EIGHTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
Third Regular Session 
)
SENATE
Senate Bill No. 2392
71 SEP-8 P 3 8 9
. A
Introduced by Senator Juan Miguel F. Zubiri
AN ACT
PROVIDING FOR THE REGISTRATION, REGULATION, AND OPERATION OF 
COOPERATIVE BANKS
EXPLANATORY NOTE
The role of cooperative banks in providing credit and other financial services to 
the cooperative sector has been very crucial and instrumental in helping our government 
in its poverty alleviation efforts. Cooperative banks are owned and financed by primary 
cooperatives using their funds from the shareholding of their members such as farmers, 
fisherfolk, micro entrepreneurs, small traders and as a return, these primary cooperatives 
borrow money from cooperative banks to support their loan program for members. After 
deducting the appropriate statutory funds at the close of each year, the net surplus 
generated by these cooperative banks are then plowed back to their members, both 
regular and associate. A demonstration of a give and take relationship whereby the co­
existence of both stakeholders is evident.
The Cooperative Development Authority (CDA) reported that as of 31 August 2021, 
24 cooperative banks are operating in the country, 4 of which are operating nationwide, 
10 region-wide, 9 in the provincial level, and 1 in the municipal level. Total assets of 
cooperative banks as of 31 December 2020 amounted to Php23,425,716, 882. Of the 24 
cooperative banks, all but one are categorized large by asset size.
With the enactment of the Philippine Cooperative Code of 2008, the cooperative 
sector has been given both the chance and the challenge to play a bigger and more 
meaningful role in the delivery of financial services to rural areas especially the extension 
of loans and credit to marginalized communities in the countryside and far-flung areas. 
This proposed Act aims to create a more robust legal framework for cooperative banks 
and is envisioned to make them more responsive to the challenges of the new Cooperative 
Code. It will hopefully expand the market reach of cooperative banks to the 499 unbanked 
cities and municipalities in the country to better serve farmers, fisherfolk, micro 
entrepreneurs, small traders and other rural workers.
In view of foregoing, early passage of this bill is earnestly sought
N MIGUEL F. ZUBIRI


EIGHTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
Third Regular Session 
)
SENATE
Senate Bill No. 2392
'21 SEP-8 P3:19
Introduced by Senator Juan Miguel F. Zubiri
AN ACT
PROVIDING FOR THE REGISTRATION, REGULATION, AND OPERATION OF 
COOPERATIVE BANKS
Be it enacted by the Senate and the House of Representatives of the Phiiippines 
in Congress assembled:
CHAPTER I
DECLARATION OF POLICY AND DEFINITIONS
Section 1. Title. - This Act shall be known as the "Cooperative Banking Act of
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Sec. 2. Declaration of Policy. - It is the declared policy of the State to foster
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the creation and growth of cooperatives to promote self-reliance, communal unity and
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the attainment of economic development and social justice. The State shall encourage
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the private sector to undertake the actual formation and organization of cooperatives and
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shall create an atmosphere that is conducive to the growth and development of these
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cooperatives.
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Further, it is hereby declared the policy of the State to:
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a.
b.
c.
Recognize Cooperative Banks (CBs) as practical vehicles for the promotion of 
self-reliance and economic development and the attainment of social justice; 
Encourage thrift and savings mobilization for the achievement of sustainable 
economic development primarily among cooperatives and their members; and 
Regulate and supervise the activities of CBs in order to achieve sound, stable, 
sustainable, and efficient operations for the protection of the public interest.
Towards these ends, the Government shall encourage and assist in the 
establishment of CBs in order to make credit facilities available and readily accessible on 
reasonable terms.
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Sec. 3. Definition of Terms. - As used in this Act:
a. Cooperative Bank — refers to a bank organized under this Act and under the 
provisions of R.A. No. 9520, otherwise known as Philippine Cooperative Code 
of 2008, and prior laws, for the primary purpose of providing a wide range of 
financial services to cooperatives and their members and the public, and which


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was issued by the Bangko Sentral ng Pilipinas (BSP) a license to operate as 
such, the majority shares of which are owned and controlled by the cooperative 
organizations;
b. Cooperative organization — refers to any cooperative whether primary, 
secondary, tertiary, or a special type of cooperative registered under the 
provisions of R.A. No. 9520 and R.A. No. 10744, otherwise known as Credit 
Surety Fund Cooperative Act of 2015;
c. Samahang Nayon and Municipal Katipunan ng mga Samahang Nayon — refers 
to pre-cooperative organizations established under Presidential Decree No. 
