Discussion Papers

No.651 Rural Bank Mergers/Consolidations in the Philippines: A Preliminary Study


March 2017


The central bank of the Philippines (Bangko Sentral ng Pilipinas, BSP) has encouraged the country's rural banks to merger/consolidate for strengthening their financial soundness and competiveness, and extending branch networks with providing some incentive measures mainly financial supports. Overviewing the cases realized from January 2000 to December 2016, we found (1) the rural banks which are considered to have expansive business strategies spend about a decade to repeat bilateral mergers, unlike BSP's intention to realize "at least five rural banks" in one merger case, (2) most of the mergers are bilateral and one-off cases, where surviving banks seem to increase some assets and branch(es). In order to further promote mergers/consolidations in the sector, BSP may need to consider modifying the incentive measures to answer actual cases, and/or allying them more closely to the on-going capital increase requirements.

Keywords: mergers, consolidations, rural banks, the banking sector, the Philippines
JEL classification: E42, E52, G38

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