Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Quezon City 
NINETEENTH CONGRESS 
First Regular Session 
House Bill No. _____ 
___________________________________________________________________ 
Introduced by Representative PABLO JOHN F. GARCIA     
___________________________________________________________________ 
EXPLANATORY NOTE 
The importance of cooperative banks in furnishing capital, credit, and other 
financial services to our grassroots sectors cannot be overstated. They have been 
instrumental in the upliftment of the quality of Filipino life and are primary allies in the 
fight against impoverishment. Cooperativism empowers and emboldens–a nation 
cannot call itself strong if the humble among its people remain feeble. 
The Cooperative Development Authority (“CDA”) reports that as of 28 
September 2021, the Philippines had 18,848 operating cooperatives.1 As of 2019, 
twenty-five (25) cooperative banks have been operating in the Philippines–four (4) 
operating nationally, eleven (11) regionally, and ten (10) provincially. Based on the 
records of the Banko Sentral ng Pilipinas, the total assets of cooperative banks 
amounted to Php 21,134,817,720.00 while their total capital account stood at Php 
4,545,113,030.00 as of September 2019. Of the twenty (25) cooperative banks, all but 
five (5) are categorized as “large” by asset size. 
This bill aims to create a more robust legal regime specifically for cooperative 
banks. It aims to expand on the membership, powers, management, functions, and 
governance of such institutions. It likewise contains provisions concerning board 
membership, quorum requirements, the setting of meetings, and director conduct to 
hold those in positions of responsibility true to their fiduciary capacity. 
The bill seeks to address various issues by setting the compensation of Board 
Members; limiting lending authority depending on the cooperative bank’s net worth; 
making the control structure of such banks more flexible; providing for escheat 
proceedings for Samahang Nayon- and Municipal Katipunan ng mga Samahang 
1 https://cda.gov.ph/updates/fy-2020-cooperative-statistics/. 
July 4, 2022 
10:30 am
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Nayon-derived accounts; and providing tax privileges to cooperative banks as a 
general rule, among others. 
 
The measure opens cooperative banks to more allied undertakings and 
enriches the Philippine financial system by placing them under the joint regulation of 
the Banko Sentral ng Pilipinas and the Cooperative Development Agency. 
 
Republic Act No. 9520, which amended the Cooperative Code of the 
Philippines, was passed more than a decade ago. The changing economy and times 
compel us to strengthen cooperative banks–institutions no doubt depended on by 
millions of Filipinos. 
 
In view of the foregoing, the urgent passage of this bill is earnestly sought. 
 
 
 
 
Rep. PABLO JOHN F. GARCIA 
3rd District, Province of Cebu 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Quezon City 
NINETEENTH CONGRESS 
First Regular Session 
House Bill No. _____ 
___________________________________________________________________ 
Introduced by Representative PABLO JOHN F. GARCIA     
___________________________________________________________________ 
AN ACT PROVIDING FOR THE REGISTRATION, REGULATION AND 
OPERATION OF COOPERATIVE BANKS AND OTHER PURPOSES 
Be it enacted by the House of Representatives and the Senate of the Congress of the 
Philippines in session assembled: 
CHAPTER I 
DECLARATION OF POLICY AND DEFINITIONS 
Section 1. 
Title. - This Act shall be known as the “Cooperative Banking Act 
of 2022”. 
Section 2.  Declaration of Policy. - It is the declared policy of the State to 
foster the creation and growth of cooperatives as a practical vehicle for promoting self-
reliance, communal unity, and harnessing people power towards the attainment of 
economic development and social justice. The State shall encourage the private sector 
to undertake the actual formation and organization of cooperatives and shall create an 
atmosphere that is conducive to the growth and development of these cooperatives.  
Further, it is hereby declared the policy of the State to: 
(a)
Recognize Cooperative Banks (“CBs”) as practical vehicles for
the promotion of self-reliance and harnessing of people power towards the 
attainment of economic development and social justice; 
(b)
Encourage thrift and savings mobilization for the achievement of
sustainable economic development primarily among cooperatives and their 
members; and 
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(c)
Regulate and supervise the activities of CBs in order to achieve
sound, stable, sustainable, and efficient operations for the protection of the 
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. The Bangko Sentral ng Pilipinas (“BSP”), in consultation with the 
Cooperative Development Authority (“CDA”), shall be primarily responsible for the 
formulation of the Implementing Rules and Regulations of this Act. 
Section 3.  Definition of Terms. - The following definitions shall apply within 
this Act: 
(a)
Bangko Sentral ng Pilipinas (“BSP”) 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 directions 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; 
(b)
Cooperative Bank refers to a bank organized under this Act and
under the provisions of R.A. No. 9520, otherwise known as 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; 
(c)
Cooperative Code refers to the Philippine Cooperative Code of
2008, or also known as R.A. No. 9520; 
(d)
Cooperative Development Authority refers to the agency of the
Government created under R.A. No. 6939, as amended by R.A. No. 11364, 
which is mandated to register, develop, regulate and supervise cooperatives; 
(e)
Cooperative Organization refers to any cooperative whether
primary, secondary or tertiary, or special types of cooperatives registered under 
the provisions of the R.A. No. 9520 and R.A. No. 10744, otherwise known as 
Credit Surety Fund Cooperative Act of 2015; 
(f)
Monetary Board refers to the Monetary Board of the BSP; and


