NINETEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
Third Regular Session 
)
^ 
. 
of !up
24 JUL23 All :18
SENATE
filiCEIVLO 5V
INTRODUCED BY SENATOR RISA HONTIVEROS
AN ACT
PROVIDING FOR THE REGISTRATION, REGULATION, AND OPERATION OF 
COOPERATIVE BANKS
EXPLANATORY NOTE
The State mandates national government agencies and local government 
authorities to promote the growth and expansion of cooperatives. The Cooperative 
Banking sector's role is vital in fostering self-reliance and sustainable economic 
development. Cooperative Banks are organized for the primary purpose of providing 
a wide range of financial services to cooperatives, their members, and the public. They 
also extend loans for the normal credit needs of farmers, fisherfolk, or farm families 
as well as cooperatives, merchants, and private and public employees.
This bill seeks to mandate the establishment, management and regulation of 
Cooperative Banks in order to make credit facilities more available and accessible to 
the public. They may accept savings and time deposits, act as a collection agent, act 
as an official depository of local government units, offer financial technology services, 
and participate in government program allocations for agricultural lending, social 
housing, loans to rural micro enterprises and other initiatives towards inclusive growth.
The Cooperative Development Authority will monitor the compliance of these 
financial institutions with cooperative laws and regulations, upon the required 
authorization from the Bangko Sentral ng Pilipinas. The bill also grants incentives and 
privileges such as exemption from all national, city, provincial, municipal or barangay 
taxes, fees and charges provided under the Cooperative Code, to encourage Filipinos
1


to organize and form Cooperative Banks.
The passage of this measure is thus earnestly sought.
RISA HONTIVEROS ^
Senator


NINETEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
Third Regular Session 
)
SENATE
S.B. No. 2741
;s>riiu;:e
''•'tj'rf? '©fficr of il;c . ci.ir;*
24 JUL23 Anna
RECEI/tDBV;
INTRODUCED BY SENATOR RISA HONTIVEROS
AN ACT
PROVIDING FOR THE REGISTRATION, REGULATION, AND OPERATION OF 
COOPERATIVE BANKS
Be It enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled:
1 
CHAPTER I
2 
DECLARATION OF POLICY AND DEFINITIONS
3
4 
Sec. 1. Tide. -This Act shall be known as the "Cooperative Banking Act".
5 
Sec. 2. Declaration of Policy. - It is the declared policy of the State to foster
6 
the creation and growth of cooperatives to promote self-reliance, communal unity and
7 
the attainment of economic development and social justice. The State shall encourage
8 
the private sector to undertake the actual formation and organization of cooperatives
9 
and shall create an atmosphere that is conducive to the growth and development of
10 
these cooperatives.
11 
Further, it is hereby declared the policy of the State to:
12 
a. Recognize Cooperative Banks (CBs) as practical vehicles for the promotion of
13 
self-reliance and economic development and the attainment of social justice.
14 
b. Encourage thrift and savings mobilization for the achievement of sustainable
15 
economic development primarily among cooperatives and their members; and
16 
c. Regulate and supervise the activities of CBs in order to achieve sound, stable,
17 
sustainable and efficient operations for the protection of the public interest.


1 
Towards these ends, the Government shall encourage and assist in the establishment
2 
of CBs in order to make credit facilities available and readily accessible on reasonable
3 
terms.
4 
Sec. 3. Definition of Terms. - As used in this Act:
5 
a. Cooperative Bank - refers to a bank organized under this Act and under the
6 
provisions of R.A. No. 9520, otherwise known as Philippine Cooperative Code
7 
of 2008, and prior laws, for the primary purpose of providing a wide range of
8 
financial services to cooperatives and their members and the public, and which
9 
was issued by the Bangko Sentral ng Pilipinas (BSP) a license to operate as
10 
such, the majority shares of which are owned and controlled by the cooperative
11 
organizations;
12 
b. Cooperative Organization - refers to any cooperative whether primary,
13 
secondary, tertiary, or a special type of cooperatives registered under the
14 
provisions of R.A. No. 9520 and R.A. No. 10744, otherwise known as Credit
15 
Surety Fund Cooperative Act of 2015;
16 
c. Samahang Nayon and Municipal Katipunan ng mga Samahang Nayon - refers
17 
to pre-cooperative organizations established under Presidential Decree No. 175
18 
on Strengthening the Cooperative Movement.
19
20 
CHAPTER II
21 
ORGANIZATION
22
23 
Sec. 4. Organization and Membership. - The organization and membership of
24 
a Cooperative Bank (CB) shall be governed by the following:
25 
a. Organization - At least fifteen (15) cooperative organizations duly established
26 
and registered under the Cooperative Code may register a CB with the
27 
Cooperative Development Authority (CDA), upon compliance with the
28 
requirements of and required authorization from the BSP;
29 
b. Membership - Membership in a CB shall be open to:
30 
1. Cooperatives of all types and categories
31 
2. Individuals who are members of a cooperative
32 
3. Foreign cooperatives


