BSP calls on rural banks to review strategies

By , on July 4, 2014

Bangko Sentral ng Pilipinas (Central Bank of the Philippines). Wikipedia photo
Bangko Sentral ng Pilipinas (Central Bank of the Philippines). Wikipedia photo

MANILA – Amid changes in their operating environment, the Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. is urging rural banks to review their strategies.

Tetangco said in a speech delivered Tuesday, during the Rural Bankers Association of the Philippines (RBAP) that competition comes from both within and outside the rural banks’ locales.

More cooperatives and non-government organizations now operate in the countryside… with relatively lower costs than most rural banks. As such, these entities may acquire portions of your market – not only from frontier areas but possibly even those you have nurtured through time,” the BSP chief told RBAP members.

“Furthermore, the passage of legislations allowing the infusion of foreign equity in rural banks is also bound to be a game changer,” Tetangco said, referring to Congress’ passage of a bill that allows full foreign ownership of rural lenders.

HE explained that aside from big entities outside the locality, competition may also come from small players inside the operation area of rural banks.

In the past years, big banks acquiring rural lenders have been turning into a trend following the Strengthening Program for Rural Banks.

The program, which was launched in 2010,  is joint effort of the Philippine Deposit Insurance Corp (PDIC) and BSP.

It aims to strengthen rural banks and to minimize bank closures that have plagued the industry.

“All these call for decisions on the part of your rural banks. Do you want to continue operating on your own? Will you consider taking in new investors – whether local or foreign? Are you looking at possible mergers?  Is there a good fit?” he added.

“In the face of rising competition, we see the market growing as the benefits of development programs and fresh investments increasingly find their way to the countryside,” he added.