 
(g) 
Samahang Nayon and Municipal Katipunan ng mga Samahang 
Nayon refers to pre-cooperative organizations established under Presidential 
Decree No. 175. 
 
CHAPTER II 
ORGANIZATION 
 
Section 4. 
Organization and Membership. - The organization and 
membership of a CB shall be governed by the following provisions of this Act: 
 
 
(a) 
Organization – At least five (5) cooperative organizations duly 
established and registered under the Cooperative Code may register a CB with 
the CDA, upon compliance with the requirements of and required authorization 
from the BSP; and 
 
(b) 
Membership – Membership in a CB shall be open to: (a) 
cooperatives of all types and categories; (b) individuals who are members of a 
member-primary cooperative, and (c) associations and organizations. 
Membership is either regular or associate. Regular membership shall be limited 
to cooperative organizations which are holders of common shares and/or 
preferred shares. Associate members shall be individuals or associations or 
organizations which are subscribing and holding preferred shares only.  
 
Section 5.  Establishment of Cooperative Banks. - The articles of 
cooperation and by-laws of a CB, or any amendment thereto, shall be registered with 
the CDA only when accompanied by a certificate of authority issued by the Monetary 
Board. 
 
Section 6.  Establishment of Branches and Other Offices. - The 
establishment of branches/branch-lite units/other banking offices by CBs shall be 
governed by the rules and regulations of the BSP. 
 
CHAPTER III 
MANAGEMENT AND GOVERNANCE OF COOPERATIVE BANKS 
 
Section 7. 
Management of Cooperative Banks. - The management of the 
CBs shall be governed by the rules and regulations to be promulgated by the BSP, in 
consultation with the CDA. To maintain the quality of bank management and accord 
appropriate protection to depositors and the public in general, the BSP shall prescribe 
the fit and proper qualifications of bank directors and officers for the purposes of this 
Section, giving due recognition to the unique nature and character of CBs.  
 


 
 
The number, composition, and term of the board of directors shall be defined in 
the articles of cooperation and by-laws of the CB.  
(a) 
Board and Committees. - The CB shall constitute, at a minimum, 
the Board of Directors, Election Committee, and Audit Committee. 
 
The Board of Directors shall be composed of at least five (5) but not 
more than fifteen (15) members, at least one (1) of whom is an independent 
director. It refers to the body entrusted with the management of the affairs of 
the CB. It shall be responsible for the strategic planning, direction-setting and 
policy formulation activities of the CB. 
 
The Election Committee shall refer to the committee which shall be 
responsible in the formulation and implementation of election rules and 
guidelines. It shall supervise the conduct of election, election-related activities, 
canvass and certify the results of the election, and decide cases relative to such 
election, except those involving the committee itself or its members. The 
members of the election committee shall be elected by the general 
assembly/representative assembly. 
 
The Audit Committee shall be responsible for the oversight of the 
financial reporting framework, internal control system, selection/appointment of 
an independent auditor and perform such other functions as may be required 
by the by-laws and existing regulations of the BSP. It shall assist the board of 
directors in fulfilling its overseeing responsibilities in relation to the adequacy 
and effectiveness of the internal audit function, implementation of corrective 
actions, investigation of issues/concerns within the committee’s terms of 
reference, and establishment of a whistleblowing mechanism. 
 
Other committees may be created by the board of directors with powers, 
functions, and responsibilities which shall be defined in the by-laws. 
 
1. 
(b)  
Key Management Officers. - The key management officers 
shall be appointed by the Board and shall include but is not limited to the 
President, Treasurer, Internal Auditor, or their equivalent ranks. The BSP shall 
prescribe the qualifications and disqualifications of the key management 
officers. 
 
