In landmark deal, co-op, rural banks join forces

The single-biggest consolidation deal in the local cooperative banking industry, which was approved by regulators last year, has been completed, with six separate lenders now operating under one name.

In a letter to industry players, Bangko Sentral ng Pilipinas (BSP) announced the consolidation of six cooperative and rural banks to form Network Consolidated Cooperative Bank (NCCB). The merged bank started operations last Sept. 8.

NCCB was formed through the merger of Cooperative Bank of Agusan del Sur, Capiz Settlers Cooperative Rural Bank, Cooperative Bank of Camarines Norte, Cooperative Bank of Leyte, Sorsogon Provincial Cooperative Bank and Southern Leyte Cooperative Bank.

The bank also received a capital infusion from the National Confederation of Cooperatives.

The merger of the six banks is one of the biggest deals approved under BSP’s Strengthening Program for Cooperative Banks (SPCB), which extends incentives to merging banks.

The SPCB is an incentive program conceptualized by the BSP, Philippine Deposit Insurance Corp. (PDIC) and Land Bank of the Philippines. The program seeks to encourage mergers and acquisitions in the industry to strengthen the cooperative banking sector.

Incentives include leeway on certain regulations, particularly on establishing new branches, and financial assistance for eligible banks. Mergers and acquisitions among rural and cooperative banks is being encouraged to give players that no longer have the resources or capability to keep up with stiff regulations a chance to exit the industry.

Mergers also result in larger institutions with more efficient operations.

“Ultimately, this should redound to the benefit of the various stakeholders, including the public,” the BSP said in a previous statement.

“This program is in recognition of the cooperative banks’ role in providing essential financial services in the economy, particularly in providing adequate banking services in local communities and in supporting growth of rural economies,” the BSP said.

Data from the BSP showed there were 558 rural and cooperative banks in the Philippines, outnumbering all other types of banks by about five to one. However, the sector only accounts for a small part of the financial system in terms of assets and resources.