175, on Strengthening the Cooperative Movement.
CHAPTER II 
ORGANIZATION
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Sec. 4. Organization and Membership. - The organization and membership of
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a Cooperative Bank (CB) shall be governed by the following:
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a. Organization —At least fifteen (15) cooperative organizations duly established
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and registered under the Cooperative Code may register a CB with the
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Cooperative Development Authority (CDA), upon compliance with the
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requirements of and required authorization from the BSP;
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b. Membership — Membership in a CB shall be open to:
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(1) cooperatives of all types and categories;
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(2) individuals who are members of a cooperative;
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(3) foreign cooperatives;
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(4) pre-cooperative organizations established under P.D. 175; and
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(5) individuals.
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Membership in a CB is either regular or associate. Regular membership shall be
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limited to cooperative organizations and individuals who are members of a domestic
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cooperative or foreign cooperative. Associate members shall be pre-cooperative
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organizations established under P.D. 175 and individuals who are subscribing and holding
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preferred shares only.
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The common shareholdings of local cooperative organizations shall at all times be
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at least sixty percent (60%) of the total outstanding voting shares of the CB. Common
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shares held by individuals who are members of a cooperative and foreign cooperatives
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shall not be more than forty percent (40%) of the total outstanding voting shares:
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Provided, That the common shareholdings of each individual who is a member of a
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cooperative shall not be more than 5% of the total outstanding voting shares.
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Sec. 5. Establishment of Cooperative Banks. - The articles of cooperation
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and by-laws of a CB or any amendment thereto shall be registered with the CDA only
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when accompanied by a certificate of authority issued by the BSP.
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Sec. 6. Establishment of Branches and Other Offices. - The establishment
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of branches, branch-lite units, or other banking offices shall be governed by the rules and
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regulations of the BSP.


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CHAPTER III
MANAGEMENT AND GOVERNANCE OF COOPERATIVE BANKS
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Sec. 7. Management of Cooperative Banks. - The management of the CBs
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shall be governed by the rules and regulations to be promulgated by the BSP, in
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consultation with the CDA. To maintain the quality of bank management and accord
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appropriate protection to depositors and the public in general, the BSP shall prescribe the
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fit and proper qualifications of bank directors and officers for the purposes of this Section,
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giving due recognition to the unique nature and character of CBs.
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The number, composition, and term of the board of directors shall be defined in
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the articles of cooperation and by-laws of the CB in accordance with the following
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guidelines:
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a. Board and Committees. - The CB shall constitute, at a minimum, the Board of
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Directors, Election Committee, and Audit Committee.
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The Board of Directors shall be composed of at least five (5) but not more than
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fifteen (15) members, at least one (1) of whom is an independent director. It
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shall be entrusted with the management of the affairs of the CB. It shall be
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responsible for the policy formulation, strategic planning, direction-setting and
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activities of the CB. The members of the Board of Directors shall be elected by
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the general assembly or representative assembly of the cooperative.
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The Election Committee shall be responsible for the formulation and
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implementation of election rules and guidelines. It shall supervise the conduct
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of election and election-related activities, canvass and certify the results of the
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election, and decide cases relative to such election, except thpse involving the
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committee itself or its members. The members of the Election Committee shall
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be elected by the general assembly or representative assembly.
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The Audit Committee is a board-level committee which composition, functions
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and responsibilities shall be in accordance with the existing regulations of the
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BSP. Other board-level committees may be created as may be directed by the
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BSP.
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Other committees may be created by the board of directors with powers,
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functions, and responsibilities which shall be defined in the by-laws.
