Solon bats for P2.5B fund to rehab 10 ailing coop banks

A lawmaker is set to file a bill establishing a P2.5 billion rehabilitation fund to help 10 ailing cooperative banks and strengthen the cooperatives banking industry.

Rep. Cresente Paez (Party-list, Coop-NATCCO) urged the government to help the ailing cooperative banks instead of allowing Bangko Sentral ng Pilipinas (BSP) to close them down.

Paez  warned that the government stands to lose some P1.8 billion with the impending foreclosure of ten distressed cooperatives banks due to capital deficiency.

Around 258,000 people will be affected should the BSP succeed in foreclosing the distressed cooperative banks, Paez said.

These people will not only be deprived of access to credit and other banking services but also lose their own equity amounting to P 244.2 million, according to Paez.

“The burning issue is that there are now ten cooperatives banks that are in trouble and under ‘Prompt Corrective Action” (PCA) by the BSP due to capital deficiency. The government stands to lose P1.8 billion if these 10 cooperatives banks will eventually be foreclosed,” Paez said.

Paez insisted that closing an ailing coop bank is not the solution even if it cannot comply with the “prompt corrective action” as required by the BSP.

He underscored the significant role played by cooperatives banks and even the BSP acknowledged them “as one of the vital sources of financing in the countryside” by delivering sustainable and market-driven financial services to the agricultural sector and the enterprising households, particularly for small businesses.

The rural banking industry, in which coop banks are part of, provided a total of P4.9 billion worth of microfinance loans to 748, 423 micro-borrowers as of March 2010, Paez said.

“Helping rehabilitate ailing banks is not a new approach. This was done in the case of the UCPB in 2008. Likewise, rehabilitating cooperative banks was done in America. In fact, in the U.S, the government put up a central bank for cooperatives and allocated funds for capital infusion to ailing cooperative banks,” Paez said.

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