Co-ops seek shield from ailing banks, bad banking

LA TRINIDAD, Benguet—The Cooperative Development Authority (CDA) has sought the help of the Bangko Sentral ng Pilipinas (BSP) after learning that the collapse of the LBC Development Bank in September hurt the finances of some Baguio-based cooperatives.

One cooperative reportedly lost as much as P25 million. Another lost P3 million, “but the insurance coverage offered to redeem the money was not even half of what we lost,” one of its officials told the Inquirer last week.

Franco Baoang, acting CDA Cordillera director, said the agency may need new guidelines and quarterly appraisals of the banking industry to help cooperatives make informed decisions about their transactions.

Aside from depositing money or securing loans, many cooperatives also lend money to members which require a stable supply of funds, said Martin Manodon, CDA Cordillera spokesperson.

‘Usually sound’

“Usually, a cooperative’s assets are sound because the members themselves are the ones who invest actively in [its] projects,” Manodon said

Baoang said the common problems arising from managing cooperative financing are internal because of poor accounting or wrong business decisions.

But the LBC bank case showed that the fate of cooperatives is also vulnerable to external forces, such as transactions with poorly managed banks or an economic crisis.

The Inquirer could not get independent verification of the losses from the local branch of LBC, a thrift bank, which was placed under receivership by the Philippine Deposit Insurance Corp. on Sept. 9.

Miguel Luma-ang, general manager of the Cooperative Bank of Benguet, said the LBC example strengthens a campaign to draw the assets of all cooperatives in the country under the custody of a central cooperative bank facility.

Merge for strength

In 2010, the BSP issued a policy statement urging rural banks, thrift banks and cooperative banks to merge to become competitive against commercial banks owing to the perceived fragility of smaller, independent banks, information supplied by the Cooperative Bank of Benguet showed.

Luma-ang, who is also president of the Benguet Provincial Cooperative Development Council, said his bank is valued at P720 million from the investments of 90 cooperatives. The bank started with 165 member-cooperatives.

Baoang said regular information about the economy and the strengths and weaknesses of commercial banks could be incorporated in the CDA’s training programs that are offered to 2,000 Cordillera cooperatives. Vincent Cabreza, Inquirer Northern Luzon