in 2008 to 631 in 2009 – the branching network showed a significant 45 % increase – from 1, 362 to 1, 974 branches. equally important, rural banks continue to expand their non - traditional service delivery channels. between 2008 and 2009, the number of rural banks with automatic teller machines – or atms – increased from 113 to 119 while rural banks providing electronic banking services moved up from 47 to 52. through rural banks, therefore, we expect that more unserved and underserved filipinos will gain access to responsible and dependable financial services. it can be a simple savings account, a time deposit, an efficient way to pay bills, an insurance product, a microfinance loan, or even just a safe channel to send and receive money. after getting clients through your doors, it is important that in words and in deeds your customers are assured that their trust in you and your bank is well - deserved. the challenge therefore is to ensure that the filipino ’ s confidence in the banking system and in rural banks in particular continues to grow and strengthen. what are the magnitudes involved in working on financial inclusion? well, rough estimates indicate that at the most, only one - third of our households have bank accounts. in other words, at least two out of every three households in the philippines do not maintain bank accounts. this means an untapped market of about 11 million households! some sceptics maintain that many households have no means to maintain bank accounts. that may be true ; but we maintain that there are millions more households that can open and maintain bank accounts given enough information, attention, incentive, and protection. in fact, these new customers could very well boost the profitability of rural banks. there is also the added potential of engaging both new and existing customers to have multiple transactions with your bank to further deepen their financial inclusion. ladies and gentlemen. “ financial inclusion ” became a global buzzword with the launching in 2005 of the united nations international year of microcredit. since then, the resounding success of microfinance proved, beyond any doubt, that an activity once seen as marginal or even charitable could in fact be undertaken in a sound, sustainable and profitable manner. this success catalyzed the push to look beyond microfinance and find ways to further expand the reach and scope of financial services. the concept gained further traction in light of the recent global financial and economic crisis. there is now a growing acceptance in global debates that

applied by january 2, 2012 ; 2 / 3 by january 1, 2013 ; and the full risk weight by january 1, 2014. another major change is the increase in risk weight for real and other properties acquired exposures from 100 % to 150 %, which shall also be applied gradually for three years : 115 % risk weight shall be applied by january 1, 2012 ; 130 % by january 1, 2013 ; and 150 % by january 1, 2014. this revision is consistent with the bsp ’ s thrust of reducing the level of non - performing assets of banks to strengthen the overall asset quality of the banking system. another new feature in the revised framework is the capital requirement for operational risk which is based on 12 % of the average positive gross income of the bank for the past three years. the new guidelines also require important items to be disclosed in the annual reports and the quarterly published balanced sheet to enhance market discipline and transparency. the bangko sentral has considered delaying the effectivity of this new circular to 1 january 2012 to give concerned banks ample time to adjust to this new capital adequacy framework. and to make the transition more manageable, the implementation is on a staggered basis. ladies and gentlemen of the rural banking sector. it is important that you see these circulars not as mere issues of compliance undertaken to satisfy the regulator ; rather, it is our hope that there is a clear understanding and appreciation on your part that these measures are crucial to your growth and viability as a business. ultimately this will benefit your customers in terms of stronger social protection and your shareholders in terms of better returns. as it is, the rural banking sector as a whole is already on the right track, as far as operational bottom line is concerned. i base this on 2009 consolidated figures. in fact, even with the global financial crisis and isolated closures of some banks, consolidated return on equity of the rural banking sector in 2009 reached 12. 12 centavos for every one peso equity investment, even better than the commercial banking sector which posted an aggregate roe of 11. 38 centavos per peso of equity. total assets of the rural banking sector also continued to expand, rising from p146 billion in 2008 to p157. 4 billion in 2009. yearend 2009 figures also showed that rural banks ’ gross total loan portfolio was more than p98 billion, while deposits stood at over p105 billion. by any measure, these are respectable figures posted at a time