Merger incentives for banks may be extended, says BSP
Nestor Espenilla Jr. FILE PHOTO
MANILA, Philippines—The end of the incentives period for the merger of weak banks may be pushed back as regulators seek to strengthen the banking sector by encouraging small players to exit the industry by selling to their larger peers.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor A. Espenilla Jr. said the Monetary Board is scheduled to take up the postponement of the Strengthening Program for Rural Banks (SPRB)-Plus expiration this week.
“It’s working,” Espenilla said of the program, which expires at the end of the year. “I am heavily inclined to recommend the extension.”
Espenilla is the head of the central bank’s financial system regulatory functions.
The SPRB-Plus, which was introduced in 2012, is a modified version of the original SPRB incentive program that was launched in 2011 by the BSP in cooperation with the Philippine Deposit Insurance Corp. (PDIC).
The enhanced incentive scheme offers a variety of financial and regulatory relief and perks to improve the prospects for success of new banking partnerships. Under the program, financial assistance may be granted by the PDIC to augment capital shortfalls and attract new investors.
The BSP also offers the more liberal approval of new branches for commercial, thrift and rural bank that step forward as “white knights” for weaker banks. In the original SPRB, only strong rural banks were allowed to act as white knights of other rural banks and with a more limited incentive package.
Espenilla said over the past year, the SPRB-Plus program has proven to be an effective mechanism for the orderly exit of industry players that are unable or unwilling to adapt to the banking sector’s changing landscape.
He said the choice today for banks, especially small, family-owned lenders, would be to either professionalize their operations and comply with strict regulations, or to sell or merge with stronger, better-capitalized banks.
“We have solved some pretty big problems that way,” Espenilla said. “We cannot build the banking system on the lowest common denominator.”—Paolo G. Montecillo
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