Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

3170

House Bill No.

Introduced by Honorable Rico B. Geron
EXPLANATORY NOTE

A sound State policy shall give highest consideration to the welfare of the Filipino
farmers to advance the nation in rural development and food security. It is the government
responsibility to enhance Filipino farmer's dignity and improve the quality of their lives
through available, reliable and established financial assistance and credit system

This bill creates the Farmer's Bank of the Philippines to which every Filipino
farmer's shall be able to avail of its credit system and to which all financial assistance
from the government will be funneled in. Although the Bank's priority is to cater financial
services to the Filipino farmer's, it shall have the same functions as that of commercial
banks regulated by the Bangko Sentral ng Pilipinas (BSP) so it can still earn and generate
its own funds.

The Farmer's Bank of the Philippines shall be the known banks for all farmers,
fisherfolks, farm workers, growers of domesticated animals and any other agricultural
activities for the purpose of supplying food in the nation.

In view of the foregoing, the passage of this bill is earnestly urged.

|. GERON
list Representative, AGAP


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House Bill No. 3170

Introduced by Honorable Rico B. Geron

AN ACT CREATING THE FARMER’S BANK OF THE PHILIPPINES AND
PROVIDING FUNDS THEREFOR

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Short Title. — This Act shall be known as the “Farmer's Bank of the
Philippines Act”.

SEC. 2. Declaration of Policy. — It is the policy of the State to provide for
sustainable agricultural development by creating true and viable social and economic
productivity of the Filipino farmers. With the end view of achieving dignified existence and
financial subsidies to the farmers for the nation’s food security.

SEC. 3. Creation. - The Farmer's Bank of the Philippines is hereby created and
established primarily to provide for all kinds of credit system to the Filipino farmers. It shall
have its principal place of business in Manila and its legal existence shalll be for a period
of fifty years from the effectivity of this Act. The Bank shall be subject to such rules and
regulations as the Bangko Sentral ng Pilipinas (BSP) may from time to time promulgate.

SEC. 4. Powers in General - To carry out this main purpose, the Bank shall have
the power:

(1) To prescribe, repeal, and alter its own by laws, to determine its operating
policies, and to issue such rules and regulations as may be necessary to achieve
the main purpose for the creation of the Bank;

(2) To adopt, alter and use a corporate seal;

(3) To acquire and own real and personal property and to sell, mortgage or
otherwise dispose of the same;


(4) To sue and be sued, make contracts, and borrow money from both local and
foreign sources. Such loans shall be subject to approval by the President of the
Philippines and shall be fully guaranteed by the Government of the Philippines;

(5) Upon recommendation of the Committee on Investments, to hold, own,
purchase, acquire, sell or otherwise invest, or reinvest in stocks, bonds or other
securities capable of giving the Bank a reasonably assured income sufficient to
‘support its financing activities and give its private stockholders a fair return on their
holdings: Provided, however, That pending the organization of the Committee on
Investments, the Bank may exercise the powers herein provided without the
recommendation of said Committee on Investments: Provided, further, That in
case of the dissolution of the Farmer's Bank of the Philippines all unsold public
lands transferred to it which may be allocated to the Government of the Philippines
in the course of liquidation of the business of the Bank shall revert to the
Department of Agriculture; and

SEC. 5. Issuance of Bonds - The Farmer's Bank of the Philippines shall, upon
recommendation by the Board of Trustees and approval of the Monetary Board of the
BSP, issue bonds, debentures and other evidences of indebtedness at such terms, rates
and conditions as the Bank may determine up to an aggregate amount not exceeding, at
any one time, five times its unimpaired capital and surplus. Such bonds and other
obligations shall be secured by the assets of the Bank and shall be fully tax exempt both
as to principal and income. Said income shall be paid to the bondholder every six (6)
months from the date of issue. These bonds and other obligations shall be fully negotiable
and unconditionally guaranteed by the Government of the Republic of the Philippines and
shall be redeemable at the option of the Bank at or prior to maturity, which in no case
shall exceed twenty-five years. These negotiable instruments of indebtedness shall be
mortgageable in accordance with established banking procedures and practices to
government institutions not to exceed sixty per centum of their face value to enable the
holders of such bonds to make use of them in investments in productive enterprises. They
shall also be accepted as payments for reparation equipment and materials.

