RURAL banks are among the top picks of small and medium entrepreneurs as their partners of choice in terms of banking and seeking loans. With rural banks being more accessible in the provinces and less intimidating than the bigger banks, it is no wonder that townsfolk, farmers, and your “suki” at the wet market would prefer to bank with them. Seeing its potential, the Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corporation (PDIC) are now finalizing the implementing guidelines for the Strengthening Program for Rural Banks (SPRB) which was approved by the PDIC Board on November 11, 2009 and the Monetary Board a month after. The SPRB, a joint initiative of the BSP and PDIC, will be funded by a P5-billion financial assistance to be contributed by the BSP and PDIC in the amount of P2.5 billion each. PDIC president Jose C. Nograles said in a statement that the need to assist the rural banking industry has become evident after the spate of rural bank closures. One of the areas PDIC initially considered was to enhance the Countryside Financial Institution Enhancement Program (CFIEP) to make it more responsive to the needs of rural banks. Another venue considered is collaboration with the BSP in crafting a new program. BSP and PDIC decided to craft a new program, which is more responsive to the needs of rural banks and affords more flexibility in implementation. “PDIC encourages the rural banks to merge and consolidate. By providing the rural banks the appropriate and necessary incentives, it is hoped that the rural banks’ long-term viability will be enhanced,” Nograles added. The incentives under the SPRB will be made available for two years. The PDIC president added that there is need for a rural bank strengthening program to enable these banks to sustain countryside development and maintain financial stability in the economy as well to ensure long-term viability of rural banks. Rural banks that are eligible for the incentive program are those whose risk-asset-ratio (RAR) is less than 10 percent and are merging or consolidating with an eligible strategic third party investor (STPI). To be eligible, the strategic third party investor (STPI) should have a Camels rating of at least “3,” not under the prompt corrective action (PCA) program of the BSP and does not have findings of unsafe and unsound practices. The financial assistance to be granted under the SPRB is a combination of preferred shares and direct loans to boost the capital of the bank. These preferred shares shall be non-voting, cumulative and convertible to common shares; and redeemable starting end of the fifth year, but not later than the 10th year. “We are confident that our partnership with the BSP to assist rural banks through the SPRB will help ensure the efficiency and effectiveness of rural banks in mobilizing savings and investments toward a robust economy particularly in the countryside,” Nograles said. [PR]
