Amendments to the Minimum Capitalization of Rural Banks

BANGKO SENTRAL NG PILIPINAS OFFICE OF THE COVERNOR CIRCULAR NO. II5I Series of 2o22 Subject: Amendments to the Minimum Capitalization of Rural Banks The Monetary Board, in its Flesolution No. ll45 dated 4 August 2022, approved the amendments to the relevant provisions of the Manual of Regulations for Banks (MORB) aimed at increasing the minimum capital requirements for rural banks. The new minimum capitalization requirement is part of the initiatives under the Rural Bank Strengthening Program (RBSP). The RBSP was developed to enhance the operations, capacity, and competitiveness of rural banks. lt is anchored on the principle that a safe and sound bank is well-capitalized. A strong capital base enables rural banks to enhance their risk management systems, upgrade resources and manage operational costs, meet prudential sta ndards, and accelerate d igita I tra nsformation. Section l. Section 'l2t of the MORB, as amended by Circular Nos. 'll2'l and '1142 dated 8 June 2O2l and 29 March 2022, respectively, is hereby further amended, as follows: I2T MINIMUM REQUIRED CAPITAL XXX Minimum capitalization The minimum capitalization of banks shall be as follows: Required Bank Category Minimum Capitalization xxx RBs Head Office Only P5O million Up to 5 branchesr 50 million 6 to lO branchesr l20 million More than lO branchesr 2OO million Cooo Banks Head Office in NCR xxx XXX For purposes of compliance with this Section, the term branch shall exclude the branch-lite units of banks. The above shall also be the required minimum capitalization upon (a ) establishmentof a new bank, (b) conversion of an existing bank from a lower to a higher category bank and vice versa, and (c) relocation of the head office of a TB in an area of higher classification. xxx Transitory provisions. RBs which comply with the new capital levels shall submit to the Bangko Sentral a certification to this effect, signed by the president or officer of equivalent rank, within ten ('lO) banking days from the date of effectivity of this Circular. RBs with capital levels below the new minimum capital requirements shall refer to the available options under the Flural Bank Strengthening Program2 (RBSP). I Branches - inclusive of Head Office 2 BSP Memorandum No. M-2O22-O24 dated 5 May 2022

FlBs availing of the capital build-up track shall submit to the Bangko Sentral an acceptable capital build-up program within six (6) months from the date of effectivity of this Circular. lf the prescribed minimum capital necessitates an increase in the authorized capital stock, affected RBs shall cause the corresponding amendments to their articles of incorporation. The appropriate supervising department of the Bangko Sentral will evaluate the continuing compliance of RBs to the aforementioned capital build-up program. RBs which are existing, or which were already authorized by the Monetary Board to establish an RB but are not yet operating, or persons from whom completed applications have been received but are pending action by the Bangko Sentral shall be given five (5)years from the date of effectivity of this Circular within which to meet the new minimum capital requirements. The Bangko Sentral reserves the right to require appropriate actions and/or impose sanctions for non-compliance with the capital build-up program on FlBs concerned as provided under existing banking laws and/or Bangko Sentral rules and regulations. xxx Section 2. Section'l05 of the MORB is hereby amended to read, as follows: IO5 ESTABLISHMENT/RELOCATIONIYOI.UNTARY CLOSURE/SALE OF BRANCHES/ BRANCH-LITE UNITS xxx Location of branches/branch-lite units. As a general rule, banks shall be allowed to establish branch/es or branch-lite units anywhere in the Philippines, including in cities previously considered as restricted areas; Provided, That, if TBs wil! establish branches in cities/municipalities of a higher classification than their head office, the applicable minimum required capital under Sec. l2l shall be increased to that of the city/municipality of the higher classification, regardless of where the head office is located. xxx Section 3. Flegulatory relief on compliance with the minimum capital requirements of rural banks under Section l2l of the MORB that were previously approved by the BSP shall be revoked upon the date of effectivity of this Circular. Section 4. This Circular shall take effect fifteen (15) calendar days following its publication either in the Official Gazette or in a newspaper of general circulation. FOR THE MONETARY BOARD: f ,, A.-- FELIPE M. MEDALLA Governor &l August2ozz