BSP to allow thrift, other banks to boost rural banking system
SUNDAY, 15 APRIL 2012 18:04 JUN VALLECERA / REPORTER
COUNTRYSIDE lenders should soon get a boost with the plan expanding the
entry of third-party investors in distressed rural banks to include even
non-rural bank white knights as strategic partners.
As implemented at present under the central bank's Special Program for
Rural Banks or SPRB, financially distressed rural banks may take on
strategic partners only with colleagues in the business plus a few
regulatory sweeteners thrown in to encourage consolidation or merger.
This was initially bared by Deputy Bangko Sentral ng Pilipinas Governor
Nestor A. Espenilla Jr. at the sidelines of a recent public forum and
later validated by BSP Gov. Amando M. Tetangco Jr.
"We are looking at ways to further strengthen countryside financial
institutions or CFIs. One option is to enhance the SPRB by enlarging the
pool of possible third party investors to include non-rural banks,"
Tetangco said in a text message on Sunday.
The SPRB is an undertaking recognizing the developmental role played by
lenders in the countryside and providing funds for a facility that helps
distressed rural banks regain financial footing.
A number of rural lenders have been brought back from the edge of
financial ruin by the timely implementation of the SPRB and by the
participation of the Philippine Deposit Insurance Corp. which partnered
with the Land Bank of the Philippines who may actually provide the fresh
infusion of capital to resuscitate ailing rural banks.
But given the preliminary nature of the plans, Tetangco would not share
for now more details to the proposal.
"Details and other possible alternatives are still being discussed," he
said.
Much earlier, however, Espenilla, who heads the powerful supervision and
examination sector at BSP, acknowledged the plan includes the possible
entry of the larger and more financially empowered thrift banks as white
knights to distressed rural lenders.
He said the possible entry of thrift banks is under evaluation by the
Monetary Board, the policy-making body of the BSP.
He did not rule out the participation of the much larger regular
commercial banks down the line when the policy ramifications of such an
entry has been fully assessed.
"This is all part of the plan to strengthen countryside financial
institutions and the role they play in rural finance," Expenilla said.
Rural banks are adequately capitalized but the industry has a worrisome
level of soured or non-performing loans that pushed back to double-digit
territory averaging 10.39 percent as at end-March 2011 representing
latest data.
According to the BSP, this was the third quarter in a series when the
industry's soured loans ratio deteriorated from previous.
The BSP said rural bank soured loans during the period accelerated by
6.49 percent to P10.91 billion from only P10.25 billion three months
earlier and faster than the 1.29 percent expansion of their loan
portfolio collectively totaling P105.03 billion from P103.7 billion.
The souring of loans may not necessarily be alarming at first blush but
over time, the pressure could build up to a level when they become
unsustainable as the mandatory capital charges builds up and
profitability is eroded.
According to the BSP, Mindanao-based rural lenders prove better than
their Luzon or even Visayan colleagues at holding down delinquent loans,
its NPLs having averaged only 5.46 percent as at end-March last year.
Luzon-based rural banks posted NPLs averaging 11.91 percent and
Visayas-based lenders 10.74 percent.
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