BSP to subject rural banks to ‘stress tests’

THE BANGKO Sentral ng Pilipinas said rural banks will soon be subjected to “stress tests,” noting that bank system failures may also be triggered by the closure of small banks.

Stress tests determine banks’ ability to absorb shocks or potential losses arising from such risks as loan defaults by borrowers and bond issuers.

Originally, only universal and commercial banks were covered by the stress tests, which the BSP conducts every semester. But the most recent test done earlier this year covered 55 banks, including several thrift banks.

BSP Deputy Governor Nestor Espenilla Jr. said the next round of stress tests will likely cover more rural banks and thrift banks.

“There is an advantage to having individual banks undergo stress tests. Such an activity allows one to see potential problems that may arise,” Espenilla told reporters yesterday following the general membership meeting of the Chamber of Thrift Banks (CTB) where he served as keynote speaker.

Espenilla said even small banks have the capacity to bring down an entire system if their operations are not sufficiently monitored.

The most recent banks to go under receivership of the Philippine Deposit Insurance Corp. are Siam Bank (A Rural Bank) Inc. and Ilocandia Community Bank Inc.

PDIC took over the banks on Nov. 23.

Siam Bank is a five-unit bank based in Cagayan de Oro City, Misamis Oriental.

Ilocandia Community Bank, on the other hand, is a three-unit bank based in Pasuquin, Ilocos Norte.