"Incentives are still in place," Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. told Business Bulletin in reaction to the new wave of mergers and acquisition among major and small players in the banking system.

The incentives come in play, particularly on the recent merger of Bank of the Philippine Islands (BPI) with Prudential Bank.

An industry source shared with Business Bulletin that BPI management is now negotiating with the regulators to consider in the incentives the non-payment of the penalties worth "a little under P200 million" transferred to the bank in the course of the merger.

But condonation of penalties incurred in the course of bank’s operations and practices is not included in the provision of incentives for mergers or BSP Circular 237, which former BSP Deputy Governor for bank supervision and examination Alberto V. Reyes has "never been renewed."

The provision on condonation only covers "liquidated damages and/or penalties on loan arrearages to the Bangko Sentral of rural banks which are parties to the merger or consolidation."

While he, instead, opted to keep mum about the BPI appeal, Tetangco explained that any appeal will be taken on a "case to case basis."

"We have to assess what will be the impact on the merger," he added.

It was learned that BPI is asking for this concession since the bank needs as much resources it can get to make the more than 100 branches of Prudential Bank, especially on information technology, at par with BPI.

Other incentives in the merger includes the revaluation of bank premises, improvements and bank equipments of the institutions; staggered booking of up to five years of its unbooked valuation reserves based upon the Bangko Sentral examination and other capital adjustments resulting from the merger or consolidation.

And, a temporary reprieve from compliance to the prescribed net worth to risk assets ratio.