BSP merger mechanism for healthy countryside lenders formally adopted

THE Bangko Sentral ng Pilipinas (BSP) has formalized the Consolidation Program for Rural Banks (CPRB), one that encourages small but financially healthy banks to merge by extending incentives.

In Circular Letter CL-2015-050, the BSP, the Philippine Deposit Insurance Corp. and the Land Bank of the Philippines have “mutually agreed to establish the CPRB.”

According to the BSP, the CPRB is a “progressive incentive program designed to encourage mergers and consolidations among rural banks.”

“The CPRB aims to strengthen the rural-banking industry, in recognition of the major role that total banks play in financial inclusion. It intends to promote mergers and consolidations among rural banks to bring about a less fragmented banking system by enabling them to improve financial strength, enhance viability, strengthen management and governance, and expand market reach, among others,” the BSP said.

BSP Deputy Governor for the Supervision and Examination Sector Nestor A. Espenilla Jr. earlier clarified that the CPRB differs from that other  bank rescue mechanism, known as the Strengthening Program for Rural Banks (SPRB), currently in place. “CPRB is a program targeted to small banks that are not under stress but would like to merge to achieve a more competitive scale. In contrast, SPRB+ is a program designed to encourage white knights to take over and rehabilitate problematic banks,” Espenilla said in an earlier statement.  The CPRB will be available for a period of two years from the signing of the memorandum, according to the BSP.

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