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b. Key Management Officers. - The key management officers shall be appointed
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by the Board and shall include the President, Treasurer, Internal Auditor, and
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Compliance Officer, or their equivalent ranks. The BSP shall prescribe the
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qualifications and disqualifications of the key management officers.
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Sec. 8. Vacancy in the Board and Committees. - Any vacancy in the board of
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directors, other than by removal or by expiration of term, may be filled by the vote of at
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least a majority of the remaining directors, if still constituting a quorum; otherwise, said
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vacancy must be filled by the general assembly in a regular or special meeting called for
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that purpose. A director so elected to fill a vacancy shall
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serve only the unexpired term of the predecessor in office.


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In case of vacancy in the committees, the board, unless otherwise provided in the by-
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laws, will appoint a person to fill the same, subject to the provision that the person
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appointed shall serve only for the unexpired portion of the term.
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Sec. 9. Compensation. - In the absence of any provision in the by-laws fixing
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their compensation, the directors shall not receive any compensation except for
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reasonable per diems: Provided, however. That the directors and officers shall not be
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entitled to any per diem when, in the preceding calendar year, the CB reported a net loss
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or had a dividend rate less than the official inflation rate for the same year. Any
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compensation other than per diems may be granted to directors by a majority vote of the
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members with voting rights at a regular or special general assembly meeting specifically
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called for the purpose: Provided, That no additional compensation other than per diems
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shall be paid during the first year of existence of the CB.
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In no case shall the total yearly compensation of directors exceed ten percent (10%) of
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the net income of the CB during the preceding year.
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Sec. 10. Liability of Directors/ Officers and Committee Members. -
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Directors, officers, and committee members, who willfully and knowingly vote for or
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assent to patently unlawful acts or who are guilty of gross negligence or bad faith in
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directing the affairs of the CB or acquire any personal or pecuniary interest in conflict
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with their duties as such directors, officers or committee members shall be liable jointly
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and severally to the CB for the full amount of damages or personal gain resulting
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therefrom.
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Sec. 11. Disloyalty of Directors and Officers. - A director or officer who, by
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virtue of the office, acquires a financial opportunity which should belong to the CB shall
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be liable for damages and must account for double the profits that otherwise would have
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accrued to the CB by refunding the same, unless the act was ratified by a two-thirds (2/3)
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vote of all the members with voting rights.
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This provision shail be applicable notwithstanding the fact that the director or
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officer used personal funds for the venture.
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Sec. 12. Dealings of Directors, Officers, Stockholders and Related
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Interests (DOSRI). - Dealings with directors, officers, stockholders and related
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interests of the CB shail comply with Section 36 of R.A. No. 8791, otherwise known as
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General Banking Law of 2000.
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Sec. 13. Illegal Use of Confidential Information. - A director or officer, or an
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associate of a director or officer, who, for the benefit or advantage or that of an associate,
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makes use of confidential information that, if generally known, might reasonably be
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expected to adversely affect the operations and viability of the CB, shall be held:
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a. Liable to compensate the CB for the direct losses suffered by the CB as a result
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of the illegal use of information; and
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b. Accountable to the CB for any direct benefit or advantage received or yet to be
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received by the associate, as a result of the transaction.
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The CB shall take the necessary steps to enforce the liabilities and accountabilities
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described herein.


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Sec. 14. Bond for Faithful Performance of Duties and Obligations. - Every
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officer or employee handling funds, securities, or property on behalf of a CB shall, before
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performing such duties, execute and deliver adequate and appropriate bond for the
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faithful performance of one's duties and obligations.
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Sec. 15. Quorum and Voting Rights. - In meetings of the board of directors,
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whether special or regular, the quorum requirements shall be one-half plus one of all the
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members. Each director shall only have one (1) vote.
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CHAPTER IV
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GENERAL ASSEMBLY
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Sec. 16. Composition of the General Assembly. - The general assembly shall be
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composed of regular members who are entitled to vote under the articles of cooperation
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and by-laws of the CB.
