EIGHTEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
(Dffitr of ll)f •rcrrtsrp
20 
FEB-3 P5:10
S E N A T E  
S. N o . _ m 5
HECEIVEDIY;
Introduced by SENATOR RAMON BONG REVILLA, JR.
AN ACT
PROVIDING FOR THE REGISTRATION, REGULATION AND OPERATION OF 
COOPERATIVE BANKS AND OTHER PURPOSES
EXPLANATORY NOTE
Cooperative banks play a pivotal role in furnishing credit and other financial 
services to the so-called non-bankable sector of our society, their efforts have been 
commendable. It has been a long time aspiration for the cooperative banking sector 
to have its own rule book distinct and different from that of rural and commercial 
banks. Using the small shareholding of fisherfolk, farmers, small traders and micro 
entrepreneurs. Cooperative banks are financed by primary cooperatives and 
Samahang Nayon's. In return, primary cooperatives get money from cooperative 
banks to support the loan program for its members. Every end of the year, net surplus 
generated by cooperative banks are then funnelled back to the owners; truly an 
example of a beneficial give and take relationship.
It is worth noting that cooperative banks have been very consistent in helping 
our government in efforts to alleviate our nation from poverty. Therefore, it is the duty 
of the State to support the advancement of this sector, aiding it in any way in order 
to further its growth. The cooperative banking sector now have bigger challenges to 
overcome in order for them to play a more meaningful role in credit delivery, targeting 
people from the countryside. This measure aims to make cooperative banks more 
capable to move the past challenges.
In view of the foregoing, the passage of this bill into law is earnestly sought.
RAMO^TONG REVILLA, JR.


EIGHTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
S E N A T E
^ e iia fe
(Wfitf of tl)f itccfptarp
20 PE8-3 P5-.10
Introduced by SENATOR RAMON BONG REVILLA, JR.
AN ACT
PROVIDING FOR THE REGISTRATION, REGULATION AND OPERATION OF 
COOPERATIVE BANKS AND OTHER PURPOSES
Be it enacted by the Senate and House o f Representatives o f the Philippines in 
Congress Assembled:
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Section 1. Title. -  This Act shall be known as the "Cooperative Banking Act of
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2020" .
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Sec. 2. Declaration o f Policy. -  It is hereby declared the policy of the State to
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foster the creation and growth of cooperatives as a practical vehicle for promoting
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self-reliance, communal unity and harnessing people power towards the attainment
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of economic development and social justice. The State shall encourage the private
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sector to undertake the actual formation and organization of cooperatives and shall
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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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1. Recognize Cooperative Banks (CB) as a practical vehicle for the promotion
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of self-reliance and harnessing of people power towards the attainment of
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economic development and social justice;
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2. Encourage thrift and savings mobilization for the achievement of
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sustainable economic development primarily among cooperatives and their
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members; and


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3. Regulate and supervise the activities of CBs in order to achieve sound, 
stable, sustainable and efficient operations for the protection of 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.
Sec. 3. Definition o f Terms. -  The following definitions shall apply within this
Act:
1. Banko Sentra! ng Pilipinas -  refers to the central monetary authority of the 
Philippines created and existing under the authority of Republic Act (R.A.) 
No. 7653, as amended, otherwise known as the New Central Bank Act, 
which provides policy direction in the areas of money, banking and credit, 
and exercises supervision over the operations of banks, and other financial 
institutions which fall under its jurisdiction.
2. Cooperative Bank -  refers to a bank organized under this Act and under 
the provisions of R.A. No. 9520, otherwise known as the Philippine 
Cooperative Code of 2008, and prior laws, the majority shares of which 
are owned and controlled by the cooperative organizations, for the 
primary purpose of providing a wide range of financial services to 
cooperatives and their members and the public.
3. Cooperative Code -  refers to the Philippine Cooperative Code of 2008, or 
also known as R.A. No. 9520.
4. Cooperative Development Authority -  refers to the agency of the 
Government created under R.A. No. 6939, as amended by R.A. 11364, 
which 
is 
mandated 
to 
register, 
develop, 
regulate 
and 
supervise 
cooperatives.
5. Cooperative Organization -  refers to any cooperative whether primary, 
secondary or tertiary, or special types of cooperatives registered under the 
provisions of R.A. No. 9520 and R.A. No. 10744, otherwise known as 
Credit Surety Fund Cooperative Act of 2015.
6. Individual -  refers to a Filipino citizen who is a member of any cooperative 
registered under R.A. No. 9520


