The Bangko Sentral ng Pilipinas (BSP) praised the resiliency of rural banks last year despite the challenges posed by the economy and the closure of several rural banks.

BSP Governor Amando M. Tetangco Jr. lauded the Rural Bankers Association of the Philippines (RBAP) for taking definite steps and transforming the sector into “a more solid and inclusive rural banking industry” during the recent inaugural dinner for the new officers and board of directors of RBAP at the Diamond Hotel in Manila.

Tetangco pointed out that the gains were made during a period of unrest, with the global financial crisis and the closure of several rural banks affiliated with the Legacy Group of Celso de los Angeles.

For one, the BSP Governor noted that the total capitalization of the rural banking sector “improved further” to P25.4 billion as of March 2009, an increase from December 2008’s P24.8 billion.

Moreover, rural banks capital adequacy ratio (CAR) stood at 17.62 percent as of December 2008, way above the mandatory 10 percent and is “reflective of rural banks” commitment towards prudential control and financial governance.”

Tetangco also cited RBAP’s success in maintaining public confidence.

“Through vigilance and proactive measures, RBAP ensured that its clients understood that these high-profile bank closures basically involved a single group that is not representative of the management of other rural banks,” Tetangco said.

Tetangco also acknowledged the rural banking sector’s pioneering work on inclusive banking through technological and product innovations, as well as its continuing efforts to be more responsive and efficient in serving your clients. In particular, rural banks sector continues to expand its operating network to reach more clients.

While the RBAP may have accomplished many last year, Tetangco challenged the new RBAP leadership to sustain reforms. He pointed out that “particular focus must be given to credit risks and liquidity risks” because of the rural banks position “as community-based financial institutions magnifies these risks.”

Tetangco also assured the cooperation of the BSP towards the creation of an appropriate policy and regulatory environment that will enable more innovations, greater efficiency, better risk management, stronger capitalization, improved disclosure and transparency practices, and enhanced corporate governance standards in the banking system.”

He said that the BSP is looking into microfinance and microinsurance as well as giving the industry more flexibility to use non-bank agents to expand their reach.
 
Also, BSP is looking at the use of independent rating agencies to attest to the banks inherent strength and secure market credibility. Mergers and acquisitions would also be encouraged through targeted financial incentives to would-be “white knights” in a program with the PDIC.

Newly inducted RBAP president Joseph Omar Andaya said that RBAP, under his leadership, would be able to continue the reforms they have started. “We will carry on the huge tasks that our predecessors have begun. To be able to do this, we will work hand-in-hand with the BSP to achieve a vibrant rural banking sector,” he said.