BSP revives merger program for coop banks

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has revived a program to promote mergers and consolidations with, and acquisition of cooperative banks by “white knights” following the entry of foreign banks amid the integration among members of the Association of Southeast Asian Nations.

BSP Deputy Governor Nestor Espenilla Jr. said state-run Philippine Deposit Insurance Corp. (PDIC) and Land Bank of the Philippines have mutually agreed to revive the Strengthening Program for Cooperative Banks (SPCB) Plus for one more year.

The SPCB Plus aims to promote mergers and consolidations with, and acquisition of cooperative banks by stronger partner.  The program would be revived until end September next year after expiring last Sept. 30.

Espenilla said same terms and conditions of the existing program would still apply.

The revival of the program, the BSP said, would benefit more cooperative banks providing essential financial services in the local communities and supporting the growth of rural economies and communities.

The original SPCB was approved in August 2011 to encourage mergers, consolidations with, or acquisitions of eligible cooperative banks by strategic third party investors (STPIs). The program expired in August 2012.

The program involved the capital augmentation through equity infusions from PDIC and Landbank to bring the capital adequacy ratio of the surviving cooperative bank to the required regulatory level

It also involved regulatory relief package from the BSP to allow the surviving cooperative bank to achieve economies of scale and better manage their liabilities.

In January 2014, the BSP, PDIC, and Landbank agreed to revive the SPCB and renamed it to SPCB Plus after introducing certain amendments and enhancements. This expanded the eligible STPIs or so-called “white knights” to include strong and well-managed rural banks and thrift banks whether or not majority owned by cooperative banks and commercial banks.

The program was envisioned to further strengthen the cooperative banking system, boost confidence in the banking system, and improve the delivery of financial services to the countryside and rural communities.

The SPCB Plus offers a variety of financial and regulatory reliefs and incentives to improve the prospects for success of new banking partnerships.  Financial assistance may be granted by PDIC and Landbank to augment capital shortfalls and provide income support to the surviving banks. 

BSP, on the other hand, put on the table a package of regulatory reliefs and branching incentives for the eligible STPIs.

The SPCB Plus expects eligible STPIs not only to sustain and strengthen the financial condition of surviving banks but also to improve their quality of corporate governance and management. 

The SPCB Plus program has been renewed twice since it was launched in September 2013.