Megalink and Bancnet, two of the country's three automated teller machine (ATM) conglomerates, are enhancing its credit and liquidity risk management by laying down a written policy on loss sharing among its member banks in case of a credit squeeze.

The ATM corporations have submitted its proposal to the Bangko Sentral ng Pilipinas (BSP) to formulate tighter credit and liquidity risk policy on loss distribution as contingency.

Based on documents, Megalink is proposing to execute a written agreement on loss sharing provision among its members in case one of its 16 banks defaulted in its obligations.

Bancnet, the biggest with 25 members, also wants BSP approval on setting procedures to measure the performance and adequacy of the "set exposure limit" of its members.

Improving the ATM networks' credit and liquidity risk management is vital to its profitability. Liquidity risk arises when a financial entity is faced with cash flow problems on short notice while credit risk involves financial loss when borrowers default.

Part of credit and liquidity risk management is the set up of reserves or contingency fund.

BSP is monitoring three ATM links. Bancnet is considered the biggest in terms of ATM network of 4,000, followed by Megalink with 2,600 while Expressnet operates 2,200. Expressnet has seven banks including Bank of the Philippine Islands, Banco de Oro, Land Bank of the Philippines and HSBC.

Both Megalink and Bancnet have partnership deals with two of the Philippines' largest mobile service providers, Globe and Smart.

It was in 2005 when Megalink, Bancnet and Expressnet agreed to interconnect networks to reduce the cost of ATM transactions for banks and their clients.

The BSP encouraged the three operators to merge as this will result in greater operational efficiencies and lower operational costs.

For the banking public, a three-way interconnection will increase deposit and withdrawal convenience, as depositors will have access to all ATM networks nationwide.

The BSP database shows that there are 7,741 ATMs nationwide. The big banks operate 6,803 ATMs with the largest number belonging to BPI. Thrift, rural banks and cooperative banks operate 938 ATMs.

About 18 million Filipinos are cardholders, based on an earlier reports.