MOA on incentive program for cooperative banks signed

Friday, November 18, 2011

A MEMORANDUM of agreement (MOA) to strengthen the program for cooperative banks (SPCB) was signed the other day to formally launch the incentive scheme designed to support the development of a stronger cooperative banking sector.

The MOA was signed between and among the Philippine Deposit Insurance Corporation, the Bangko Sentral ng Pilipinas and the Land Bank of the Philippines.

The SPCB aims to encourage mergers, consolidations and acquisitions of cooperative banks (CBs) by eligible strategic third party investors (STPIs) and will give financial incentives and assistance to cooperative banks and their partner STPIs “through a combination of preferred shares and direct loan to strengthen the cooperative bank’s capital position.”

The SPCB, which will run until August 2012, has two components: capital augmentation component and regulatory relief package.

For the capital augmentation component, “equity infusions will come from PDIC and LBP to bring the capital adequacy ratio of the surviving cooperative bank to the required regulatory level. The BSP, on the other hand, will make available the regulatory relief package to allow the surviving cooperative bank to achieve economies of scale and better manage their liabilities.”

Financial assistance will likewise be made available by LBP to qualified participating cooperative banks.

Eligible STPIs may be CBs, thrift banks, rural banks, primary cooperatives or federations of cooperatives. “Where the STPI is either a TB or RB, the bank should also be at least 67 percent owned by CBs, primary cooperatives and/or federation cooperatives.”

“In case the STPIs are primary cooperatives or federations of cooperatives, a certification or endorsement of good standing from the Cooperative Development Authority will be required in addition to a proven good track record based on their audited financial statements.”

Through the SPCB, surviving banks are expected to have an improved capital position with a net worth of at least P100 million and a minimum risk-based capital adequacy ratio (RBCAR) of 15 percent. Surviving banks should be CBs or thrift banks or rural banks at least 67 percent owned by cooperatives. (CGC)

Published in the Sun.Star Bacolod newspaper on November 18, 2011.

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