The central bank's Monetary Board has approved amendments to the minimum capitalization of rural banks which will enable them to enhance their risk management systems, upgrade resources and manage operational costs, meet prudential standards, and accelerate digital transformation.

"The revised minimum capital requirements shall result in stronger and well-capitalized rural banks underpinning a Philippine banking system that is stable, sound, resilient and inclusive for Filipinos," Bangko Sentral ng Pilipinas governor Felipe Medalla said.

The measure is part of the initiatives under the Rural Bank Strengthening Program which aims to enhance the operations, capacity and competitiveness of rural banks.

"With a strengthened capital base, rural banks would be able to withstand adverse financial shocks and at the same time, tap opportunities to enhance income potential, expand banking operations, and provide better credit facilities and services responsive to the needs of their clients and the banking public," the governor added.

Medalla said that the minimum capital levels of rural banks are: P50 million for head office only and those with up to five branches; P120 million for those with six to 10 branches; and P200 million for those with more than 10 branches.

Moreover, in view of the liberalization in branching regulations and digitalization of banking services, the tiering of the new minimum capital requirements for rural banks only considers the RB's network size as indicated in the number of branches (including head office) and no longer considers their area of operations.

Affected rural banks, including those which were already authorized by the MB to establish a rural bank, shall be given five years to comply with the new minimum capital requirements by referring to the available options under the RBSP.

These include merger/consolidation, acquisition/third party investment, voluntary exit/upgrade of banking license, capital build-up program, and supervisory intervention.

Rural banks availing of the capital build-up track under the RBSP must submit to the BSP an acceptable CBUP within prescribed timelines.