More rural banks taking merger route: Philippines

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More rural banks are consolidating their operations to boost the financial strength of the industry amid the initiatives of the Bangko Sentral ng Pilipinas (BSP) to improve the risk management of small banks.

BSP Deputy Governor Chuchi Fonacier said the merger between Camalig Bank Inc. and the Municipal Rural Bank of Nabua (Camarines Sur) Inc. took effect last Oct. 1.

Fonacier said Camalig Bank, the surviving entity, absorbed the assets and liabilities of Municipal Rural Bank of Nabua.

The two banks executed the Articles and Plan of Merger last March 27.

According to Fonacier, the Securities and Exchange Commission (SEC) approved the Articles and Plan of Merger last Sept. 11.

Last Sept. 1, the merger between Bayanihan Bank Inc. and the Rural Bank of Pozorrubiio took effect after the necessary regulatory approvals were obtained.

Likewise, the tripartite merger of Bangko Kabayan Inc., First Agro-Industrial Rural Bank Inc. and Progressive Bank Inc. took effect last July 13 after the SEC approved the group's supplemental Articles of Merger.

So far this year, the BSP's Monetary Board has ordered the closure of seven small banks including the Rural Bank of Talisay (Cebu), United Consumers Rural Bank, Bangko Pangasinan, Rural Bank of San Juan (Southern Leyte), Binangonan Rural Bank, Rural Bank of San Marcelino and Rural Bank of San Agustin (Isabela).

Last year, the BSP ordered the closure of nine banks. In 2021,the number of banks ordered closed by the central bank almost tripled to 13 from five in 2020 due to the impact of the COVID-19 pandemic.

To strengthen the sector, the central bank has rolled out the Rural Bank Strengthening Program (RBSP) to enhance the operations, capacity, and competitiveness of the industry.

The regulator earlier raised the minimum capital requirements for rural banks to at least P50 million to enhance the operations, capacity and competitiveness of small banks.

Under the new structure, the minimum capitalization of rural banks would be P50 million for those with a head office and only up to five branches, P120 million for those with six to 10 branches, and P200 million for small banks with more than 10 branches.

As of end 2022, there were 379 rural banks operating all over the country with 2,924 regular branches and 865 automated teller machines (ATMs).

Rural banks play a vital role in promoting countryside development and inclusive economic growth.

The regulator wants to reinforce the resiliency of small banks and enable them to respond to the evolving socio-economic conditions and regulatory environment with the increasing digitalization across economic sectors.