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Sec. 17. Powers of the General Assembly. - The general assembly shall be the
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highest policy-making body of the CB and shall exercise such powers as are stated in the
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Cooperative Code, in the articles of cooperation, and in the by-laws of the CB. The general
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assembly shall have the following exclusive powers which cannot be delegated:
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a. To determine and approve amendments to the articles of cooperation and by-
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laws;
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b. To elect or appoint the members of the board of directors, and to remove them
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for cause; and
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c. To approve developmental plans of the CB.
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Subject to such other provisions of the Cooperative Code and only for purposes of prompt
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and intelligent decision-making, the general assembly may, by a three-fourths (3/4) vote
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of all its members with voting rights present and constituting a quorum, delegate some
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of its powers to a smaller body of the CB. These powers shall be enumerated under the
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by-laws of the CB.
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Sec. 18. Meetings. - A regular meeting shall be held annually by the general
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assembly on a date fixed in the by-laws, or if not so fixed, on any date within one hundred
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eighty (180) days after the close of each fiscal year: Provided, That notice of regular
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meetings may be sent through personal delivery, registered mail or other electronic
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means, or such other manner as the BSP may allow under its existing regulations, to all
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members of record, and posted in conspicuous places within the CB premises.
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Whenever necessary, a special meeting of the general assembly may be called at any
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time by a majority vote of the board of directors or as provided for in the by-laws:
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Provided, That a notice shall be sent one (1) week prior to the meeting to all members
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who are entitled to vote: Provided, however. That a special meeting shall be called by
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the board of directors after compliance with the required notice or by at least ten percent
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(10%) of the total members who are entitled to vote to transact specific business covered
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by the call.
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If the board fails to call a regular or a special meeting within the given period, the CDA
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shall, upon petition of ten percent (10%) of all the members of the CB who are entitled
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to vote, and for good cause shown, shall issue an order to the petitioners directing them
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to call a meeting of the general assembly by giving proper notice as required in the
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Cooperative Code or in the by-laws.


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In the case of a newly approved CB, a special general assembly shall be called, as far as 
practicable, within ninety (90) days from such approval;
The CDA may call a special meeting of the CB for the purpose of reporting to the members 
the result of any examination or other investigation of the CB affairs; and
Notice of any meeting may be waived, expressly or impliedly, by any member.
Sec. 19. Quorum and Voting System. - The quorum requirement for general 
assembly meetings, whether special or regular, shall be one-half plus one of the number 
of voting shares of all the members in good standing.
To amend its articles of cooperation and by-laws, at least three-fourths (3/4) vote of all 
the members with voting rights, present and constituting a quorum shall be required. All 
other voting requirements shall be prescribed by the BSP.
The voting rights of the members shall be proportionate to the number of their paid-up 
shares.
CHAPTERV
POWERS, FUNCTIONS, AND ALLIED UNDERTAKINGS
Sec. 20. Powers and Functions of Cooperative Banks. - CBs shall primarily provide 
a wide range of financial services to cooperative organizations, their members, and the 
public. A CB may perform any or all of the following banking services:
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Extend loans and advances primarily for the purpose of meeting the normal 
credit needs of farmers, fishermen, or farm families as well as cooperatives, 
merchants, and private and public employees: Provided, That loans and 
advances granted to cooperative organizations shall not be subject to individual 
ceilings on loans to DOSRI;
Accept savings and time deposits;
Act as correspondent of other financial institutions;
Discount and rediscount paper with the Land Bank of the Philippines, 
Development Bank of the Philippines or any other bank, including its branches 
and agencies. Said banks shall specify the nature of paper deemed acceptable 
for rediscounting, as well as the rediscount rate to be charged by any of these 
banks;
Act as collection agent;
Act as official depository of Local Government Units and other government 
agencies or instrumentalities;
Acquire readily marketable bonds and other debt securities;
Buy and sell foreign exchange;
To act as conduit bank for the disbursement of government funds intended for 
lending to agriculture, micro, small-medium enterprises (MSMEs) and projects 
for local economic development;
To be eligible to participate in government program allocations for agricultural 
lending, social housing, loans to rural micro enterprises and other initiatives 
towards inclusive growth; and
Offer other banking services as provided for in Section 53 of R.A. No. 8791.