1 
4. Pre-cooperative organizations established under P.D. 175 and
2 
5. Individuals
3 
Membership in a CB is either regular or associate. Regular membership shall be limited
4 
to cooperative organizations and individuals who are members of a domestic
5 
cooperative or foreign cooperative. Associate members shall be pre-cooperative
6 
organizations established under P.D. 175 and individuals who are subscribing and
7 
holding preferred shares only.
8 
The common shareholdings of local cooperative organizations shall at all times be at
9 
least sixty percent (60%) of the total outstanding voting shares of the CB. Common
10 
shares held by individuals who are members of a cooperative and foreign cooperatives
11 
shall not be more than forty percent (40%) of the total outstanding voting shares;
12 
Provided, That the common shareholdings of each individual who is a member of a
13 
cooperative shall not be more than 5% of the total outstanding voting shares.
14 
Sec. 5. Establishment of Cooperative Banks. - The articles of cooperation and
15 
by-laws of a CB or any amendment thereto shall be registered with the CDA only when
16 
accompanied by a Certificate of Authority issued by the BSP.
17 
Sec. 6. Establishment of Branches and Other Offices. - The establishment of
18 
branches, branch-like units, or other banking offices shall be governed by the rules
19 
and regulations of the BSP.
20
21 
CHAPTER III
22 
MANAGEMENT AND GOVERNANCE OF COOPERATIVE BANKS
23
24 
Sec. 7. Management of Cooperative Banks. - The management of the CBs shall
25 
be governed by the rules and regulations to be promulgated by the BSP, in
26 
consultation with the CDA. To maintain the quality of bank management and accord
27 
appropriate protection to depositors and the public in general, the BSP shall prescribe
28 
the fit and proper qualifications of bank directors and officers for the purposes of this
29 
Section, giving due recognition to the unique nature and character of CBs.
30 
The number, composition, and term of the board of directors shall be defined in the
31 
Articles of Corporation and by-laws of the CB in accordance with the following
32 
guidelines:


1 
a. Board and Committees. - The CB shall constitute, at a minimum, the Board of
2 
Directors, Election Committee, and Audit Committee.
3 
The Board of Directors shall be composed of at least five (5) but not more than
4 
fifteen (15) members, at least one (1) of whom is an independent director. It
5 
shall be entrusted with the management of the affairs of the CB. It shall be
6 
responsible for the policy formulation, strategic planning, direction-setting and
7 
activities of the CB. The Members of the Board of Directors shall be elected by
8 
the general assembly or representative assembly of the cooperative.
9 
The Election Committee shall be responsible for the formulation and
10 
interpellation of election rules and guidelines. It shall supervise the conduct of
11 
election and election-related activities, canvass and certify the results of the
12 
election, and decide cases relative to such election, except those involving the
13 
committee itself or its members. The members of the Election Committee shall
14 
be elected by the general assembly or representative assembly.
15 
The Audit Committee is a board-level committee which composition, functions
16 
and responsibilities shall be in accordance with the existing regulations of the
17 
BSP. Other board-level committees may be created as may be directed by the
18 
BSP.
19 
Other Committees may be created by the board of directors with powers,
20 
functions, and responsibilities which shall be defined in the by-laws.
21 
b. Key Management Officers - The key management officers shall be appointed
22 
by the Board and shall include the President, Treasurer, Internal Auditor, and
23 
Compliance Officer, or their equivalent ranks. The BSP shall prescribed the
24 
qualifications and disqualifications of the key management officers.
25 
Sec. 8. Vacancy in the Board and Committees. - Any vacancy in the board of
26 
directors other than by removal or expiration of term, may be filled by the vote of at
27 
least a majority of the remaining directors, if still constituting a quorum; otherwise,
28 
said vacancy must be filled by the general assembly in a regular or special meeting
29 
called for that purpose. A director so elected to fill a vacancy shall serve only the
30 
unexpired term of the predecessor in office.


