3 RECEIVED

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2 y(t JUL 203

Quezon City

SIXTEENTH CONGRESS

First Regular Session

HOUSE BILL NO. 284

Introduced by Honorable Cresente C. Paez and Honorable
Anthony M. Bravo

EXPLANATORY NOTE

With more than 2,500 primary cooperatives and Samahang Nayons (SN) whose
membership can reach not less than 5 million individuals, it has been an aspiration for the
cooperative banking sector to have its own rule book distinct and different from that of the
rural and commercial banks. The pivotal role of cooperative banks in furnishing credit and
other financial services to the so-called non-bankable sector of our society has been very
impressive. Cooperative banks are owned and financed by primary cooperatives and SN
using the small shareholding of farmers, fisherfolks, micro entrepreneurs, small traders
and as a return, these primary cooperatives borrow money from cooperative banks to
support its loan program for members. After the close of each year, the net surplus
generated by these cooperative banks are then plowed back to the owners. A
demonstration of a give and take relationship whereby the co-existence of both arm is
evident.

Aside from this, cooperative banks have been very active in helping our government
in its poverty alleviation efforts. Moreover, with the new Philippine Cooperative Code of
2008, bigger challenges have been posted for the cooperative sector to play a bigger and
more meaningful role in the delivery of credit and credit facilities to the countryside. This
proposed Act will then make cooperative banks more responsive to the challenges of the
new cooperative code.

Due to reasons cited above, the expeditious approval of this bill is earnestly sought.

HON. cnispr PAEZ HON. ANTHONY M. BRAVO


Republic of the Philippines

House of Representatives
Quezon City

SIXTEENTH CONGRESS
First Regular Session

284
HOUSE BILL NO.

Introduced by Honorable Cresente C. Paez and Honorable
Anthony M. Bravo

AN ACT PROVIDING FOR THE CREATION OF THE COOPERATIVE BANKING
ACT OF 2013

SECTION 1. Short Title — This Act shall be known and cited as the “Cooperative
Banking Act of 2013”.

SECTION 2. Declaration of Policy— The State hereby recognizes the need to promote a
holistic countryside development where the main beneficiaries are the development players
themselves. It is aimed to attain a more equitable distribution of opportunities, income and
wealth thereby expanding productivity and raising the quality of life for all, especially the
underprivileged

Towards these ends, the State hereby encourages and assists in the establishment of Cooperative
Banks that would make needed credit available and readily accessible to primary cooperatives
and non-bankable sectors of our society in the rural areas on affordable terms

SECTION 3. In furtherance of this Act, the Monetary Board of the Bangko Sentral ng
Pilipinas (BSP) and the Cooperative Development Authority (CDA) shall formulate the
necessary rules and regulations governing the establishment and operation of cooperative banks,
separate and distinct from rural and commercial banks. It shall be called Rule Book governing
cooperative banks.

SECTION 4. Organization of Cooperative Banks — The organization of cooperative banks
shall be based on Article 97 of RA 9520 otherwise known as the Philippine Cooperative Code of
2008.


SECTION 5S. Administration of Cooperative Banks — The administration of cooperative
banks shall be an utmost concern of the Board of Directors and Management pursuant to Article
98 of RA 9520. Provided, further, that the Board of Directors possess no disqualificatoins as
indicated in Article 39 of RA 9520.

SECTION 6. Capital Requirements of Cooperative Banks~ The capital requirements of
cooperative banks shall be subscribed and paid by the listed primary cooperative shareholders,
including Samahang Nayons, of the cooperative bank pursuant to Article 101 of RA 9520.
Cooperative banks shall also institute capital build-up schemes to increase its capital subject to

approved guidelines

Individual and foreign investments shall be accepted by cooperative banks subject to guidelines
by BSP and CDA.

