Gov’t revives CPRB, eyes mergers

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Chuchi Fonacier
File photo of BSP Deputy Governor Chuchi G. Fonacier during the Asia Microfinance Forum 2014 — Photo by Asia Microfinance Forum

By Melissa Luz T. Lopez, Senior Reporter

THE GOVERNMENT will give a fresh two-year window for the Consolidation Program for Rural Banks (CPRB), with regulators looking to prod more mergers among small lenders to fortify their financial footing.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said state agencies will be reviving the CPRB to extend the period of consolidation proposals for another two years after it expired on Aug. 25.

“It’s a new program, a relaunching with some amendments,” Ms. Fonacier told reporters late Monday.

The BSP will have to sign a new memorandum of agreement with the Philippine Deposit Insurance Corp. (PDIC) and the Land Bank of the Philippines (Landbank) to formally revive the CPRB, Ms. Fonacier said.

The program invites rural banks located in one province or region to come together and form a new financial entity. Such mergers are seen to fortify the capital and asset base of the lenders, making them more liquid and resilient versus defaults.

Banks merging via the CPRB may tap financial assistance for portions of the costs incurred for financial advisory services, business process improvement services, or capacity building support in pursuing the consolidation.

Under the guidelines, the emerging bank must have a risk-based capital adequacy ratio of at least 12% and a combined unimpaired capital of at least P100 million. The banks may infuse fresh capital or tap Landbank’s equity investment facility to meet these requirements.

Ms. Fonacier said the rules for the new CPRB will let go of the five-bank requirement in order to be eligible for the funding aid, which was introduced back in April. However, merging banks still have to meet the required capitalization.

Three groups of rural banks have applied over the last two years, although Ms. Fonacier said that these are in different stages into the process.

“To be conservative about it, one group may be approved but maybe by early next year the soonest,” the BSP official said, noting that the group in the “advanced” stage of the application is already gathering documents for the new bank.

PDIC President Roberto B. Tan has said that groups of rural banks from Southern Luzon and Leyte are closer to realizing their consolidation plans.

The central bank has shut down six rural banks so far this year after these were found with unhealthy balance sheets and insufficient assets to remain in business.