BSP eases branching rules for co-op banks

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has liberalized the establishment and branching guidelines that would allow cooperative banks to serve beyond their province to provide a wide range of financial services to their clients.

The BSP has approved the rules and regulations for cooperative banks under RA 9520 also known as the Philippine Cooperative Code of 2008 to provide a more level playing field among cooperative banks and other type of banks and at the same time provide clearer regulatory framework for their operations.

“The end goal is a strong and vibrant cooperative banking sector that will provide much needed financial services in the countryside,” the BSP said.

Under the new guidelines that took into consideration the unique character of cooperatives and at the same time aligning the guidelines with other types of banks, cooperative banks would now be allowed to establish branches beyond their province that are determined underserved or unserved.

While the law states that only one cooperative bank may be established in each province, the BSP clarified that it also provided the flexibility for the establishment of another cooperative bank in the same province provided that the branch would not be in the city or municipality where the head office of the first cooperative bank is located.

“The liberalization of the branching rules allow cooperative banks to establish branches or extension offices or other banking offices depending on their combined capital requirements,” it pointed out.

According to the central bank, cooperative banks with over P100 million worth of capitalization could establish offices anywhere in the country except in restricted areas while those with at least P50 million could establish offices in Luzon, Visayas, and Mindanao. Cooperative banks with at least P10 million could set up offices within the province where their head office is located.

“These provisions will better ensure that no area will be left wanting for much needed financial services,” the central bank added.

Furthermore, the BSP pointed out that any cooperative bank that would be established under the new law should have a minimum capital requirement of P10 million to ensure that these banks are operating in a professional, sound, and sustainable manner.

The central bank also espoused guidelines on governance and membership to ensure professional management and operations of the cooperative bank.

Under the guidelines, voting rights of members would be proportionate to their paid up shares as opposed to the previous practice of “one man, one vote.” The guidelines also clearly defined regular and associate membership.

Also, the BSP said the new guidelines provided cooperative banks with scope to perform any or all of the banking functions of other types of banks but subject to certain rules and regulations.