SECTION 7. Supplemental Capital for Cooperative Banks- To provide supplemental capital
to any cooperative bank until it has accumulated enough capital of its own or stimulate private
investments in cooperative banks, the Land Bank of the Philippines, the Development Bank of
the Philippines or any government owned or controlled bank or financial institution shall
subscribe within thirty (30) days to the capital stock of any cooperative bank ftom time to time in
an amount equal to the total equity investment of the shareholders which shall be paid in full at
the time of the subscription or such amount as may be necessary to promote and expand rural
economic development. Share capital held by the Land Bank of the Philippines, the
Development Bank of the Philippines or by any government-owned or controlled bank or
financial institution, under the terms of this section, shall be made preferred only as to assets
upon liquidation and without the power to vote and shall share in dividend distributions from the
date of issuance in the amount to be set forth by BSP in consultation with the cooperative
shareholders and the Cooperative Development Authority (CDA).

Subject to guidelines, government-owned and commercial banks who cannot abide by the 25%
allocation of their loanable funds for agriculture and agrarian reform as mandated by the Agri-
‘Agra law (RA 10000), can deposit the said allocation/amount to cooperative banks and such be
treated as a compliance of the said law.

SECTION 8. Share capital certificates shall be issued to represent the contributions to capital
stock of the cooperative bank to all cooperative-investors, LBP or any government-owned or
controlled bank or financial institution and individuals who have paid and subscribed capital
shares of the cooperative bank subject to conditions set forth by the BSP and CDA.


SECTION 9. The power to supervise the operation of any cooperative bank shall be vested to
the Monetary Board of the BSP and CDA pursuant to Article 96 of RA 9520,

SECTION 10. In addition to the operations specifically authorized in this Act, any cooperative
bank may;

(a) Accept savings and time deposits;

(®) Open current or checking accounts, provided the cooperative bank has net assets of at
least Five Million pesos (P 5,000,000) subject to such guidelines as may be established
by BSP and CDA

(©) Act as correspondent for other financial institutions,

(d) Act as a collection agent;

(©) Operate an Automated Teller Machine;

(® Act as official depository of municipal, city or provincial funds in the municipality, city
or province where it is located, subject to such guidelines as may be established by the
Monetary Board of BSP and CDA.

(g) Rediscount paper with the Land Bank of the Philippines, the Development Bank of the

Philippines or any banking institution, including its branches and agencies. Said

institution shall specify the nature of paper deemed acceptable for rediscount, as well as

the rediscount rate to be charged by any of these institutions;

Offer other banking services as may be specified and allowed by the Monetary Board of

BSP and CDA;

(Extend loans to private and public employees in accordance with the provisions of

(h)

Section 5 or Republic Act No. 3779, as amended; and
(Extend loans to primary cooperative-investors. At least 50% of the entire loan portfolio

shall be allocated to primary cooperatives. Provided, that loans granted to primary

cooperatives who are investors of the Bank shall not be considered DOSRI loans.

SECTION 11. The Land Bank of the Philippines, the Development Bank of the Philippines or
any government-owned or controlled bank or financial institution shall within sixty (60) days of
certification of the Monetary Board, which shall be final, extend to a cooperative bank a loan or
loans from time to time repayable in ten (10) years, with concessional rates of interest, against
security which may be offered by any shareholder or shareholders of the cooperative bank

SECTION 12. In an emergency or when a financial crisis is imminent, the BSP shall provide
financial assistance to any cooperative bank against assets of the cooperative bank which may be
considered acceptable by a concurrent vote of at least four (4) members of the Monetary Board
of the BSP


SECTION 13. To encourage consolidation and mergers of cooperative banks within three (3)

years and that merged or consolidated banks shall be given the following incentives for a period

of seven (7) years.

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Its deposit liabilities shall be subjected to only one third (1/3) of reserves normally
required for cooperative banks

Its loans form government banks and financial institutions shall be restructured for a
period of not less than ten (10) years and shall be converted as share capital (preferred)
after the said period.

Its reserve requirement can all be maintained under interest-bearing government
securities but kept unencumbered with government financial institutions or the BSP; and
It shall have unrestricted branching right within the region, free from any assessment or
surcharges required in setting up a branch but under coordination with the BSP and
CDA which will have to assess that there are qualified personnel, control and

procedures to operate the branch

SECTION 14. Assistance to Cooperative Banks~ The BSP and the CDA shall be the lead

agencies in extending assistance to cooperative banks pursuant to Article 103 of RA 9520.

