The Bangko Sentral ng Pilipinas would back calls to amend the Rural Banking Act so that rural banks in the country would be allowed to accept investments from foreign firms.
BSP Governor Amando Tetangco Jr. told reporters that the central bank finds merit in the request of the rural banking sector to accept foreign equity contributions.
“We will support the industry’s proposal. [Having foreign partners] will help rural banks become more efficient in their operations and service delivery,” Tetangco said Friday.
The Rural Bankers Association of the Philippines (RBAP) sought the BSP’s support as this could help convince Congress to amend the Rural Banking Act.
Tomas Gomez IV, spokesman of RBAP, earlier said the rural banking sector would develop more rapidly if foreign investors would be allowed to infuse equity into the country’s rural banks.
Gomez said that with the help of foreign equity, rural banks would be able to invest in more technology, thus improve their capacity to serve depositors and borrowers.
RBAP has already received a number of inquiries from potential foreign investors, but investment plans were being hampered by the law barring foreigners from investing in rural banks.
There are about 640 rural banks in the country.
Over the past two years, the industry has witnessed several closures due to failure of some rural banks to meet capitalization requirements of the BSP.
Gomez said rural banks that have closed down are still a minority, as the industry maintains an average capitalization that is above regulatory requirements.
He said the industry’s average capital adequacy ratio is at about 19 percent, above the 10-percent requirement of the central bank.
Gomez said the rural banking industry would be even stronger if its members were allowed to accept equity infusion from foreign investors.