THIRTEENTH CONGRESS OF THE REPUBLIC) 
OF THE PHILIPPINES 
First Regular Session 
Introduced by Senator Magsaysay, Jr. 
EXPLANATORY NOTE 
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 Section 521. The said mandate provides that Congress shall undertake a 
mandatory review of the code at least once every five 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 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 ruled that a m a l  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 
SentraI ng Pilipinas and prior authority is given by the sanggunian and local chief 
executive concerned. 
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. 
In view of the foregoing, approval of this bill earnestly requested. 


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13TH CONGRESS OF THE REPUBLIC) 
Jwa 30 mu32 
OF THE PHILIPPINES 
1 
First Regular Session 
1 
S E N A T E  
S. B. No. 
Introduced by Senator Magsaysay, Jr. 
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 3 11 is hereby amended by adding a new paragraph 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 [, preferably government-owned,] located in or nearest their 
respective areas of jurisdiction. Earnings of each depository account shall accrue 
exclusively thereto. 
SEC. 2. All laws, executive orders, presidential decrees, rules and regulations or 
parts thereof of which are inconsistent with any of the provisions of this Act are hereby 
repealed. 
SEC. 3. This Act shall take effect on the seventh day after its publication in at 
least two (2) daily newspapers of general circulation. 
Approved,