According to the Rural Bankers Association of the Philippines (RBAP), regulatory reforms that would require large capital for rural banks that would encourage consolidation could be detrimental to small lenders affected by the epidemic.
“We agree that consolidation and consolidation lead to stronger banks and a healthier rural banking industry. While its targets are commendable, the implementation timeline should be carefully reviewed as Grameen Banks is still recovering from operational losses during the epidemic, ”said RBAP President Albert T. Kancha, Jr. said in a Viber message
fiThe null stages of reviewing the minimum capital requirements for Grameen Banks, considering that a strong capital base will be important to meet the challenges facing the industry.
The minimum required capital for Grameen Banks starts from P10 million to P200 million, depending on the location and number of branches to be set up by the lenders.
Mr Kancha urged regulators to consider the need for “extraordinary assistance” from the government to small banks in the event of an epidemic.
“Some Grameen Banks may be unnecessarily classyfiDue to temporary delays in collection from borrowers whose businesses have been affected by the epidemic, ED as low capital due to the provision of loan losses, ”he said.
“These risks may be temporary and do not mean that Grameen Bank is unstable.”
According to the central bank, the gross non-performing loan (NPL) ratio in the rural and cooperative banking sector stood at 12.84% by the end of 2021. This is lower than the 14.67% NPL ratio a year ago.
However, it was still much higher than the sector’s 10.48% NPL ratio seen at the end of 2019.
Meanwhile, Mr Koncha said a survey of Grameen Banks which has been consolidated or consolidated shows that such transactions are very costly and time consuming for small lenders.
“Some mergers actually broke down when trying to consolidate because of the costs involved and the pain points involved,” Mr Concha said.
“Tax incentives and tax breaks and a simple inter-agency government approval process will definitely encourage more rural banks to consolidate and consolidate,” he added.
The central bank said it had shut down 21 Grameen Banks since the outbreak began in March 2020. At the same time, it has processed transactions of nine Grameen Banks for consolidation, consolidation and acquisition. – Loose Wendy T. Nobel