THE Bangko Sentral ng Pilipinas (BSP) launched on Thursday its new framework to strengthen local rural banks through new regulations largely focusing on solidifying the capital base of these countryside lenders.
BSP Governor Benjamin E. Diokno said the program, called Rural Bank Strengthening Program or the RBSP, will run for three years and will ultimately enhance the operations, capacity and competitiveness of rural banks in the country.
“The RBSP is anchored on the principle that a safe and sound bank is well-capitalized,” Diokno said. “Based on studies, a strong capital base is critical in addressing the key challenges of rural banks.”
The governor said they are at the final stages of reviewing the minimum capital requirements for rural banks. The review also considers the evolving factors affecting the viability of rural banks’ businesses and operations.
The proposed circular on the minimum capital requirements will be up for comments in the next couple of weeks.
Once the finalized minimum capital requirements are out, rural banks will be guided by five “time-bound tracks” that ensure that rural banks have adequate capital, according to the BSP.
Track 1 and Track 2 offer a refreshed merger, consolidation and acquisition or third-party investment (TPI) program. These tracks are collectively termed MCA tracks.
Track 3 offers rural banks a facilitated, voluntary exit option as well as an opportunity to upgrade their banking licenses.
Track 4 refers to the time-bound capital build-up program. This track aims to incentivize rural banks to meet the new prescribed capital within the BSP’s given timeline.
Lastly, Track 5 refers to the Supervisory Intervention. Under this track, the BSP will implement a strict, time-bound, and milestones based supervisory intervention to mitigate further losses and protect the interest of depositors.
Qualified rural banks that successfully complete the first four tracks may avail of various incentives and capacity-building interventions as determined by the BSP.
These incentives may include support for digitalization, financial advisory, prudential relief or support measures, and fiscal incentives, which will be carried out in partnership with relevant agencies and multilateral development partners, such as the Asian Development Bank.