Capital limit on thrift banks lowered

Manila Standard Today

Mar 14, 2006

 

Capital limit on thrift banks lowered

By Eileen A. Mencias

The Bangko Sentral ng Pilipinas has lowered the capitalization requirement on thrift banks that want to operate as a foreign currency deposit unit (FCDU).

BSP Deputy Gov. Nestor Espenilla Jr. said the BSP reduced the capitalization requirement on thrift banks in the National Capital Region to P325 million from P650 million.

For thrift banks based outside of the NCR, the minimum capital to qualify for an FCDU license is P52 million.

Of the country’s 84 thrift banks, only 24 have FCDU licenses. An FCDU license allows a thrift bank to accept dollar deposits and grant foreign currency denominated loans.

The lowering of the capital requirement complements a Monetary Board (MB) resolution that allows rural banks to apply for FCDU licenses. For rural banks, the minimum capitalization requirement for an FCDU license is P20 million. BSP data showed about 200 of the 750 rural banks in the country meet the minimum capitalization requirement.

BSP said rural banks must be properly managed and have no regulatory or management issue with the BSP in order to qualify for the license.

Espenilla said the move will give beneficiaries of Filipinos working abroad the option to keep their funds in dollars or other foreign currencies and allow them to earn a small interest on the deposit.

BSP data showed about 20 percent of remittances of Filipinos working abroad is coursed through informal channels. The remittances from informal channels are usually converted into pesos by money changers right away.

An FCDU license allows thrift banks and rural banks to accept dollar and other foreign currency deposits as well as grant dollar loans which, Espenilla said, “will serve as a hedging mechanism.”

By giving thrift and rural banks FCDU licenses, those who plan to go abroad can at least tap dollar loans for their pocket money and other expenses.

The BSP expects only about $11.7 billion of the $13.5 billion remittances of overseas Filipino workers would be channeled to the banking system this year.

BSP said of the $12.3 billion estimated remittances last year, only $10.7 billion passed through banks and other formal channels.

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