BSP clarifies regulations for cooperative banks
THE BANGKO Sentral ng Pilipinas (BSP) has issued clarificatory
guidelines for cooperative banks' loans, capitalization and governance
requirements.
Memorandum No. 007-2013, dated Feb. 22, was released yesterday,
detailing the discussions between the BSP and the Cooperative Banks
Federation of the Philippines last march.
"They requested clarification for avoidance of doubt and facilitate
explanation to the cooperative members," BSP Deputy Governor Nestor A.
Espenilla, Jr. said in a text message.
Cooperative banks are covered by regulations on loans to directors,
officers, stockholders and related interests (DOSRI), the BSP said.
According to existing regulations, loans extended by cooperative banks
to their primary stockholders will be considered DOSRI loans, and are
therefore subject to prudential regulations.
Thus, the loans should not be set upon terms that are less favorable to
the bank compared to those offered to other clients. They must also
follow general guidelines in the granting, processing and reporting of
loans to the central bank.
Loans to primary stockholders, though, are exempted from the individual
ceiling on DOSRI loans, as prescribed in the Manual of Regulations for
Banks. The cap is equivalent to the DOSRI's deposit plus the book value
of his or her paid-in capital contribution to the cooperative bank.
Loans to primary shareholders, meanwhile, are not considered DOSRI loans
unless their individual members are also directors or officers of the
cooperative bank.
Loans to primary stockholders must be secured, otherwise, these will be
deducted from Tier 1 capital.
On capitalization, the BSP said that deposit for stock subscriptions
(DSS) will be considered as Tier 1 or core capital.
However, the DSS must meet the definition of an equity instrument: not
interest-bearing or withdrawable by the subscriber. It must also be
issued only when the cooperative bank's authorized capital is already
fully-subscribed, and the banks' stockholders and directors have
approved the increase in capitalization.
The BSP must likewise have been notified of the increase in
capitalization, and the Monetary Board must have approved any
transactions involving the ownership of voting shares of stock.
Cooperative banks are prohibited from using loan proceeds for capital
build-up. They can deduct from loans only if the borrower consents to
it, and the bank can support it with reliable data and record-keeping.
Moreover, the BSP stressed that cooperative banks, like all other banks,
must have the required number of independent directors, as stated in
Circular No. 749 issued last February.
"At least 20% but not less than two of the members of the board should
be independent directors," it reiterated.
An independent director may be nominated by a cooperative, it added, as
long as this cooperative does not have "substantial shareholdings," or
have enough shares to elect a seat on the board, or have at least 10% of
the bank's equity.
Lastly, corporate governance and audit committees are required at the
level of the board of directors, the BSP said.
"The corporate governance committee that banks, including cooperative
banks, are required to constitute is tasked to evaluate the
qualifications of persons nominated to be bank directors..." it explained.
Election committees, on the other hand, are not required, although the
BSP does not object to their creation.
Information technology (IT) officers also aren't a requirement if
cooperative banks have "very basic or no" IT system.
Based on BSP data, cooperative banks had P13.039 billion in outstanding
loans as of the first quarter of 2012. A third of this was in community,
social and personal services, and another third in agriculture, hunting
and forestry. Other major items included wholesale and retail trade,
repair of motor vehicles, personal and household goods, real estate and
renting, and health and social work. -- Diane Claire J. Jiao
- See more at:
http://www.bworldonline.com/content.php?section=Finance&title=BSP-clarifies-regulations-for-cooperative-banks&id=66376#sthash.GaHuE7DT.dpuf
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