Rural banking liberalization sought

The rural banking sector has reiterated its call for the approval of a proposed measure that will allow its members to take in foreign investments.

The Rural Bankers Association of the Philippines (RBAP) said the Rural Banking Act should be amended in such a way that would allow foreigners to invest in rural banks in the country to boost the rural banking sector.

“Foreign equity will help rural banks expand their reach, invest in new technology and improve their lending capacity,” RBAP spokesman Tomas Gomez IV told reporters.

He said that quite a number of foreign entities had expressed interest in investing in Philippine rural banks. However, they were being prevented by the rural banking law, which prohibits foreigners from having equity stakes in rural banks in the country, he said.

Over the past two years, there have been several rural banks that have closed down due to various reasons, including low capitalization and mismanagement.

Gomez said, however, that the majority of the rural banking industry players were healthy and operating profitably.

He said the rural banking sector, in general, was financially sound as its average capitalization exceeded regulatory requirement.

He said the average capital adequacy ratio (CAR) of the rural banking industry stands at 19 percent, way above the 10 percent requirement of the Bangko Sentral ng Pilipinas.

Gomez said there was still room for further development of the rural banking sector and accepting equity investments from foreigners would help do so.

In the meantime, he said RBAP likewise was supporting the consolidation of the rural banking sector. This, he said, would help create a stronger industry.

There are at present about 640 rural banks in the country.

In the meantime, Gomez said the BSP regulation imposing higher capitalization requirement on those wanting to put up new rural banks and on existing operators who want to transfer their head offices to municipalities or cities of higher classifications was a step in the right direction.