BSP open to foreign ownership in rural banks
01/11/2010 | 05:19 PM
The Bangko Sentral ng Pilipinas (BSP) is open to allowing foreign investors to buy into rural banks to give the industry a much needed boost.
For this to happen, lawmakers would first have to amend Republic Act 7353 or the Rural Banking Act of 1992, BSP Deputy Governor Nestor Espenilla, Jr. told reporters.
“The point is there should be an amendment to the law, and I think it is not a bad idea," he said.
Earlier, the 645-strong Rural Bankers Association of the Philippines (RBAP) sought changes to the 17 year-old law to allow foreign equity infusion.
Industry players wanted to allow up to 40 percent foreign ownership in rural banks to boost the capitalization of the industry.
Espenilla said rural banks are attractive to foreign investors who can improve the industry’s small-scale operations by providing much needed capital and technology.
“Foreign investors can provide them possible access to capital and technology. The challenge right now to rural bank is their small-scale operations that make it hard for them to develop technology on their own," he added.
Last month, the Monetary Board and Philippine Deposit Insurance Corp. (PDIC) board approved a program that seeks to strengthen capital-deficient rural banks through a P5-billion fund.
The fund, to be shared by the central bank and Philippine Deposit Insurance Corp. (PDIC), will be extended to strategic investors that wish to merge and consolidate with or acquire problem banks in the countryside.
Banking regulators hope to encourage mergers, consolidations and acquisitions via lending to white knights. Third-party investors can also use the money to subscribe to preferred shares of a rural bank, effectively injecting fresh capital.
Rural banks have been on the forefront of countryside lending, but are the easiest to fold up because of mismanagement and lack of funds.
The central bank said a stronger rural banking system could more effectively serve the countryside and promote economic growth.
About 20 rural banks have fallen by the wayside this year because they do not have access to funds. — GMANews.TV
For this to happen, lawmakers would first have to amend Republic Act 7353 or the Rural Banking Act of 1992, BSP Deputy Governor Nestor Espenilla, Jr. told reporters.
“The point is there should be an amendment to the law, and I think it is not a bad idea," he said.
Earlier, the 645-strong Rural Bankers Association of the Philippines (RBAP) sought changes to the 17 year-old law to allow foreign equity infusion.
Industry players wanted to allow up to 40 percent foreign ownership in rural banks to boost the capitalization of the industry.
Espenilla said rural banks are attractive to foreign investors who can improve the industry’s small-scale operations by providing much needed capital and technology.
“Foreign investors can provide them possible access to capital and technology. The challenge right now to rural bank is their small-scale operations that make it hard for them to develop technology on their own," he added.
Last month, the Monetary Board and Philippine Deposit Insurance Corp. (PDIC) board approved a program that seeks to strengthen capital-deficient rural banks through a P5-billion fund.
The fund, to be shared by the central bank and Philippine Deposit Insurance Corp. (PDIC), will be extended to strategic investors that wish to merge and consolidate with or acquire problem banks in the countryside.
Banking regulators hope to encourage mergers, consolidations and acquisitions via lending to white knights. Third-party investors can also use the money to subscribe to preferred shares of a rural bank, effectively injecting fresh capital.
Rural banks have been on the forefront of countryside lending, but are the easiest to fold up because of mismanagement and lack of funds.
The central bank said a stronger rural banking system could more effectively serve the countryside and promote economic growth.
About 20 rural banks have fallen by the wayside this year because they do not have access to funds. — GMANews.TV
