By Lawrence Agcaoili (The Philippine Star) Updated September 19, 2011
12:00 AM
MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has tied up
with state-run Philippine Deposit Insurance Corp. (PDIC) and Land Bank
of the Philippines for a coordinated incentive program designed to
support the development of a stronger cooperative banking sector.
BSP Governor Amando Tetangco Jr. said the Strengthening Program for
Cooperative Banks (SPCB) would ensure that cooperative banks could meet
the capital requirements set by the central bank.
"The cooperative movement is an important movement in the society. It
empowers the members of the community that are, that were probably, they
don't have the same access as the big companies and major corporations,"
Tetangco told reporters.
Data from the BSP showed that there are 40 operating cooperative banks
in the country with resources aggregating P15.9 billion as of end-March.
While the assets of the cooperative banking sector accounts for only a
small fraction of the assets of the entire banking system, the BSP said
it plays a vital role in the financial system since almost all of these
40 cooperative banks operate in the countryside
These banks, according to the central bank, provide the much needed
financial services to hundreds of primary and federation cooperatives
and their individual members who usually face difficulties in accessing
banking services.
"The same cooperatives and the large number of their individual members
are the stockholders or owners of cooperative banks. Thus, there is much
social benefit in revitalizing this particular segment of the banking
system," the BSP said.
The BSP would implement the coordinated incentive program that would run
until August 2012 and is designed to support the development of a
stronger cooperative banking sector together with PDIC and Landbank.
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.
It is aimed at rationalizing the cooperative banking sector to bring
about larger and stronger cooperative banks whose management, more solid
capital position, and wider branch network would enable them to improve
their services to cooperative members, deepen their reach into the
countryside, mobilize savings, and spur lending activities in the
unbanked and the underserved areas.
"The SPCB offers a variety of incentives to cooperative banks and their
partner STPIs, and these include targeted financial assistance to
augment capital, credit facilities to support business expansion, and a
package of regulatory relief," the BSP added.
Under the program, PDIC and Landbank would provide the critical support
component through a financial assistance.
Through the SPCB, surviving cooperative banks or banks at least 67
percent owned by cooperatives are expected to have a much improved
capital position with a net worth of at least P100 million and a minimum
risk-based capital adequacy ratio (RBCAR) of 15 percent.
This, the BSP said, would place the surviving banks in a better position
to expand their lending activities and provide a wider variety of
innovative financial services especially catered to primary cooperatives
and their members.
Equity would be infused by the PDIC and Landbank into the STPIs to
neutralize the potential adverse impact of asset write-downs that are
essential to clean up the books and ensure that surviving banks are
strong and capable.
Equity infusions would come in the form of perpetual, non-cumulative
preferred shares, convertible to common shares at the end of 10 years.
An exit mechanism provides for the buy-out of government shares after 10
years.
In addition to equity infusion, credit facilities would also be made
available by Landbank to enable STPIs to further scale up their
operations at an accelerated rate.
On the other hand, the BSP would provide complementary regulatory
support package to further enable the surviving banks to expand their
operations.
The regulatory support package includes flexibility in the opening,
conversion and relocation of bank offices, including head offices,
flexibility in ownership limits, more liberal guidelines that would
allow staggered booking of required valuation reserves, waiver of
penalties as may be appropriate, and the restructuring of existing
rediscounting and emergency loans with the BSP.
Eligible STPIs may be cooperative banks, thrift banks, rural banks,
primary cooperatives or federations of cooperatives provided such
entities have a CAMELS rating of at least 3, are not under the central
bank's Prompt Corrective Action Framework and have not been cited by the
BSP or the PDIC to have engaged in any unsafe and unsound banking practice.
Where the STPI is a rural or thrift bank, the bank should also be at
least 67 percent owned by cooperative banks, primary cooperatives and/or
federation cooperatives.
The eligible STPIs are also expected not only to sustain and continue to
improve the capital base, but also to further strengthen the quality of
corporate governance and management systems thereby making such banks
that serve the cooperative sector truly sustainable, viable, and efficient.
Even before operating guidelines are released by the BSP, PDIC, and
Landbank, strong expressions of interest to participate in the program
have been received from a number of players in the industry indicating
the strong buy-in of the cooperative sector.
In August last year, a similar program for rural banks dubbed as the
Strengthening Program for Rural Banks (SPRB) involving P5 billion in
financial assistance was launched. To date, not a single transaction has
been completed.
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