In addition to the powers granted to CBs by this Act and other existing laws, any CB may 
perform any or all of the banking services offered by other types of banks subject to the 
prior approval of the BSP.


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Sec. 21. Investment in Allied Undertakings. - Subject to the requirements
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and restrictions as may be imposed by the Monetary Board under its existing rules and
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regulations, CBs may invest in equities of allied undertakings which may include the
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following:
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a. Banks, financial institutions and non-bank financial intermediaries;
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b. Warehousing and other post-harvest facilities;
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c. Fertilizer and agricultural chemical and pesticides distribution;
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d. Farm equipment distribution;
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e. Trucking and transportation of agricultural products;
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f. Marketing of agricultural products;
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g. Leasing;
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h. Automated teller machine (ATM) networks;
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i. Public transportation;
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j. Financial technology; and
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k. Other undertakings as may be determined by the Monetary Board.
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Sec. 22. Limitations on Lending Authority. - Except as the Monetary Board may
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otherwise prescribe, the direct indebtedness to CBs of any person, company, corporation,
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or firm, including the indebtedness of members of a partnership and association, for
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money borrowed, shall in no time exceed twenty five percent (25%) of unimpaired capital
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and surplus of the CB. However, the direct indebtedness mentioned shall exclude loans
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secured by obligations of the BSP; loans fully guaranteed by the Government as to the
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payment of principal and interest; loans to the extent covered by the hold-out on, or
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assignment of, deposits maintained in the lending CB and held in the Philippines; and
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other loans or credits as the Monetary Board may, from time to time, specify non-risk
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assets.
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CHAPTER VI
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CAPITALIZATION AND CAPITAL STRUCTURE
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Sec. 23. Capital Requirement for Cooperative Banks. - A CB shall have a minimum
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paid-up capital in such amount as may be required by the BSP. The BSP may prescribe
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rules and regulations on the types of shares a CB may issue, including the terms thereof
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and rights appurtenant thereto to determine compliance with laws and regulations
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governing capital and equity structure of banks: Provided, That CBs shall Issue par value
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shares only.
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Sec. 24. Barrio Savings Fund (BSF)/ Barrio Guarantee Fund (BGF)/ Cooperative
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Development Loan Fund (CDLF), Cooperative Marketing Program (CMP), and
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Other funds administered by CDA. - In order to augment the capitalization of CBs,
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the aforementioned funds collected or deducted by various CBs throughout the country
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from the loan proceeds of farmer borrowers in compliance with P.D. 175, which are still
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floating and outstanding either as active or dormant accounts in the books of those banks,
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shall be converted as capital of the CB located in the province where the depository banks
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of the BSF and BGF are located.
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Sec. 25. Samahang Nayon and Municipal Katipunan ng mga Samahang Nayon.
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- The Samahang Nayon (SN) and Municipal Katipunan ng mga Samahang Nayon (MKSN)
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which held common shares of CBs prior to the effectivity of R.A. No. 9520 shall apply for
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conversion to cooperatives in order to maintain their status as regular members of CBs:
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Provided, That the CBs shall exert efforts to inform and assist the SN and MKSN to convert
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within a period of three (3) years from the effectivity of this Act. Upon failure of the SN


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and MKSN to finally convert to a cooperative within said period, the funds held in the 
name of such SN and MKSN shall be considered as preferred shares and shall remain as 
capital of the CB.
Sec. 26. Additional Source of Capital of the CBs. - The funds or common shares in 
CBs held in the name of cooperatives whose certificates of registration have already been 
cancelled by the CDA and which failed to liquidate such funds or shares during its 
liquidation shall remain as capital in said CBs and shall be treated as preferred shares.
CHAPTER VII 
SUPERVISION
Sec. 27. Supervision of Cooperative Banks. - All CBs shall be under the supervision 
of the BSP: Provided, however, That the CDA shall monitor the CBs' compliance with 
cooperative laws, rules, and regulations. With respect to the governance of the CBs, the 
provisions of the banking laws, rules, and regulations shall prevail, notwithstanding 
Section 71 of R.A. No. 8791.
