Posted on July 17, 2009 - by boris

BSP eyes rural bank perks…

Manila Standard Today-Philippine News posted:

Bangko Sentral and Philippine Deposit Insurance Corp. will offer a set of incentives to facilitate mergers and acquisitions in the rural banking sector.

Bangko Sentral Gov. Amando Tetangco Jr., in a speech delivered at the inaugural dinner Wednesday for the new officers of the Rural Bankers Association of the Philippines, said the bank and PDIC were now drafting the set of financial incentives to be given to prospective “white knights of rural banks.”

He said the central bank would also open the field for rural banks to go into microfinance and insurance to widen their business.

“High on our agenda is to open doors for you in housing microfinance and micro-insurance, as well as possibly grant you more flexibility to use non-bank agents as a way to expand your reach,” Tetangco said.

“We are also designing a program with PDIC to encourage mergers and acquisitions through targeted financial incentives to would-be white knights of rural banks,” he added.

Incentives granted by the central bank for mergers and acquisitions vary from one bank to another and may include staggered booking of losses, among others.

Tetangco said the performance of the rural banking sector actually improved despite the closure of units associated with the failed Legacy group. He said rural banks boosted their capitalization to P25.4 billion at the end of the first quarter from P24.8 billion at the end of December last year.

“It appears that our rural bankers have turned this period of challenges as an opportunity to further strengthen your institutions,” Tetangco said. “Through vigilance and proactive measures, RBAP ensured that your clients understood that these high-profile bank closures basically involved a single group that is not representative of the management of other rural banks.”

RBAP spokesman Tomas Gomez IV said Tetangco had indicated that rural banks might be allowed to sell insurance products by the end of the year to underserved sectors in the countryside.

Gomez said the proposed arrangement did not involve bancassurance, as rural banks were not allowed to buy equity in insurance companies.

Gomez said the sale might include sale of traditional products such as life or vehicle insurance to the existing clients of rural banks.

The proposed arrangement could even be better than bancassurance because rural banks will not be limited to just one insurance company.

Source:http://www.manilastandardtoday.com/?page=business1_july17_2009