MB OKs increase in minimum capital requirement for rural banks

“The revised minimum capital requirements shall result in stronger and well-capitalized rural banks, underpinning a Philippine banking system that is stable, sound, resilient, and inclusive for Filipinos,” Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said in a statement Friday. (File Photo: Bangko Sentral ng Pilipinas/Facebook)

MANILA – The Monetary Board has approved the amendments to the minimum capitalization of rural banks that would enable them to enhance their risk management systems, upgrade resources and manage operational costs, meet prudential standards, and accelerate digital transformation.

This is part of the initiatives under the Rural Bank Strengthening Program (RBSP), which aims to enhance the operations, capacity, and competitiveness of rural banks.

“The revised minimum capital requirements shall result in stronger and well-capitalized rural banks, underpinning a Philippine banking system that is stable, sound, resilient, and inclusive for Filipinos,” Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said in a statement Friday.

“With a strengthened capital base, rural banks would be able to withstand adverse financial shocks and at the same time, tap opportunities to enhance income potential, expand banking operations, and provide better credit facilities and services responsive to the needs of their clients and the banking public.”

The minimum capital levels of rural banks are PHP50 million for the head office only and those with up to five branches; PHP120 million for those with six to 10 branches; and PHP200 million for those with more than 10 branches.

Given the liberalization in branching regulations and digitalization of banking services, the tiering of the new minimum capital requirements for rural banks only considers these banks’ network size, as indicated in the number of branches (including head office), and no longer considers their area of operations.

Affected rural banks, including those already authorized by the Monetary Board to establish a rural bank, shall be given five years to comply with the new minimum capital requirements by referring to the available options under the RBSP.

These include merger/consolidation, acquisition/third party investment, voluntary exit/upgrade of banking license, capital build-up program (CBUP), and supervisory intervention.

Rural banks availing of the capital build-up track under the RBSP must submit to the BSP an acceptable CBUP within prescribed timelines. (PR)