Sec. 28. Promulgation of Guidelines. - The BSP and CDA may formulate guidelines 
to implement or clarify the provisions of the Act: Provided, That the BSP, as the regulator 
of banks, shall be the primary regulator of cooperative banks consistent with the 
provisions of RA 8791: Provided/ further. That in order to minimize the burden of dually- 
regulated entities, the BSP shall, in consultation with the CDA, shall in its promulgation 
of rules and regulations, to the extent allowed in banking and other relevant laws, and 
insofar as consistent with the BSP's exercise of supervisory and regulatory powers over 
banks, consider the requirements of this Act and the CDA for cooperatives in general.
CHAPTER VIII
PRIVILEGES AND INCENTIVES
Sec. 29. Privileges of Cooperative Banks. - CBs registered under this Act and the 
Cooperative Code shall have the following privileges and incentives:
1. Those privileges and incentives accorded to cooperatives under the Cooperative 
Code and other prior laws including exemption from all national, city, provincial, 
municipal or barangay taxes, fees and charges of whatever nature and description: 
Provided, hov\/ever. That when a CB has reached an undivided net savings of more 
than One hundred million pesos (P 100,000,000.00), transactions to non-member 
will become taxable;
2. The foreclosure of mortgages covering loans granted by CBs and executions of 
judgment thereon involving real properties levied upon by sheriff shall be exempt 
from the publications in newspapers where the total amount of loan, excluding 
interests due and unpaid, does not exceed One million pesos (P1,000,000.00) or 
such amount as the Monetary Board may prescribe as may be warranted by 
prevailing economic conditions. It shall be deemed sufficient publication in such 
cases where the notices of foreclosure and execution of judgment are posted in 
the most conspicuous areas such as the municipal building, the municipal public 
market, the CB, and the barangay hall where the land mortgaged is situated during 
the period of sixty (60) days immediately preceding the public auction or execution 
of judgment. Proof of publication as required herein shall be accomplished via an 
affidavit of the sheriff or officer conducting the foreclosure sale or execution of 
judgment and shall be attached to the records of the case;


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3. A CB shall be allowed to foreclose lands mortgaged to it subject to the provisions
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of Republic Act No. 6657, otherwise known as Comprehensive Agrarian Reform
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Law of 1988. For agrarian lands foreclosed by a CB, the disposal of the same to
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another qualified beneficiary under Republic Act 6557 shall be made through the
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same CB. Further, the amortization of the beneficiary in favor of the Department
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of Agrarian Reform (DAR) shall be coursed through the servicing CB: Provided,
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however. That CBs shall be exempt from the landholding limits as prescribed by
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the DAR or any other law requiring the same;
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4. 4. For CBs granted by the BSP with accreditation as Rural Financial Institution
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(RFI) under Republic Act 10000, the following privileges shall be awarded:
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a. Unrestricted branching rights to set-up agriculture-oriented branches in
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unbanked municipalities and predominantly agricultural communities, subject
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to existing regulations on minimum capitalization for banks and the size of
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branch network;
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b. Automatic eligibility with Philippine Guarantee Corporation (with respect to
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agricultural credit guarantee), Philippine Crop Insurance Corporation, and
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governmental agencies providing services towards risk-mitigation in the
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agriculture sector;
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c. Priority status as credit delivery partner or conduit of government directed
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programs for agricultural projects through the Department of Agriculture and
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other government agencies; and
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d. Entitlement to participate free of charge in capability-building activities in
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agriculture lending such as the exchange of best-practice experiences, study
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tour, technology transfer among ASEAN members states and other fora of
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international cooperation.
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Sec. 30. Separability Clause. - If any provision or section of this Act or the application
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thereof to any person or circumstance is held invalid, the other provisions or sections of
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this Act shall remain valid, and the application of such remaining provisions or sections
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to the other persons or circumstances shall not be affected thereby.
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Sec. 31. Repealing Clause. - All laws, issuances, rules, and regulations inconsistent
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with this Act are hereby modified or amended accordingly.
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Sec. 32. Effectivity. - This Act shall take effect fifteen (15) days after its publication in
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the Official Gazette or in a newspaper of general circulation.
Approved.