1 
In case of vacancy in the committees, the board, unless otherwise provided in the by-
2 
laws, will appoint a person to fill the same, subject to the provision that the person
3 
appointed shall serve only for the unexpired portion of the term.
4 
Sec. 9. Compensation. - In the absence of any provision in the by-laws fixing
5 
their compensation, the directors shall not receive any compensation except for
6 
reasonable per diems: Provided, however. That the directors and officers shall not be
7 
entitled to any per diem when, in the preceding calendar year, the CB reported a net
8 
loss or had a dividend rate less than the official inflation rate for the same year. Any
9 
compensation other than per diems may be granted to directors by a majority vote of
10 
the members with voting rights at a regular or special general assembly meeting
11 
specifically called for the purpose: Provided, that no additional compensation other
12 
than per diems shall be paid during the first year of existence of the CB.
13 
In no case shall the total yearly compensation of directors exceed ten percent (10%)
14 
of the net income of the CB during the preceding year.
15 
Sec. 10. Liability of Directors, Officers and Committee Members. - Directors,
16 
officers, and committee members, who willfully and knowingly vote for or assent to
17 
patently unlawful acts or who are guilty of gross negligence or bad faith in directing
18 
the affairs of the CB or acquire any personal or pecuniary interest in conflict with their
19 
duties as such directors, officers or committee members shall be liable jointly and
20 
severally to the CB for the full amount of damages or personal gain resulting
21 
therefrom.
22 
Sec. 11. Disloyalty of Directors and Officers. - A director or officer who, by
23 
virtue of the office, acquires a financial opportunity which should belong to the CB
24 
shall be liable for damages and must account for double the profits that otherwise
25 
would have accrued to the CB by refunding the same, unless the act was ratified by a
26 
two-thirds (2/3) vote of all the members with voting rights.
27 
This provision shall be applicable notwithstanding the fact that the director or officer
28 
used personal funds for the venture.
29 
Sec. 12. Dealings of Directors, Officers, Stockholders and Related Interests
30 
(DOSRI). - Dealings with directors, officers, stockholders and related interests of the
31 
CB shall comply with Section 36 of R.A. No. 8791, otherwise known as General Banking
32 
Law of 2000.


1 
Sec. 13. Illegal Use of Confidential Information. - A director or officer, or an
2 
associate of a director or officer, who, for the benefit or advantage or that of an
3 
associate, makes use of confidential information that, if generally known, might
4 
reasonably be expected to adversely affect the operations and viability of the CB, shall
5 
be held:
6 
a) Liable to compensate the CB for the direct losses suffered by the CB as a
7 
result of the illegal use of information; and
8 
b) Accountable to the CB for any direct benefit or advantage received or yet to
9 
be received by the associate, as a result of the transaction.
10 
The CB shall take the necessary steps to enforce the liabilities and accountabilities
11 
described herein.
12 
Sec. 14. Bond for Faithful Performance of Duties and Obligations. - Every officer
13 
or employee handling funds, securities, or property on behalf of a CB shall, before
14 
performing such duties, execute and deliver adequate and appropriate bond for the
15 
faithful performance of one's duties and obligations.
16 
Sec. 15. Quorum and Voting Rights, - In meetings of the board of directors,
17 
whether special or regular, the quorum requirements shall be one-half plus one of all
18 
the members. Each director shall only have one (1) vote.
19
20 
CHAPTER IV
21 
GENERAL ASSEMBLY
22
23 
Sec. 16. Composition of the General Assembly. - The general assembly shall be
24 
composed of regular members who are entitled to vote under the Articles of
25 
Cooperation and By-laws of the CB.
26 
Sec. 17. Powers of the General Assembly. - The general assembly shall be the
27 
highest policy-making body of the CB and shall exercise such powers as are stated in
28 
the Cooperative Code, in the Articles of Cooperation, and in the By- laws of the CB.
29 
The general assembly shall have the following exclusive powers which cannot be
30 
delegated:
31 
a) To determine and approve amendments to the articles of cooperation and
32 
by laws;


