Proper prudential regulation is a cornerstone of a stable and efficient financial system. In the Philippines, cooperatives, including those engaged in credit activities, are regulated not by the Central Bank but by the Cooperative Development Authority (CDA). While these cooperatives constitute a small portion of the overall financial sector, with total assets of reporting cooperatives (including non-financial ones) accounting for only about 2.6% of the banking sector (CDA, Statista), they serve as vital economic and social pillars for small rural enterprises and households.
However, compliance with prudential standards is often lacking in the Philippine cooperative sector due to a combination of limited resources, capacity constraints at the CDA, and a general lack of regulatory oversight. Speaking at a regional workshop on risk-based supervision organized by DGRV in Bangkok, Elenita Sanroque, CEO of the Association of Asian Confederation of Credit Unions (ACCU), emphasized that
“while in developed markets the banks call out for less regulation, many developing and emerging countries in Asia (including the Philippines) need stronger regulations”.
In December 2023, DGRV and CDA signed a Memorandum of Understanding (MoU), marking the beginning of a new partnership. The MoU aims to enhance cooperation between the two organizations to strengthen the supervisory capacity of the CDA. As part of this collaboration, senior officials from the CDA visited Germany in October to engage with representatives from Deutsche Bundesbank, BVR, and two cooperative banks. During their visit, they gained insights into how regulatory bodies and cooperative federations in Germany work collaboratively to ensure the stability of the cooperative banking system.
Signing of the MoU between CDA and DGRV
Despite the contextual differences between the Philippines and Germany, the DGRV project facilitates the adaptation of lessons and principles from Germany to the Philippine context. The ultimate goal is to safeguard the assets of cooperative members, a shared objective between regulators and cooperatives alike. Through this collaborative effort, the Philippines aims to strengthen its regulatory framework and enhance the resilience of its cooperative sector in the face of financial challenges. A goal shared by both, the regulators, and the cooperatives.
A Project Story of the Month / DGRV Team Asia – Philippines
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