FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
S. No. 2135 
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) 
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Introduced by Senator Manuel "Lito" M. Lapid 
EXPLANATORY NOTE 
,J 
One of the hallmarks of the present Local Government Code for the country is its 
emphasis on the wisdom of autonomy, That is, making LGUs independent and allowing 
them to become effective partners in nation building, One of the provisions in the said 
statute that fully guarantees local autonomy and the dynamism of the LGUs as a 
political units is its provision on Section 521. The said mandate provides that Congress 
shall undertake a mandatory review of the code at least once every five (5) years and 
as often as it may deem necessary, with the primary objective of providing a more 
responsive and accountable local government structure, 
With that backdrop, the proposed bill is submitted seeking to further 
institutionalize local autonomy by strengthening the fiscal autonomy of local government 
units (LGUs), 
One of the means to accomplish this is by giving LGUs greater leeway in the 
choice of its depository bank, National government agencies have interpreted differently 
the preference over government-owned banks as depository bank, The Department of 
Budget and Management (DBM) has interpreted the provision to mean that a local 
government unit shall choose only one depository bank, whether the Land Bank of the 
Philippines or the Philippines, within its area of jurisdiction, 
On the other hand, the Commission on Audit (COA) ruled that a rural bank may 
accept deposits of local government notwithstanding the presence of government-
owned banks within the locality provided said bank is authorized by the Monetary Board 
of the Bangko Sentra/ ng Pilipinas (BSP) and prior authority is given by the Sanggunian 
and local chief executive concerne6 
The review of this code is something which almost all local government units 
awaits and anticipated with great enthusiasm as it will pave the way for a more effective 
public fiscal autonomy, 
In view of the foregoing, approval of this bill earnestly requested, -----
...JZ::! M. LAP~ 
Senator 


FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
S. No. 2135 
) 
) 
) 
',' 
,-, / .' , 
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Introduced by Senator Manuel "Lito" M. Lapid 
AN ACT 
PROVIDING FOR GREATER FISCAL AUTONOMY IN FAVOR OF LOCAL 
GOVERNMENT UNITS (LGUs) IN THE CHOICE OF DEPOSITORY BANKS, 
AMENDING SECTION 311 OF REPUBLIC ACT NO. 7160, OTHERWISE 
KNOWN AS THE LOCAL GOVERNMENT ACT OF 1991 
Be it enacted by the Senate and the House of Representatives of the Philippines 
in Congress Assembled: 
SECTION 1. Section 311 of Republic Act No. 7160 is hereby amended to read 
as follows; 
SEC. 311. 
Depository Accounts. 
Local treasurers shall 
maintain depository accounts in the name of their respective local 
government units with banks DULY AUTHORIZED BY THE BANGKO 
SENTRAL NG PILIPINAS (BSP) [, preferably government-owned,] 
located in or nearest their respective areas of jurisdiction. Earnings of 
each depository account shall accrue exclusively thereto. 
SEC. 2. 
Separability Clause. - If any provision of this Act or the application 
of such provision to any person or circumstance is held invalid for any reason, the other 
provisions or their application to other persons or circumstances not affected thereby 
shall remain in full force and effect. 
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SEC. 3. 
Repealing Clause - All laws, decrees, orders, rules, regulations 
and issuances or parts thereof inconsistent with this Act are hereby repealed or 
amended accordingly. 
SEC. 4. 
Effectivity Clause. - This Act shall take effect fifteen (15) days 
after its publication in at least two (2) newspapers of general circulation. 
Approved, 
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