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MB Approves Amended Branching Policy And Revised Rules on Mandatory Allocation of Credit to MSMEs


The Monetary Board, the policy making body of the Bangko Sentral ng Pilipinas (BSP), approved the issuance of two (2) Circulars that are expected to heighten access to bank credit and services.

The first Circular amends branching policy and guidelines by rationalizing existing regulations on the establishment of banking offices. Specifically, it allows the establishment of branches and other banking offices anywhere in the country. The geographical exception would be in the eight (8) cities within Metro Manila --- namely, Makati, Mandaluyong, Manila, Paranaque, Pasay, Pasig, Quezon and San Juan --- which have been identified as already adequately served. This amended branching policy is meant to promote healthy competition in the banking system and improve the delivery of efficient banking services.
To further boost the micro-enterprise sector, the Circular allows the establishment of microfinance-oriented banks as well as microfinance-oriented branches of other banks anywhere in the country subject to certain conditions. This policy holds even in the aforementioned eight cities within Metro Manila (the so-called “restricted areas”) as it is an exception to the general rule.

The Circular has reduced the prerequisites for the establishment of banking offices without sacrificing prudential concerns. In particular, it limits the prerequisites for the establishment of banking offices other than branches to the following requirements: (a) compliance with minimum capital requirement but not lower than P10 million in the case of rural banks and cooperative banks; (b) 10% risk-based capital adequacy ratio; (c) CAMELs composite rating not lower than “3”; and (d) compliance with the ceiling on total investments in real estate and improvements. It has removed the 200-meter minimum distance requirement from an existing office in  the establishment of  branches. It also allows thrift banks (TBs) or rural banks (RBs) with combined capital accounts of at least P500 million to establish one (1) branch in the “restricted areas” for TBs or in Metro Manila including the “restricted areas” for RBs, if they do not have one  yet, to complete their nationwide market presence.

The second Circular provides the implementing regulations for the recently passed law, Republic Act 9501, which amends “The Magna Carta for Micro, Small and Medium Enterprises” (R.A. No. 6977, as amended)

Under the amendatory Act (R.A. No. 9501), the mandatory credit allocation to micro and small enterprises has been increased from 6% to 8% while the requirement for medium enterprises has been maintained at two percent. Moreover, compliance with the mandatory allocation of credit resources has been limited to actual extension of loans to micro, small and medium enterprises (MSMEs) and subscription to and purchase of preferred shares of stocks and liability instruments to be issued by the SB Corporation.

The Circular provides for a P500,000 penalty for zero compliance. Under-compliance, on the other hand, would be penalized proportionately against  a  base  amount of P400,000  (for the 8% allocation  for micro and small enterprises) and P100,000 (for the 2% allocation for medium enterprises), respectively.

The two (2) Circulars are expected to broaden the delivery of banking services through the branching network of banks while providing further policy support for the growth and development of MSMEs through the provision of credit.

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