More rural banks set to merge

A sizable number of rural banks are in consolidation talks that could lead to the formation of four major rural banks in critical provinces in Luzon and the Visayas, a rural bank industry executive said.

According to Rural Bankers Association of the Philippines (RBAP) president Antonio O. Pasia, rural banks have embraced the fact that consolidation leads to the strengthening of the system.

“Rural banks have to innovate, and re-invent to remain relevant,” Pasia, who is also the president of Malarayat Rural Bank Inc., said during the RBAP turnover ceremonies yesterday.

He said total 28 rural banks are involved in talks 12 located in Batangas, six in Leyte, five in Laguna and five in Cavite.

Pasia said the incoming Duterte administration has made it clear their intention to develop the agriculture and fisheries sector in the countryside.

Increasing capital and speeding up the process of consolidation is part of innovation and strengthening the system.

The Bangko Sentral ng Pilipinas (BSP) is requiring rural banks a minimum working capital of at least P40 million to P200 million (depending on classification).

Rural and cooperative banks with head offices in Metro Manila are mandated to keep P50 million to P200 million in capital based on their branch network. Those with head offices outside the capital and in first to third class municipalities are required a minimum of P20 million to P80 million in capital, while those headquartered in fourth to sixth class municipalities should have P10 million to P40 million for capital.

Last year, there were 632 banks, of which 524 are classified as rural and cooperative banks, which operated 2,086 branches and bank offices.

Pasia said that while the number of players had been reduced, the number of branches increased.

The BSP reported the number of branches and other offices of Philippine banks went up 3.8 percent to 10,756 last year from 10,361 in 2014.

Source: Phil Star. Date: 22 June 2016