The Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corporation (PDIC) recently launched a joint P5-billion Strengthening Program for Rural Banks (SPRB) in simple ceremonies held at the PDIC office. BSP Governor Amando M. Tetangco, Jr. and PDIC President Jose C. Nograles led the launch attended by officers of the Rural Bankers Association of the Philippines (RBAP).

The SPRB is a financial incentive program aimed at encouraging mergers and consolidation among rural banks. It will further strengthen the local banking industry and enhance its long-term viability. The Program will give financial incentives and assistance to eligible banks through a combination of preferred shares and direct loan. As envisioned under the program, BSP is tasked to provide regulatory relief. PDIC, the implementing agency of SPRB, will accept applications through the SPRB Lane to be set up at the PDIC office. Applications for the program will be jointly evaluated by PDIC and BSP. The funding is equally shared by the two bank co-regulators.

A number of roadshows nationwide will be conducted to inform the rural banks of the facility’s implementing guidelines. The first roadshow will be undertaken on August 10 in coordination with the RBAP for rural banks based in the National Capital Region, Cavite, Rizal and Bulacan.

Rural banks that are eligible for the bank-strengthening program are those whose risk-based capital adequacy ratio is less than 10% and are merging or consolidating with an eligible strategic third party investor (STPI). The STPI, meanwhile should have a CAMELS rating of at least “3”, should not be under the prompt corrective action of the BSP, and should not have findings of unsafe and unsound banking practices.

Nograles noted that rural banks continue to improve operations. PDIC’s Quarterly Report on Deposits disclosed that as of end of March 2010, the rural bank’s total deposits grew double digit at 12.2% to P12.7 Billion. Meantime, BSP data showed that more people are now gaining banking access especially from the unserved and underserved regions of the country through increased bank branches. Both PDIC and BSP expressed optimism that the SPRB will complement all these developments in the rural banking sector.

Earlier this year, PDIC launched another facility that would encourage mergers and consolidation activities in the banking industry, the Investor-Investee Helpdesk. The Helpdesk is a free-of-charge matchmaking facility where investors or acquiring banks that are looking for banks to acquire, merge or consolidate with, or invest in may be introduced to investees or banks seeking interested acquirers. The facility has attracted 28 prospective investors and investees to date.