxed rule is necessary, given that many areas in the countryside still lack access to financial services.

There are still municipalities in rural areas where banking services are lacking, if not totally absent.

To boost credit services for people in the countryside, the BSP is also spearheading the establishment of more credit surety funds (CSFs) in various rural areas.

CSFs are pooled funds that are used to guarantee loans extended to micro enterprises.