BSP, PDIC gets nod to save ailing rural banks

The Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corp. (PDIC) can now save rural banks from falling apart through capital injection. BSP Deputy Gov. Nestor Espenilla Jr. said Sunday the Monetary Board approved Thursday 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 troubles turn critical. The measure was approved by the seven-man board in the wake of an admission by PDIC president Jose "Jopot" Nograles that more or less 15 percent or 179 of Philippine rural banks were either weak or in some form of financial trouble. Under the SPRB, eligible rural banks may receive, in the form of preferred share subscription, an appropriate sum in capital infusion from a P5-billion fund jointly put up by the BSP and PDIC. The idea was to inject rural banks under stress with capital long before the problem turns critical, according to Espenilla. The SPRB is meant to assist banks are still operating, "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 than the cost [of fresh] capital. That's the nature of the support. The BSP will then help by providing regulatory incentive," he said. The deputy governor pointed out that the PDIC would actually invests in the preferred shares of troubled rural banks as the central bank by law and by its charter could not invest in any bank. He said an earlier plan to allow foreign interests to acquire equity in rural banks was abandoned, as that would require legislative change because rural banks were supposed to be 100 percent Filipino-owned. —JE/VS, GMANews.TV