THE BANGKO Sentral ng Pilipinas (BSP), the Philippine Deposit Insurance
Corporation (PDIC) and the Land Bank of the Philippines have approved an
incentive program that hopes to encourage mergers and consolidations
among banks owned or run by cooperatives.
The Strengthening Program for Cooperative Banks, which will run until
August 2012, will allow cooperative banks to have a solid capital
position and expand their network in the countryside, the central bank
said late last week.
"The program encourages mergers, consolidations with or acquisitions of
cooperative banks, particularly those that are capital deficient, by
eligible strategic third party investors (STPIs) under a specific set of
guidelines," the BSP said in a statement.
The move will also allow cooperative banks to have a more solid capital
position and wider branch network to service more clients and spur
lending activities in the unbanked countryside, it added.
"[Cooperative banks] empower the members of the community that...do not
have the same access [to credit] as the big companies and major
corporations," BSP Governor Amando M. Tetangco, Jr. told reporters late
last week.
Cooperative banks lend to farmers and fisherfolks to aid the growth of
the farm sector, which accounts for roughly a fifth of the domestic
economy and a third of the country's workforce.
Under the program, perks include a financial assistance from the PDIC
and the Landbank.
State deposit insurer PDIC and Landbank might provide equity into banks
in the form of perpetual, non-cumulative preferred shares that
convertible to common shares at the end of 10 years.
Investors should then buy out the government's shares after 10 years.
"In addition to equity infusion, credit facilities will also be made
available by Landbank to enable STPIs to further scale up their
operations at an accelerated rate," the BSP said.
The central bank, for its part, will provide regulatory support for the
mergers and acquisitions.
The regulatory aid includes flexibility in the opening, conversion and
relocation of bank offices; more liberal guidelines that would allow
staggered booking of required valuation reserves; waiver of penalties;
and the restructuring of existing rediscounting and emergency loans with
the BSP," the central bank said.
The program will end next August. To qualify for the perks, one or more
eligible STPIs should merge or consolidate with or acquire one or more
cooperative banks or those banks that are capital deficient.
Eligible STPIs may be cooperative banks, thrift banks, rural banks,
primary cooperatives or federations of cooperatives provided that have a
good standing in the BSP and PDIC. -- Neil Jerome C. Morales
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