Rabobank, DGRV eye PHL cooperative banks

Global financial services provider Rabobank Group of Netherlands DGRV - Deutscher Genossenschafts- und Raiffeisenverband e. V. of Germany are interested in the Philippines’ Special Program for Cooperative Banks (SPCB), a central bank official said Wednesday. The financial institutions intend to join the incentive program either as providers of technical or financial assistance, Bangko Sentral ng Pilipinas Deputy Gov. Nestor Espenilla Jr. said in an interview with reporters. The matter is still being discussed for a final mode of entry, he said. "They are interested in partnership. One is providing financial support, perhaps equity, perhaps loan… We don't know yet, because discussions are ongoing," Espenilla said. “They can come in and establish a guarantee fund perhaps or just provide outright technical assistance, consultancy, or how to run things better," he added. The program, launched by the BSP and state-run Philippine Deposit Insurance Corp.(PDIC), supports the development of a stronger cooperative banking sector. The SPCB aims to trim the number of cooperative banks to less than 10 well managed and well capitalized participants from about 40. Cooperative banks have weakened, Espenilla noted, saying if the trend stays its course then some banks may have to close. "A significant number of cooperative banks are experiencing weakness. But there are also a substantial number of strong, well-managed cooperative banks. This is all about partnering weak banks with strong banks so we will end up with a strong cooperative banking system," he said. Rabobank is an international financial services provider offering banking, asset management, leasing, insurance and real estate services serving about 10 million customers in 48 countries, while DGRV is the largest economic organization in Germany with over 20 million members promoting and representing the mutual interests of its members and their affiliated cooperative institutions. BSP data showed the country’s 40 cooperative banks have combined resources of P15.9 billion as of end-March, equivalent to a fraction of the assets of the trillion-peso banking system. Serving the countryside Cooperative banks play a vital role in the financial system by serving the countryside, said Espenilla. To be implemented with state-owned Land Bank of the Philippines, the program will run until August 2012, encouraging mergers and acquisitions and consolidations with eligible Strategic Third Party Investors (STPIs) under a specific set of guidelines. BSP Gov. Amando Tetangco Jr. said in a speech during Wednesday’s SPCB launch and signing of Memorandum of Agreement (MOA) the program was conceived to bring about larger and stronger cooperative banks. Incentives under the program are designed to help and encourage cooperative banks attain a healthy financial condition, the BSP chief said. PDIC and LandBank also offering equity infusions to boost the capital position of cooperative banks, he noted. "These equity infusions will neutralize the potential adverse impact of asset write-downs that are essential to clean up the books and ensure that the surviving banks are strong and capable," Tetangco said. “An exit mechanism provides for the buy-out of government shares after 10 years. In addition to equity infusions, credit facilities will also be made available by LandBank to enable STPIs to further scale up their operations at an accelerated rate," he added. The central bank will provide regulatory relief packages such as allowing 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. "The grant of regulatory relief is expected to allow the surviving banks to achieve economies of scale and better manage their liabilities," the BSP chief added. Under the program, PDIC and LandBank would provide the critical support component through a financial assistance. 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 of 15 percent. LandBank has committed P1 billion in credit facilities and P300 million in equity investment to surviving banks and the National Confederation of Cooperatives has committed P100 million to the program. — VS, GMA News