Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House Bill No. yt

Introduced by Representative Michael L. Romero

EXPLANATORY NOTE

The Constitution provides protection for farmers and other members of
the agriculture sector. Unfortunately, financial institutions were established for
them and yet proved not to cater to their needs the way they should.

This House bill seeks to create the Philippine Farmers’ Bank to which
will be available to every Filipino farmer. 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 but it will establish its office in the far
flung rural areas in our countryside.

‘The Philippine Farmer's Bank 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.

Earnest approval of this bill is hereby requested.

MI L. ROMERO


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House Bill No. eats

Introduced by Representative Michael L. Romero

AN ACT

CREATING THE PHILIPPINE FARMER'S BANK, PROVIDING
FUNDS THEREFOR, DEFINING ITS POWERS AND FUNCTIONS,
AND FOR OTHER PURPOSES

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

ARTICLE I
GENERAL PROVISIONS

SECTION 1. Short title. — This Act shall be known as the
"Philippine Farmers' Bank Act".

SECTION 2. Declaration of policy. — It is hereby a declared 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 and reaching out to the unserved and unbanked areas
of the provinces.


SECTION 3. Creation. — The Philippine Farmer's Bank is hereby
created and established primarily to provide for all kinds of credit system to the
Filipino farmers most especially those located in the unbanked and unserved
areas. It shall have its principal place of business in Manila and its legal
existence shall 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.

ECTION 4. Powers and Functions - 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; and

(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.

ARTICLE II
SUPPLETORY PROVISIONS

SECTION 5. Issuance of Bonds - Philippine Farmer's Bank 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 (25) 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.

SECTION 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, 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 guaranty fund is no less than twenty percent of the
outstanding net obligation of the Philippine Farmer's Bank 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.

SECTION 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.

SECTION 8. Capital - The authorized capital stock of the Bank shall
be Three Billion pesos (P3,000,000,000.00) 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 nine hereof shall not exceed in the aggregate the
equivalent of two and one-half per centum of its assets limited therein.

SECTION 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.

SECTION 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.

SECTION 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.

SECTION 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, exercisable 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.

ARTICLE III
COMPOSITION AND QUALIFICATIONS

SECTION 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.

SECTION 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.

SECTION 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 Philippine Farmers’ Bank 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.

ARTICLE IV
ORGANIZATION AND STAFFING

SECTION 16. Personnel and 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.

SECTION 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 Philippine Farmers’ Bank 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.

SECTION 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.

ARTICLE V
PROGRESS REPORT

SECTION 19. Review Report on the Status 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.

SECTION 20. Reviewing 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.


ARTICLE VI
PARITY PROVISIONS

SECTION 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.

SECTION 22. Directive - 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.

SECTION 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.

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


ARTICLE VII
PENAL PROVISIONS

SECTION 25. Penalties and Sanctions. - 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.

ARTICLE VIII
FUNDING

SECTION 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.

ARTICLE IX
MISCELLANEOUS PROVISIONS

SECTION 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.

SECTION 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.

SECTION 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,