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7. Monetary Board -  refers to the Monetary Board of the BSP
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8. Samahang Nayon and Municipal Katipunan ng mga Samahang Nayon -
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refers to pre-cooperative organizations established under Presidential
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Decree No. 175.
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Sec. 4. Organization and Membership. -  The organization and membership of
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a CB shall be governed by the following provisions of this Act:
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1. Organization -  At least five (5) cooperative organizations duly established
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and registered under the Cooperative Code may register a CB with the
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CDA, upon compliance with the requirement and required authorization
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from the Banko Sentrai ng Pilipinas (BSP)
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2. Membership -  Membership in a CB shall be open to: (a) cooperatives of all
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types and categories (local or foreign), (b) individuals who are members of
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a cooperative, and (c) associations and organizations. Membership is
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either regular or associate. Regular membership shall be limited to
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cooperative organizations and any individual who are members of a
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cooperative. Associate members shall be individuals or associations or
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organizations which are subscribing and holding preferred shares only.
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The common shareholdings of cooperative members shall at all times be
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at least sixty percent (60%) of the total outstanding voting shares of the
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CB, while common shares held by individuals shall not be more than forty
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(40%) of the total outstanding voting shares: Provided, further, that the
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individual common shareholders shall not be related to each other within
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the fourth degree of consanguinity or affinity. Provided, finally, that a
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foreign cooperative may own, acquire or purchase common shares not
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exceeding forty percent (40%) of the total outstanding common shares.
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Sec. 5. Establishment o f Cooperative Banks. -  The articles of cooperation and
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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 Monetary Board.
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Sec. 6. Establishment o f Branches and Other Offices. -  The establishment of
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branches/branch-lite units/other banking offices by CBs shall be governed by the
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rules and regulations of the BSP.


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Sec. 7. Management o f 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 management and accord
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appropriate protection to depositors and the public in general, the BSP shall
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prescribe the fir and proper qualifications of bank directors and officers for the
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purposes of this Section, giving due recognition to the unique nature and character
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of the CBs.
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The number, composition and term of the board of directors shall be defined
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in the articles of cooperation and by-laws of the CB.
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7.1 Board and Committees. -  The CB shall constitute, at a minimum, the
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Board of 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
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than fifteen (15) members, at least one (1) of whom is an independent director. It
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refers to the body entrusted with the management of the affairs of the CB. It shall
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be responsible for the strategic planning, direction-setting and policy formulation
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activities of the CB. The members of the Board of Directors shall be elected by the
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general assembly.
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The Election Committee shall refer to the committee which shall be
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responsible in the formulation and implementation of election rules and guidelines. I
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shall supervise the conduct of election, election-related activities, canvass and certify
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the results of the election, and decide cases relative to such election, except those
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involving the committee itself or its members. The Election Committee shall be
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composed of the Internal Auditor/Chief Compliance Officer, Independent Director
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and Board Secretary.
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The Audit Committee shall be composed of at least three (3) members of the
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Board of Directors, who shall ball be non-executive directors, including the
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chairperson who shall be an independent director. The Committee shall be
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responsible for the oversight of financial reporting framework, internal control
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system, selection/appointment of independent auditor and perform such other
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functions as may be required by the by-laws and existing regulations of the BSP. It
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shall assist the board of directors in fulfilling its overseeing responsibilities in relation
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to the adequacy and effectiveness of the internal audit function, implementation of


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corrective actions, investigation of issues/concerns within the committee's terms of
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reference and establishment of whistleblowing mechanism.
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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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7.2. Key Management Officers. -  The key management officers shall be
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appointed by the Board and shall include but not be limited to the President,
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Treasurer, Internal Auditor, Chief Compliance Officer or their equivalent ranks. The
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BSP shall prescribe the qualifications and disqualifications of the key management
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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
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of at least a majority of the remaining directors, if still constituting a quorum;
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otherwise, said vacancy must be filed by the general assembly in a regular or special
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meeting called for that purpose. A director so elected to fill a vacancy shall serve
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only the unexpired term his predecessor in office.
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In case of vacancy, in the committees, the board, unless otherwise provided
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in the by-laws, will appoint a person to fill the same, subject to the provision that
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the person appointed shall serve only for the unexpired portion of the vacated term.
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Sec. 9. Compensation. -  In the absence of any provisions 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
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loss 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
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of the members with voting rights at a regular or special general assembly meeting
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specifically called for the purpose: Provided, that no additional compensation other
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than per diems 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
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(10%) of the net income of the CB during the preceding year.
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Sec. 10. Liability o f Directors, Officers and Committee Members. -  Directors,
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officers, and committee members, who wilfully and knowingly vote for or assent to
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patently unlawful acts or who are guilty of gross negligence or bad faith in directing


