BY NEIL JEROME C. MORALES, Reporter
Coop Bank mergers get support from BSP, PDIC and LBP
MONETARY authorities target facilitating mergers, acquisitions and consolidations of the existing 40 cooperative banks in the country to come up with just five to six strong and large cooperative banks.
This, after the Bangko Sentral ng Pilipinas (BSP), the Philippine Deposit Insurance Corp. (PDIC) and the Land Bank of the Philippines signed yesterday an agreement to give incentives for joint ventures in cooperative banks.
“Right now, we have 40 cooperative banks. Many of them are problematic,” BSP Deputy Governor Nestor A. Espenilla, Jr. told reporters on Wednesday.
“The outcome of this is from 40 cooperative banks, we may end up with maybe five or six, less than 10 banks, regionally based, well-capitalized and well managed,” Mr. Espenilla added.
The Strengthening Program for Cooperative Banks (SPCB), which will run until August 2012, will allow cooperative banks to have a solid capital position and expand their network in the countryside.
“The SPCB was conceptualized to bring about larger and stronger cooperative banks by encouraging mergers, consolidations and acquisitions by eligible strategic third party investors (STPIs) under specific set of guidelines,” BSP Governor Amando M. Tetangco, Jr. said in his speech.
Under the program, the 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 governmentís shares after 10 years.
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.
Mr. Espenilla said: “Strong banks have no incentive to bail out a problematic bank. This is where the PDIC and BSP will come in [because] we will contribute equity through PDIC to eliminate negative capital.”
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.
“The 30 of 40 cooperative banks have expressed their interest to participate in this program,” Cresente C. Paez, representative for party list COOP-National Confederation of Cooperatives (NATCCO), said in an interview yesterday.
Mr. Paez said this will strengthen banks that service to two million clients, most of which are poor and high risk people in the agriculture sector.
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.
“For this program, the Landbank will provide P300 million for equity investment and up to P1 billion for credit facility available to surviving banks,” Landbank President Gilda E. Pico said in her speech.
For its part, COOP-NATCCO can also act as a strategic partner and is willing to raise as much as P100 million, Mr. Paez said.
Furthermore, two foreign cooperative banks have expressed interest to participate in the merger and acquisition of local cooperative banks.
Mr. Espenilla said DGRB, or the German Cooperative and Raiffeisen Confederation of Germany and the Rabobank of Switzerland are interested to provide financial support through equity or perhaps loans.
Mr. Paez concurred, saying that talks began early this year. He added that foreign banks can also share their technical knowledge on cooperative banks.
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.
As of end-March, there were 40 operating cooperative banks in the country with P15.9 billion in resources, data from the BSP show.
Last February. the Monetary Board has approved the rules and regulations for cooperative banks under Republic Act 9520, otherwise known as the Philippine Cooperative Code of 2008.
The issuance takes into consideration the unique character of cooperatives while aligning the rules and regulations with other types of banks, with the end goal of strengthening cooperatives as vehicles for social and economic progress.
The BSP has provided liberalized rules to level the playing field among cooperative banks and other types of banks.
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