Easing of rules on merging rural banks under incentive program eyed

Banking regulators are looking at easing the requirements for rural bank mergers, such that two lenders may consolidate under the incentive program of the government.

Philippine Deposit Insurance Corp. president Roberto B. Tan told the Inquirer last week that they would allow the merger of at least two rural banks to avail themselves of the perks under the extended consolidation program for rural banks (CPRB).

The CPRB, which lapsed on Aug. 25, as agreed upon by the Bangko Sentral ng Pilipinas, PDIC and Land Bank of the Philippines, which were jointly shepherding the program.

BSP Deputy Governor Chuchi G. Fonacier said on Friday that with the extension of the CPRB, “there’s flexibility to reduce the number of participating banks.”

Under the revised rules issued by the PDIC in April, the CPRB offered regulatory incentives to the merger of less than five rural banks with head offices or majority of the branches located in the same region or area.

When it was introduced in 2015, the CPRB mandated the consolidation of at least five rural lenders.

Earlier, Tan said four groups participated in the CPRB, of which two groups are composed of nine rural banks. These were already on the second phase of the program, or in the process of securing the consent of the BSP, the PDIC and the Securities and Exchange Commission for their merger.

“PDIC expects approvals of the two consolidation transactions by the second half of the year,” Tan said without identifying the rural banks involved.

Tan said another group involving four rural banks was “about to engage its financial adviser for the conduct of due diligence.”

As for a group of five banks that earlier applied for perks under CPRB, it eventually opted to consolidate outside the program, Tan had said.

Landbank president Alex V. Buenaventura had said that the state-run lender supported the CPRB’s extension.

The CPRB is a bank-strengthening program for rural banks aimed at enhancing their ability and viability to promote financial inclusion as well as stability in their respective communities.