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the affairs of the CB or acquire any personal or pecuniary interest in conflict with
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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 o f Directors and Officers. -  A director or officer who, by
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virtue of his office, acquires for himself an opportunity which should belong to the
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CB shall be liable for damages and must account for double the profits otherwise
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would have accrued to the CB by refunding the same, unless his act has been
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ratified by two-thirds (2/3) vote of all the members with voting rights. This provision
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shall be applicable, notwithstanding the fact that the director or officer uses his own
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funds in the venture.
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Sec. 12. Dealings o f Directors and Officers. -  Dealings with directors and
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officers of the CB shall comply with the provisions of Section 36 of R.A. No. 8791,
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otherwise known as General Banking Law of 2000.
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Sec. 13. Illegal Use o f Confidential Information. -  A director or officer, or an
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associate of a director or officer, who, for his benefit or advantage or that of an
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associate, makes use of confidential information that, if generally known, might
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reasonably be expected to adversely affect the operations and viability of the CB,
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shall be held:
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1. Liable to compensate the CB for the direct losses suffered by the CB as a
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result of the illegal use of information; and
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2. Accountable to the CB for any direct benefit or advantage received or yet
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to be received by him or his associate, as a result of the transaction.
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Sec. 14. Bond fo r Faithful Performance o f Duties and Obligations. -  Every
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officer or employee handling funds, securities, or property on behalf of a CB shall,
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before performing such duties, execute and deliver adequate and appropriate bond
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for the faithful performance of his/her 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 regular or special, the quorum requirements shall be one-half plus one of all
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members of the board of directors. Each director shall only have one vote.


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Sec. 16. Composition o f the Genera! Assembly. -  The general assembly shall
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be composed of regular members who are entitled to vote under the articles of
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cooperation and by-laws of the CB.
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Sec. 17. Powers o f the General Assembly. -  The general assembly shall be
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the highest policy-making body of the CB and shall exercise such powers as are
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stated in this Code, in the articles of cooperation and in the by-laws of the CB. The
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general assembly shall have the following exclusive powers which cannot be
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delegated:
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1. To determine and approve amendments to the articles of cooperation and
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by-laws;
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2. To elect or appoint the members of the board of directors, and to remove
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them for cause; and
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3. To approve developmental plans of the CB.
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Sec. 18. Meetings. -
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1. A regular meeting shall be held annually by the general assembly on a date
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fixed in the by-laws, or if not so fixed, on any date within one hundred eighty
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(180) days after the close of each fiscal year: Provided, that notice of regular
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meetings shall be in writing which shall be sent through personal delivery,
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registered mail or other electronic means to all members of record, and
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posted in conspicuous places with the CB premises.
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2. Whenever necessary, a special meeting of the general assembly may be
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called at any time by a majority vote of the board of directors or as provided
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for in the by-laws: Provided, that a notice in writing shall be sent one (1)
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week prior to the meeting to all members who are entitled to vote. However,
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a special meeting shall be called by the board of directors after compliance
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with the required notice or by at least ten percent (10%) of the total
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members who are entitled to vote to transact specific business covered by the
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call.
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3. In the case of a newly approved CB, a special general assembly shall be
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called, as far as practicable, within ninety (90) days from such approval.


