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RETAIL BANKING | Cesar Tordesillas, Philippines

Moody’s lauds Philippine regulations encouraging mergers

Moody’s expects regulations encouraging consolidations in the smaller sector of the Philippine banking industry to improve the credit standing of big banks.


The credit rating agency called the P5-billion Strengthening Program for Rural Banks of BSP and PDIC supporting mergers and acquisitions in the rural banking sector as “credit positive”. The SPRB previously did not include the larger universal and commercial banks. The revised program, now allows the big banks to participate in the M&As, not just thrift and rural banks.

“We believe that the enhanced program, which expands the investor pool from only rural banks previously to now also include universal and commercial and thrift banks, will increase the pace of consolidation in an overcrowded Philippine banking system,” said the Moody’s report.

“Specifically, we expect the enhancement to lead to more universal and commercial banks acquiring financially weaker rural banks, which we see as a necessary step for the industry to strengthen its overall financial health, efficiency, and corporate governance. Rural banks in general have poorer credit fundamentals than the banking system average, particularly in asset quality and liquidity.”

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