The Board of Trustees shall have the power to prescribe rules and regulations for the
registration of the bonds issued by the Bank at the request of the holders thereof.

SEC. 6. Special Guaranty Fund - In the event that the Bank shall be unable to pay
the bonds, debentures, and other obligations issued by it, a fixed amount thereof shall be
paid from a special guaranty fund to be set up by the Government, to guarantee the
obligation of the Farmer's Bank of the Philippines, and established in accordance with
this Section, and thereupon, to the extent of the amounts so paid, the Government of the
Republic of the Philippines shall succeed to all the rights of the holders of such bonds,
debentures or other obligations: Provided, however, That for the next four years after the
establishment of the Bank, the payment to the special guaranty fund should not exceed
one million pesos per year, after which period, the Government shall pay into the guaranty
fund the sum of five hundred thousand pesos each year until the cumulative total of such


PPO
guaranty fund is no less than twenty percent of the outstanding net obligation of the
Farmer's Bank of the Philippines at the end of any single calendar year.

The guaranty fund shall be administered by the BSP in the manner most consistent with
its charter. For the purpose of such fund, there shall be appropriated annually the sum of
‘one million pesos out of any moneys in the National Treasury not otherwise appropriated,
until the total amount of twenty million pesos shall have been attained.

SEC. 7. Receiving Payments and Time Deposits - The Bank, under the supervision
of the Monetary Board and subject to the provisions of the General Banking Act, shall
receive savings and time deposits from any person and, for this purpose, establish, and
maintain branches and offices in such areas as may be necessary to service such
deposits. The Monetary Board shall supervise and authorize the Bank to receive savings
and time deposits from the public in areas where facilities for such a service do not exist
or cannot be adequately provided by other deposit institutions.

SEC. 8. Capital - The authorized capital stock of the Bank shall be one billion five
hundred million pesos divided into ninety million shares with a par value of ten pesos
each, which shall be fully subscribed by the Government and sixty million preferred
shares with a par value of ten pesos each which shall be issued in accordance with the
provisions of Sections seventy-seven and eighty-three of this Code. Of the total capital
subscribed by the Government, two hundred million pesos shall be paid by the
Government within one year from the approval of this Code, and one hundred million
pesos every year thereafter for two years for which purpose the amount of two hundred
million pesos is hereby appropriated upon the effectivity of this Code, and one hundred
million pesos every year for the next two years thereafter, out of the funds in the National
Treasury not otherwise appropriated for the purpose: Provided, That if there are not
enough funds in the National Treasury for the appropriation herein made, the Secretary
of Finance, with the approval of the President of the Philippines, shall issue bonds or
other evidence of indebtedness to be negotiated either locally or abroad in such amount
as may be necessary to cover any deficiency in the amount above-appropriated but not
exceeding four hundred million pesos, the proceeds of which are hereby appropriated:
Provided, further, That the bonds to be issued locally shall not be supported by the Central
Bank: Provided, finally, That there is automatically appropriated out of the unappropriated
funds in the National Treasury such amounts as is necessary to cover the losses which
‘shall include among other things loss of earnings occasioned by the limitation of the resale
cost herein provided such that said amount together with the administrative expenses
mentioned in Section ninety hereof shall not exceed in the aggregate the equivalent of
two and one-half per centum of its assets limited therein.

SEC. 9. Government Shares - All shares of stock in the Bank subscribed or owned
by the Government shall not be entitled to participate in the income earned by the Bank
from its investments and other operations, whether in the form of cash or stock dividends
or otherwise. Amounts expended for the administration of the Bank shall not be deemed
as a participation of the Government in income.


SEC. 10. Preferred Shares - All preferred shares of stock issued under Section
seventy-seven of this Code shall be entitled to the income earned by the Bank on its
investments and other operations and shall have a limited right to elect annually one
member of the Board of Trustees and one member of the Committee on Investments:
Provided, That the holders of such preferred shares of stock shall not bring derivative
suits against the Bank. Such preferred shares shall be fully transferable: Provided, further,
That upon the liquidation of the Bank, the redemption of such preferred shares shall be
given priority and shall be guaranteed at par value.

SEC. 11. Voting of Shares - The voting power of all the shares of stock of the
Farmer's Bank of the Philippines owned or controlled by the Government shall be vested
in the President of the Philippines or in such person or persons as he may from time to
time designate.

