56 TH CHARTER ANNIVERSARY SYMPOSIUM

56TH CHARTER ANNIVERSARY SYMPOSIUM

BREAK – OUT SESSION:“CHALLENGES FACING RBs”

BREAK – OUT SESSION:“CHALLENGES FACING RBs”

BRINGING BACK TO MAINSTREAM: A CASE STUDY OF RBx


I. RBs MANDATE

I. RBs MANDATE

Section 2 of RA 7353 “The State hereby recognizes the need to promote comprehensive rural development with the end in view of attaining equitable distribution of opportunities, income and wealth; a sustained increase in the amount of goods and services produced by the nation of the benefit of the people; and in expanding productivity as a key raising the quality of life for all, especially the underprivileged.

Towards these ends, the State hereby encourages and assists in the establishment of rural banking system designed to make needed credit available and readily accessible in the rural areas on reasonable terms.”


I. RBs MANDATE

RA 10574 SEC. 3. Section 6 of Republic Act No. 7353 is hereby amended to read as follows:

“SEC. 6. Loans or advances extended by rural banks organized and operated under this Act shall be primarily for the purpose of meeting the normal credit needs of farmers, fishermen or farm families owning or cultivating land dedicated to agricultural production as well as the normal credit needs of cooperatives and merchants…”


I. RBs MANDATE

a. Setting

b. Rural Economies

c. Prominent Families Filling In


II. MANAGEMENT REALITIES


II. MANAGEMENT REALITIES

1. Subsequent Generation’s Predicament

2. Remote Control Management

3. Capital and Reportorial Requirements

4. Survival Mode Operation (Window dressing)

5. Dire Consequences

6. Prompt Corrective Action


III.TRANSITION TO NEW MANAGEMENT


III. TRANSITION

A. DUE DILIGENCE PROCESS

1. Looking into the RB’s historical financial performance and condition

2. Identifying Risks and assessing internal control

3. Identifying Potentials and assessing Valuation and Investment Requirements


III. TRANSITION

B. NEGOTIATION PROCESS

1. Determining and agreeing to the “Right” Price

2. Notifying the “Authorities”, e.g. PDIC, BSP


III. TRANSITION

C. SAFEGUARDING PROCESS

1. Securing BSP and PDIC approval; Interlocking Directorship and Officership

2. Management Contract; Installation of a Management Team;

3. Interim Operational Guidelines

4. Introduction of Personnel Manual, Conflict of Interest Policy; Retired Personnel who were not able to assimilate new values, culture and skills; Upgrade salaries and benefits of the “hold-over” ones.


III. TRANSITION

D. REHABILITATION AND REINTEGRATION

1. Migration from manual to automated system

2. Standardization and maintenance of adequate Reports, Records and Forms

3. Implementation of Remedial Measures

4. Implementation of Written Internal Control System and Compliance System

5. Authentication and validation of accounts


III. TRANSITION

D. REHABILITATION AND REINTEGRATION

6. Profiling and Re-documentation

7. Capital Infusion

8. Strengthening of Credit Management System

9. Strategic Planning

10. Refurbishment and Office Makeover


IV. BACK IN THE MAINSTREAM, FULFILLING ITS MANDATE



1. Result: After 1 year

1.a. Organization • Motivated and continuous re-tooling of personnel• Clearer Personnel Policies• Well-defined organization structure

1.b. Operations• Written Manuals that are being observed• Stronger Credit Management System• Implementation of regular Asset Quality Review and

Provisioning System• Deposits: confidence restored, 94% increase in

deposits• More cost efficient operation



1. Result: After 1 year

1.c. Healthier financial condition284% increase in Profitability

ITEMS % OF INCREASE (DECREASE)IN TERMS OF AMOUNT LOANS 20% DEPOSIT 94%IN TERMS OF CLIENT BASE

LOANS -17% DEPOSIT 37%



2. Results of Latest Supervisory Examination

Lifted out from PCA status; healthy for consolidation

The RB emerged from a CAMELS 1 rating to a 3 in 6 months (per latest GE January 2013). Once consolidated, the to-be absorbed RB will actually contribute to the acquiring bank’s healthy position.




3. Latest Ratios

KEY RATIOS JUNE 2012 SEPT. 2013

Liquidity Ratio 50.91% 58.55%

Liquid Assets & Investment Ratio 50.91% 59.42%

Past Due and ITL 37.60% 15.93%

RBCAR 11.26% 18.12%

NPL to Total Assets Ratio 28.83% 7.93%

ROE -34.33% 14.36%

Loans to Deposit Ratio 102.11% 60.48%



4. True to its Mandate, RBx addresses BSP’s financial inclusion objective


Thank you

Presented by:Jose Misael B. Moraleda

President/CEOCamalig Bank

Documents

56 TH CHARTER ANNIVERSARY SYMPOSIUM