1 
b) To elect or appoint the members of the board of directors, and to remove
2 
them for cause; and
3 
c) To approve developmental plans of the CB.
4 
Subject to such other provisions of the Cooperative Code and only for purposes of
5 
prompt and intelligent decision-making, the general assembly may, by a three-fourths
6 
(3/4) vote of all its members with voting rights present and constituting a quorum,
7 
delegate some of its powers to a smaller body of the CB. These powers shall be
8 
enumerated under the by-laws of the CB.
9 
Sec. 18. Meetings - A regular meeting shall be held annually by the general
10 
assembly on a date fixed in the by-laws, or if not so fixed, on any date within one
11 
hundred eighty (180) days after the close of each fiscal year: Provided, That notice of
12 
regular meetings may be sent through personal delivery, registered mail or other
13 
electronic means, or such other manner as the BSP may allow under its existing
14 
regulations, to all members of record, and posted in conspicuous places within the CB
15 
premises.
16 
Whenever necessary, a special meeting of the general assembly may be called at any
17 
time by a majority vote of the board of directors or as provided for in the by-laws:
18 
Provided, That a notice shall be sent one (1) week prior to the meeting to all members
19 
who are entitled to vote: Provided, however. That a special meeting shall be called by
20 
the board of directors after compliance with the required notice or by at least ten
21 
percent (10%) of the total members who are entitled to vote to transact specific
22 
business covered by the call.
23 
If the board fails to call a regular or a special meeting within the given period, the
24 
CDA shall, upon petition of ten percent (10%) of all the members of the CB who are
25 
entitled to vote, and for good cause shown, shall issue an order to the petitioners
26 
directing them to call a meeting of the general assembly by giving proper notice as
27 
required in the Cooperative Code or in the by-laws.
28 
In the case of a newly approved CB, a special general assembly shall be called, as far
29 
as practicable, within ninety (90) days from such approval;
30 
The CDA may call a special meeting of the CB for the purpose of reporting to the
31 
members the result of any examination or other investigation of the CB affairs; and
32 
Notice of any meeting may be waived, expressly or impliedly, by any member.


1 
Sec. 19. Quorum and Voting System. - The quorum requirement for general
2 
assembly meetings, whether special or regular, shall be one-half plus one of the
3 
number of voting shares of all the members in good standing.
4 
To amend its articles of cooperation and by-laws, at least three-fourths (3/4) vote of
5 
all the members with voting rights, present and constituting a quorum shall be
6 
required. All other voting requirements shall be prescribed by the BSP.
7 
The voting rights of the members shall be proportionate to the number of their paid-
8 
up shares.
9
10 
CHAPTER V
11 
POWERS, FUNCTIONS, AND ALLIED UNDERTAKINGS
12
13 
Sec. 20. Powers and Functions of Cooperative Banks. - CBs shall primarily
14 
provide a wide range of financial services to cooperative organizations, their members,
15 
and the public. A CB may perform any or all of the following banking services:
16 
a) Extend loans and advances primarily for the purpose of meeting the normal
17 
credit needs of farmers, fishermen, or farm families as well as cooperatives,
18 
merchants, and private and public employees: Provided, That loans and
19 
advances granted to cooperative organizations shall not be subject to
20 
individual ceilings on loans to DOSRI;
21 
b) Accept savings and time deposits;
22 
c) Act as correspondent of other financial institutions;
23 
d) Discount and rediscount paper with the Land Bank of the Philippines,
24 
Development Bank of the Philippines or any other bank, including its
25 
branches and agencies. Said banks shall specify the nature of paper
26 
deemed acceptable for rediscounting, as well as the rediscount rate to be
27 
charged by any of these banks;
28 
e) Act as collection agent;
29 
f) Act as official depository of Local Government Units and other government
30 
agencies or instrumentalities;
31 
g) Acquire readily marketable bonds and other debt securities;
32 
h) Buy and sell foreign exchange;