SEC. 12. Board of Trustees - The affairs and business of the Bank shall be
directed, its powers exercised and its property managed and preserved by a Board of
Trustees. Such Board shall be composed of one Chairman and four members. The
Chairman and two members of the Board of Trustees shall serve on full-time basis with
the Bank. The Chairman and all members of the Board shall be appointed by the
President with the consent of the Commission on Appointments for a term of seven years,
except that the first Chairman and members to be appointed under this Code shall serve
for a period of three, five and seven years, such terms to be specified in their respective
appointments. Thereafter the Chairman and members, with the exception of the ex-officio
member, appointed after such initial appointment shall serve for a term of seven years
including any Chairman or member who is appointed in place of one who resigns or is.
removed or otherwise vacates his position before the expiration of his seven-year term.
The Chairman and the two full-time members of the Board shall act as the heads of such
operating departments as may be set up by the Board under the authority granted by
Section eighty-seven of this Code. The Chairman shall have authority, exerciseable at his
discretion, to determine from time to time the organizational divisions to be headed by
each member serving full time and to make the corresponding shifts in designations
pursuant thereto. The compensation of the Chairman and the members of the Board of
Trustees serving full time shall be twenty-four thousand and eighteen thousand pesos,
respectively. The other members of the Board shall receive a per diem of one hundred
pesos for each session of the Board that they attend.

SEC. 13. The Chairman and Vice-Chairman - The Chairman of the Board shall be
the chief executive officer of the Bank. He shall have direct control and supervision of the
business of the Bank in all matters which are not by this Code or by the by-laws of the
Bank specifically reserved to be done by the Board of Trustees. He shall be assisted by
an Executive Vice-Chairman and one or more vice-chairman who shall be chosen and
may be removed by the Board of Trustees. The salaries of the Vice-Chairmen shall be
fixed by the Board of Trustees with the approval of the President of the Philippines.

SEC. 14. Qualifications of Members - No person shall be appointed Chairman or
member of the Board unless he is a man of accepted integrity, probity, training and


experience in the field of banking and finance, at least thirty-five years of age and
possessed of demonstrated administrative skill and ability.

SEC. 15. Committee on Investments - There shall be a Committee on Investments.
composed of three members; the member of the Board of Trustees elected by the holders
of preferred shares as Chairman, one member to be appointed by the President of the
Philippines from among the government members of the Board of Trustees, and another
member to be selected by the holders of preferred shares under Section eighty-three of
this Code. The Committee on Investments shall recommend to the Board of Trustees the
corporations or entities from which the Farmer's Bank of the Philippines shall purchase
shares of stock.

The Farmer's Bank of the Philippines shall not invest in any corporation, partnership or
company wherein any member of the Board of Trustees or of the Committee on
Investments or his spouse, direct descendant or ascendant has substantial pecuniary
interest or has participation in the management or control of the enterprise except with
the unanimous vote of the members of the Board of Trustees and of the Committee on
Investments, excluding the member interested, in a joint meeting held for that purpose
where full and fair information of the extent of such interest or participation has been
adequately disclosed in writing and recorded in the minutes of the meeting: Provided,
That such interested member shall not in any manner participate in the deliberations and
‘shall refrain from exerting any pressure or influence whatever on any official or member
of the Bank whose functions bear on or relate to the investment of the funds of the Bank
in the enterprise: Provided, further, That the total investment in any single corporation,
partnership, company, or association shall not exceed five per centum of the total
investible funds.

SEC. 16. Personnel; Cost of Administration - The Administrative expenses of the
Bank during any single fiscal year shall not in any case exceed two and one-half per
centum of its total assets. The Board of Trustees shall provide for an organization and
staff of officers and employees necessary to carry out the functions of the Bank, fix their
compensation, and appoint and remove such officers and employees for cause. The Bank
officers and employees shall be subject to the rules and regulations issued by the Civil
Service Commission but shall not fall under the Salary Standardization Law. The Board
of Trustees shall recommend to the Civil Service Commission rules and regulations for
the recruitment, appointment, compensation, administration, conduct, promotion and
removal of all Bank officers and employees under a strict merit system and prepare and
conduct examinations under the supervision of said Commission.

