Rural banks get boost–BSP
Regulatory relief has come for rural banks that even now tether on the brink of ruin in the form of capital injection from both the Bangko Sentral ng Pilipinas and the Philippine Deposit Insurance Corp, a report of the Philippine News Agency said.
The relief is too late for such entities as the People’s Bank of Binmaley and thousands of thrifty and industrious Pangasinenses or the depositors of the Rural Bank of Kananga in Leyte who fell victim to alleged financial shenanigans of self-styled financier Celso delos Angeles.
On Sunday, Deputy BSP governor Nestor Espenilla Jr. said the monetary board approved just days earlier the so-called Strengthening Program for Rural Banks or SPRB which enables the community lenders to receive financial aid from regulators long before their financial problems becomes fatal.
The measure gained approval from the seven-man monetary board in the wake of the admission by PDIC president Jose Nograles that more or less 15 percent or 179 of the rural bank population have been weakened and under some form of financial distress.
These are the banks that have been placed under the BSP prompt and corrective action or PCA program.
But under the SPRB, eligible rural banks may receive in the form of preferred share subscription an appropriate amount in capital injection drawn from a P5 billion fund jointly contributed by the BSP and the PDIC.
Espenilla said the idea was to inject capital to rural banks under stress long before their financial problems become critical.
“The SPRB is meant to assist still open banks, hopefully to avoid receivership,” he said.
“As a deal comes along, the PDIC will evaluate it in accordance with an agreed set of criteria with the BSP. The PDIC will calculate the possible entitlement for capital contribution. That contribution is basically lower cost (of fresh) capital. That’s the nature of the support. The BSP will then help by providing regulatory incentive,” he said.
He also stressed while the BSP contributed money to the SPRB, it is the PDIC that actually invests in the preferred shares of troubled rural banks as the BSP is legally barred from investing in any bank.
An earlier plan to allow foreign interests to acquire equity in rural banks had been abandoned as this requires a change in legislation, Espenilla said.
Rural banks have to be fully Filipino-owned under existing laws.