SECTION 15. Cooperative Banks, after acquiring a Certificate of Tax Exemption from the BIR,
shall be exempted from taxes as indicated in Articles 60 and 61 of the Philippine Coopeartive
Code of 2008.

SECTION 16. Without prejudice to any prosecution under any law which may have been

violated, a fine of not more than one hundred thousand pesos (P 100,00) or imprisonment for not

less than six (6) months but not more than ten (10) years, or both, at the discretion of the court,

shall be imposed upon:

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Any officer, employee, or agent of a cooperative bank who shall

(1) Make false entries in any bank report or statement thereby affecting the financial
interest of, or causing damage to, the bank or any person; or

(2) Without order of a court of competent jurisdiction, disclose any information relative
to the funds or properties in the custody of the bank belonging to private individuals,
corporation, or any other entity; or

(3) Accept gifts, fees or commission or any other form of remuneration in connection
with the approval of a loan from said bank; or

(4) Otherwise or aid in overvaluing any security for the purpose of influencing in any
way of the action of the bank on any loan; or

(5) Appear and sign as guarantor, endorser, or surety for loans granted; or

(©) Violate any of the provisions of this Act.


() Any applicant for a loan from, or borrower of a cooperative bank who shall
(1) Misuse, misapply, or divert the proceeds of the loan obtained by him from its
declared purpose; or
(2) Fraudulently overvalue property offered as security for a loan from said bank; or
(3) Give out or furnish false or willful misrepresentation of material facts for the purpose
of obtaining, renewing, or increasing a loan or extending the period thereof, or
(4) Attempt to defraud the said bank in the event of court action to recover a loan; or
(5) Offer any officer, employee or agent of a cooperative bank as a gift, fee, commission
or other form of compensation in order to influence such bank personnel into
approving a loan application; or
(6) Dispose or encumber the property or the crops offered as security for the loan.
(©) Any examiner, or officer or employee of the BSP and the CDA or of any department,
bureau, office, branch or agency of the Government who is assigned to examine,
supervise, assist or render technical service to cooperative banks and who shall connive

or aid in the commission of the same.

SECTION 17. Any municipal trial court judge or register of deeds who shall demand or accept,
directly or indirectly, any gift, fee, commission or other form of compensation in connection
with the service, or shall arbitrarily or without reasonable cause delay the acknowledgment or
administration of oath or the registration of documents required to be performed by said judge
shall be punished by a fine of not more than ten thousand pesos (P 10,000) or by imprisonment
for not more than one (1) year, or both, at the discretion of the court

SECTION 18. Any bank not organized under this Act and any person, association, or
corporation doing the business of banking, not authorized under this Act which shall use the
words “Cooperative Bank” as part of the name or title of such bank or of such person,
association, or corporation, shall be punished by a fine of not less than one thousand pesos (P
1,000) for each day during which said words are so used.

SECTION 19. The Monetary Board of the BSP, CDA in consultation with the cooperative
sector and in coordination with other government agencies shall promulgate rules and regulations
to carry out the provisions of this Act within six (6) months from its effectivity. An oversight
committee called the Joint Congressional Oversight Committee on Cooperative Banks of both
the House of Representatives and the Senate shall be organized to review the implementing
guidelines and monitor the implementation of the law. The budgetary requirement shall be
provided for in the General Appropriations Act, annually


SECTION 20. SEPARABILITY CLAUSE - If, for any reason, any section or provision of this
Act is declared unconstitutional or invalid, the other sanctions or provisions hereof shall continue

tobe in full force and effect.
SECTION 21. REPEALING CLAUSE - All laws, decrees, executive orders, proclamations,
rules and regulations or parts thereof inconsistent are hereby repealed.

SECTION 22. EFFECTIVITY - This act shall take effect upon its publication in the Official
Gazette or in two (2) newspapers of general circulation

Approved,