SEC. 17. Legal counsel - The Secretary of Justice shall be ex-officio legal adviser
of the Bank. Any provision of law to the contrary notwithstanding, the Farmer's Bank of
the Philippines shall have its own Legal Department, the chief and members of which
shall be appointed by the Board of Trustees. The composition, budget and operating
expenses of the Office of the Legal Counsel and the salaries and traveling expenses of
its officers and employees shall be fixed by the Board of Trustees and paid by the Bank.


Pe

SEC. 18. Auditor - The Commissioner of the Commission on Audit (COA) shall be
the ex-officio auditor of the Bank and shall appoint a representative, who shall be the
auditor in charge of the auditing office of the Bank. The COA Commissioner shall, upon
the recommendation of the auditor of the Bank, appoint or remove the personnel of the
auditing office. The compensation, budget and operating expenses of the auditing office
and the salaries and traveling expenses of the officers and employees thereof shall be
fixed by the Board of Trustees and paid by the Bank notwithstanding any provision of law
to the contrary.

SEC. 19. Report on Condition of Bank - The representative of the COA shall make
a quarterly report on the condition of the Bank to the President of the Philippines, to the
Senate through its President, to the House of Representatives through its Speaker, to the
Secretary of Finance, to the COA and to the Board of Trustees of the Bank. The report
shall contain, among other things, a statement of the resources and liabilities including
earnings and expenses, the amount of capital stock, surplus, reserve and profits, as well
as losses, bad debts, and suspended and overdue paper carried in the books as assets
of the Bank, and a plantilla of the Bank.

SEC. 20. Auditing Rules and Regulations - The COA shall, with respect to the
Bank, formulate improved and progressive auditing rules and regulations designed to
expedite the operations of the Bank and prevent the occurrence of delays and bottlenecks
in its work.

SEC. 21. Removal of Members - The President of the Philippines may, at any time,
remove the Chairman or any member of the Board appointed by him if the interest of the
Bank so requires, for any of the following causes:

(1) Mismanagement, grave abuse of discretion, infidelity in the conduct of fiduciary
relations, or gross neglect in the performance of duties;

(2) Dishonesty, corruption, or any act involving moral turpitude; and

(3) Any act or performance tending to prejudice or impair the substantial rights of
the stockholders.

Conviction of the Chairman or a member for a crime carrying with it a penalty greater than
arresto mayor shall cause the removal of such Chairman or member without the necessity
of Presidential action.

The Chairman or member may, in any of the above cases, be civilly liable for any damage
that may have been suffered by the stockholders.

SEC. 22. Regulation - The Bank shall not be subject to the laws, rules and
regulations governing banks and other financial institutions of whatever type except with
respect to the receipt of savings and time deposits in accordance with Section 7 of this
Act, in which case the legal reserve and other requirements prescribed by the BSP for


such deposits shall apply. The Bank shall be operated as an autonomous body and shall
be under the supervision of the BSP.

SEC. 23. Tax Exemption - The operations, as well as holdings, equipment,
property, income and earnings of the Bank from whatever sources shall be fully exempt
from taxation.

SEC. 24. Organization of Bank - The Bank shall be organized within one year from
the date that this Act takes effect.

SEC. 25. Penalty for Violation of the Act. - Any trustee, officer, employee or agent
of the Bank who violates or permits the violation of any of the provisions of this Chapter,
or any person aiding or abetting the violations of any of the provisions of this Chapter,
shall be punished by a fine not to exceed ten thousand pesos or by imprisonment of not
more than five years, or both such fine and imprisonment at the discretion of the Court.

SEC. 26. Appropriations - There is hereby appropriated the amount of One Billion
pesos for salaries, wages, purchase of motor vehicles, supplies, equipment, and other
sundry expenses. The amount appropriated herein shall be carried in the appropriations
for the General Appropriations Acts of the Department of Agriculture for succeeding fiscal
years.

SEC. 27. Separability Clause. - If, for any reason, any provision of this Act is
declared invalid or unconstitutional, the remaining provisions not affected thereby shall
continue to be in force and effect.

SEC. 28. Repealing Clause. — All laws, decrees, executive orders, proclamations,
rules and regulations, and other issuance, or parts thereof, which are inconsistent with
the provisions of this Act are hereby repealed or modified accordingly.

SEC. 29. Effectivity Clause. - This Act shall take effect fifteen (15) days after its
complete publication in the Official Gazette or in at least two (2) newspapers of general
circulation, whichever is earlier.

Approved,