Bangko Sentral raises rural bank’s minimum capital

The Bangko Sentral ng Pilipinas (BSP) has raised the minimum capital requirement for rural banks by a range of 53 percent to 285 percent to sustain the viability and competitive edge of major players in the industry. The policy-setting Monetary Board on Oct. 29 has approved the increase and also simplified the differentiated minimum capital and the grouping of cities and municipalities, the central bank said Wednesday. Now is the time to amend the capital requirement for the industry, which was last increased in December 1999, the central bank said, citing the rationale behind the Monetary Board decision. "The Monetary Board believes that the existing capital requirement for rural banks is no longer adequate to sustain a competitive and robust bank," the BSP said in a statement. The BSP raised the minimum capital requirement for rural banks with head offices in Metro Manila to P100 million from P26 million, and to P50 million from P13 million in the cities of Cebu and Davao. For rural banks in first to fourth class municipalities, the central bank raised the minimum capital to P10 million from P6.5 million, and to P5 million from P2.6 million in fifth to sixth class municipalities. The increase was approved after extensive consultations with stakeholders, particularly major players in the industry. The new capital requirement would apply to a newly-established rural bank, according to the BSP. In the case of an existing bank, a higher capital would be required when it converts to a higher category, or when the head office relocates to a better municipality. Another cause for imposing a higher capital is when most of the total assets or deposit liabilities of a rural bank are accounted for by branches in municipalities of higher classification. A higher capital would also be imposed on a rural that wants to do special banking transactions like limited trust, foreign currency deposits, as well as demand deposits and notices of withdrawals. The number of rural banks fell to 661 as of end-June from 692 a year earlier, after several banks including members of the controversial Legacy Group were closed. The Bangko Sentral SP and state-run Philippine Deposit Insurance Corp. (PDIC) early this year had launched the Strengthening Program for Rural Banks — a P5-billion financial assistance fund. The program covers an equity portion in the form of preferred shares of up to 50 percent of additional fund to bring a bank’s capital adequacy ratio to the mandated 10 percent. — VS, GMANEws.TV