1 
i) To act as conduit bank for the disbursement of government funds intended
2 
for lending to agriculture, micro, small-medium enterprises (MSMEs) and
3 
projects for local economic development;
4 
j) To be eligible to participate in government program allocations for
5 
agricultural lending, social housing, loans to rural micro enterprises and
6 
other initiatives towards inclusive growth; and
7 
k) Offer other banking services as provided for in Section 53 of R.A. No. 8791.
8 
In addition to the powers granted to CBs by this Act and other existing laws, any CB
9 
may perform any or all of the banking services offered by other types of banks subject
10 
to the prior approval of the BSP.
11 
Sec. 21. Investment in Allied Undertakings. - Subject to the requirements and
12 
restrictions as may be imposed by the Monetary Board under its existing rules and
13 
regulations, CBs may invest in equities of allied undertakings which may include the
14 
following:
15 
a) Banks, financial institutions and non-bank financial intermediaries;
16 
b) Warehousing and other post-harvest facilities;
17 
c) Fertilizer and agricultural chemical and pesticides distribution;
18 
d) Farm equipment distribution;
19 
e) Trucking and transportation of agricultural products;
20 
f) Marketing of agricultural products;
21 
g) Leasing;
22 
h) Automated teller machine (ATM) networks;
23 
i) Public transportation;
24 
j) Financial technology; and
25 
k) Other undertakings as may be determined by the Monetary Board.
26 
Sec. 22. Limitations on Lending Authority. - Except as the Monetary Board may
27 
otherwise prescribe, the direct indebtedness to CBs of any person, company,
28 
corporation, or firm, including the indebtedness of members of a partnership and
29 
association, for money borrowed, shall in no time exceed twenty five percent (25%)
30 
of unimpaired capital and surplus of the CB. However, the direct indebtedness
31 
mentioned shall exclude loans secured by obligations of the BSP; loans fully
32 
guaranteed by the Government as to the payment of principal and interest; loans to


1 
the extent covered by the hold-out on, or assignment of, deposits maintained in the
2 
lending CB and held in the Philippines; and other loans or credits as the Monetary
3 
Board may, from time to time, specify non-risk assets.
4
5 
CHAPTER VI
6 
CAPITALIZATION AND CAPITAL STRUCTURE
7
8 
Sec. 23. Capital Requirement for Cooperative Banks. - A CB shall have a
9 
minimum paid-up capital in such amount as may be required by the BSP. The BSP
10 
may prescribe rules and regulations on the types of shares a CB may issue, including
11 
the terms thereof and rights appurtenant thereto to determine compliance with
12 
laws and regulations governing capital and equity structure of banks: Provided, That
13 
CBs shall issue par value shares only.
14 
Sec. 24. Barrio Savings Fund (BSF), Barrio Guarantee Fund (BGF), Cooperative
15 
Development Loan Fund (CDLFJ), Cooperative Marketing Program (CMP), and other
16 
funds administered by CDA. - In order to augment the capitalization of CBs, the
17 
aforementioned funds collected or deducted by various CBs throughout the country
18 
from the loan proceeds of farmer borrowers in compliance with P.D. 175, which are
19 
still floating and outstanding either as active or dormant accounts in the books of
20 
those banks, shall be converted as capital of the CB located in the province where the
21 
depository banks of the BSF and BGF are located.
22 
Sec. 25. Samahang Nayon and Municipal Katipunan ng mga Samahang Nayon.
23 
- The Samahang Nayon (SN)and Municipal Katipunan ng mga Samahang Nayon
24 
(MKSN) which held common shares of CBs prior to the effectivity of R.A. No. 9520
25 
shall apply for conversion to cooperatives in order to maintain their status as regular
26 
members of CBs: Provide4 That the CBs shall exert efforts to inform and assist the SN
27 
and MKSN to convert within a period of three (3) years from the effectivity of this Act.
28 
Upon failure of the SN and MKSN to finally convert to a cooperative within said period,
29 
the funds held in the name of such SN and MKSN shall be considered as preferred
30 
shares and shall remain as capital of the CB.
31 
Sec. 26. Additional Source of Capital of the CBs. - The funds or common shares
32 
in CBs held in the name of cooperatives whose certificates of registration have already
10


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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: Provide4 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:
a) 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 however, that when a CB has
11


1 
reached an undivided net savings of more than One hundred million pesos
2 
(PlOO,000,000.00), transactions to non-member will become taxable;
3 
Sec. 32. Effectivity. - This Act shall take effect fifteen (15) days after its
4 
publication in the Official Gazette or in a newspaper of general circulation.
Approved,
12