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Sec. 19. Quorum and Voting System. -  The quorum requirement for general
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assembly meetings, whether regular or special, shall be one-half plus one of the
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number of voting shares of all members in good standing.
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To amend its articles of cooperation and by-laws, at least three-fourths (3/4)
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vote of all the members with voting rights, present and constituting a quorum shall
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be required. All other voting requirements shall be prescribed by the BSP.
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The voting rights of the members shall be proportionate to the number of their
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paid-up shares.
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Sec. 20. Powers and Functions o f Cooperative Banks. -  CBs shall primarily
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provide wide range of financial services to cooperative organizations, their members,
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and to the public. A CB may perform any or all of the following banking services:
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1. Extend loans and advances primarily for the purpose of meeting the noramal
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credit needs of farmers, fishermen or farm families as well as cooperatives,
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merchants, private and public employees;
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2. Accept savings and time deposits from the public as well as from government
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agencies and instrumentalities, local government units and government-
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owned and controlled corporations subject to existing rules and regulations;
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3. Act as a correspondent of other financial institutions;
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4. Discount and rediscount paper with the Land Bank 
of the Philippines,
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Development Bank of the Philippines or any other bank, including its branches
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and agencies. Said banks shall specify the nature of paper deemed acceptable
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for rediscounting, as well as the rediscount rate to be charged by any of these
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banks;
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5. Act as collection agent;
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6. Acquire readily marketable bonds and other debt securities;
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7. Buy and sell foreign exchange; and
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8. Offer other banking services as provided in Section 53 of R.A. No. 8791.
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In addition to the powers granted to the CBs by this Act and other existing laws,
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any CB may perform any or all of the banking services offered by other types of
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banks subject to prior approval of the BSP.
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Sec. 21. Investment in Allied Undertakings. -  Subject to the requirements and
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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, but
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not be limited to the following:
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1. Banks, financial institutions and non-bank financial intermediaries;
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2. Warehousing and other post-harvest facilities;
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3. Fertilizer and 
agricultural 
chemical 
and 
pesticides manufacturing 
and
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distribution;
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4. Farm equipment distribution
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5. Trucking and transportation of agricultural products;
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6. Marketing of agricultural products
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7. Leasing;
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8. Automated teller machine (ATM) networks;
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9. Public transportation;
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10. Insurance;
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11. Financial technology; and
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12. Other undertakings as may be determined by the Monetary Board.
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Sec. 22. Limitations and Lending Authority. -  Except as the Monetary board
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may otherwise prescribe, the direct indebtedness to CBs of any person, company,
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corporation, or firm, including the indebtedness of members of a partnership and
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association, for money borrowed, excluding: loans secured by obligations of the
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BSP; loans fully guaranteed by the Government as to the payment of principal and
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interest; loans to the extend covered by the hold-out on, or assignment of, deposits
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maintained in the lending CB and held in the Philippines; and other loans or credits
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as the Monetary Board may, from time to time, specify non-risk assets, shall in no
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time exceed twenty five percent (25%) of unimpaired capital and surplus of the CB.
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Sec. 23. Capital Requirement for Cooperative Banks. -  A CB shall have a
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minimum paid-up capital in such amount as may be required by the BSP. The BSP
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may prescribe rules and regulations on the types of shares a CB may issue, including
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the terms thereof and rights appurtenant thereto to determine compliance with laws
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and regulations governing capital and equity structure of banks. Provided, that CBs
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shall issue par value shares only.
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Sec. 24. Samahang Nayon and Municipal Katipunan ng mga Samahang
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Nayon. -  Samahang Nayon (SN) and Municipal Katipunan ng mga Samahang Nayon


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(MKSN) which held common shares of CBs prior to the effectivity of R.A. No. 9520
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shall apply for conversion to cooperatives in order to maintaining their status as
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regular members of CBs: Provided, that the CBs shall exert effort to perform and
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assist the SN and MKSN to convert within a period of five (5) years from the
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effectivity of this Act. Upon failure of the SN and MKSN to finally convert to a
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cooperative or association within said period, the funds held in the name of such SN
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and MKSN shall be subject to escheat.
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Sec. 25. Funds Held in the Name o f Cooperatives Whose Certificates o f
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Registration Have Already Been Cancelled. -  Cooperatives whose certificates of
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registration have already been cancelled by the CDA and which failed to liquidate
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their funds or shares in accordance with R.A. No. 9520 shall file a petition with the
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CDA for the reactivation of their registration: Provided, that the CBs shall exert effort
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to inform and assist such cooperatives to activate their registration with the CDA
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within a period of five years (5) from the effectivity of this Act. Provided, further,
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that the shares of such cooperatives which fail to reactivate their registration with
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the CDA within the said period shall remain in the CBs as retained earnings.
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Sec. 26. Supervision o f Cooperative Banks. -  All CBs shall be under the
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supervision of the BSP; Provided, however, that the CDA shall monitor the CBs
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compliance to cooperative laws, rules and regulations. With respect to the provisions
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and governance of the CBs, the provisions of the banking laws, rules and regulations
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shall prevail, notwithstanding Section 71 of R.A. No. 8791.
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Sec. 27. Privileges o f Cooperative Banks. -  CBs registered under this Act and
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under the Cooperative Code shall be given the same privileges and incentives
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granted to rural banks, thrift banks, commercial banks, and other banks to
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rediscount notes with the BSP, the Land Bank of the Philippines and other
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government banks without affecting in any way the provisions of this Act.
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The same privileges and incentives generally granted to cooperatives under
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the Cooperative Code shall be granted to CB organized under this Act and other prior
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laws including exemption from all national, city, provincial, municipal or barangay
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taxes, fees and charges of whatever nature and description. Provided, however, that
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when CB has reached an undivided net savings of more than ONE HUNDRED
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MILLION PESOS (Php 100,000,000.00), transaction to non-member will become
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taxable.
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Sec. 28. Separability Clause. -  If any provision or section of this Act or the
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application thereof to any person or circumstances is held invalid, the other
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provisions or sections of this Act shall remain valid, and the application of such
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remaining provisions or sections to the other persons or circumstances, shall not be
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affected thereby.
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Sec. 29. Repeating Cause. -  All laws, issuances, rules and regulations
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inconsistent with this Act are hereby repealed accordingly.
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Sec. 30. Effectivity. -  This Act shall take effect fifteen (15) days from the date
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of its publication in the Official Gazette or in at least two (2) newspapers of general
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circulation.
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Approved,
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