BSP issues guidelines for new rural bank program

The Bangko Sentral ng Pilipinas (BSP) has released the guidelines for the three-year implementation of the Rural Bank Strengthening Program (RBSP) over the weekend.

In a memo (Memorandum No. M-2022-024), BSP Governor Benjamin E. Diokno said RBSP was developed to enhance the operations, capacity, and competitiveness of rural banks “in view of their vital role in promoting countryside development and inclusive economic growth.”

The RBSP is a structured program with four key elements: strengthened capital base; holistic menu of five time-bound tracks; incentives and capacity building interventions; and review and enhancements of existing regulations.

These five time-bound tracks are merger and consolidation, acquisition/third party investment, voluntary exit/upgrade of license, capital build-up, and supervisory intervention.

Diokno said qualified rural banks that successfully complete the first four tracks may avail of various incentives and capacity-building interventions as determined by the BSP.

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, he said.

The BSP has recently circulated a draft circular to the minimum capital requirement of rural banks. The proposed minimum is P60 million for a head office with five branches and P200 million for more than five branches.

Last Thursday, during his regular online press briefing, Diokno said the proposed increase in the minimum capitalization is related to the RBSP to ensure a safe, sound and well-capitalized small banks’ sector.

Diokno has said previously that well-capitalized rural bank will be able to do the following: enhance their risk management systems; upgrade resources and manage operational costs; meet prudential standards, and accelerate digital transformation.

The BSP’s proposed changes to rural banks’ minimum capital requirements is in line with moves to strengthen the sector.

It was last March 3 when the BSP approved RBSP to enhance the operations, capacity, and competitiveness of rural banks.

The BSP will conduct a promotional program for the RBSP to assess rural banks’ willingness and capacity to adhere to the requirements of the program.

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