Section 8.  Vacancy in the Board and Committees. - Any vacancy in the 
board of directors, other than by removal or by expiration of term, may be filled by the 
vote of at least a majority of the remaining directors, if still constituting a quorum; 
otherwise, said vacancy must be filled by the general assembly in a regular or special 
meeting called for that purpose. A director so elected to fill a vacancy shall serve only 
the unexpired term of his predecessor in office. 


 
 
In case of vacancy in the committees, the board, unless otherwise provided in 
the by-laws, will appoint a person to fill the same, subject to the provision that the 
person appointed shall serve only for the unexpired portion of the vacated term. 
 
2. 
 
Section 9.  Compensation. - In the absence of any provisions in the 
by-laws fixing their compensation, the directors shall not receive any compensation 
except for reasonable per diems: Provided, however, That the directors and officers 
shall not be entitled to any per diem when, in the preceding calendar year, the CB 
reported a net loss or had a dividend rate less than the official inflation rate for the 
same year. Any compensation other than per diems may be granted to directors by a 
majority vote of the members with voting rights at a regular or special general 
assembly meeting specifically called for the purpose: Provided, That no additional 
compensation other than per diems shall be paid during the first year of existence of 
the CB.  
3. 
 
In no case shall the total yearly compensation of directors exceed ten percent 
(10%) of the net income of the CB during the preceding year. 
 
Section 10. Liability of Directors, Officers and Committee Members. - 
Directors, officers, and committee members, who willfully and knowingly vote for or 
assent to patently unlawful acts or who are guilty of gross negligence or bad faith in 
directing the affairs of the CB or acquire any personal or pecuniary interest in conflict 
with their duties as such directors, officers or committee members shall be liable jointly 
and severally to the CB for the full amount of damages or personal gain resulting 
therefrom. 
 
Section 11. Disloyalty of Directors and Officers. - A director or officer who, 
by virtue of his office, acquires for himself an opportunity which should belong to the 
CB shall be liable for damages and must account for double the profits that otherwise 
would have accrued to the CB by refunding the same, unless his act has been ratified 
by a two-thirds (2/3) vote of all the members with voting rights. This provision shall be 
applicable notwithstanding the fact that the director or officer used his own funds for 
the venture. 
4. 
 
5. 
Section 12. Dealings of Directors and Officers. - Dealings with 
directors and officers of the CB shall comply with the provisions of Section 36 of R.A. 
No. 8791, otherwise known as the General Banking Law of 2000.  
 
1. 
Section 13. Illegal Use of Confidential Information. - A 
director or officer, or an associate of a director or officer, who, for his benefit or 
advantage or that of an associate, makes use of confidential information that, if 


 
generally known, might reasonably be expected to adversely affect the operations and 
viability of the CB, shall be held: 
2. 
 
3. 
(a) 
Liable to compensate the CB for the direct losses suffered 
by the CB as a result of the illegal use of information; and 
4. 
 
5. 
(b) 
Accountable to the CB for any direct benefit or advantage 
received or yet to be received by him or his associate, as a result of the 
transaction. 
 
6. 
Section 14. Bond for Faithful Performance of Duties and 
Obligations. - Every officer or employee handling funds, securities, or property on 
behalf of a CB shall, before performing such duties, execute and deliver adequate and 
appropriate bond for the faithful performance of his/her duties and obligations.  
 
Section 15. Quorum and Voting Rights. - In meetings of the board of 
directors, whether special or regular, the quorum requirements shall be one-half plus 
one of all the members of the board of directors. Each director shall only have one 
vote. 
 
CHAPTER IV 
GENERAL ASSEMBLY 
 
Section 16. Composition of the General Assembly. - The general assembly 
shall be composed of regular members who are entitled to vote under the articles of 
cooperation and by-laws of the CB. 
 
Section 17. Powers of the General Assembly. - The general assembly shall 
be the highest policy-making body of the CB and shall exercise such powers as are 
stated in the Cooperative Code, in the articles of cooperation, and in the by-laws of 
the CB. The general assembly shall have the following exclusive powers which cannot 
be delegated: 
 
(a) 
To determine and approve amendments to the articles of 
cooperation and by-laws; 
 
(b) 
To elect or appoint the members of the board of directors, and to 
remove them for cause; and 
 
(c) 
To approve developmental plans of the CB. 
 
Subject to such other provisions of the Cooperative Code and only for purposes of 
prompt and intelligent decision-making, the general assembly may, by a three-fourths 
(3/4) vote of all its members with voting rights, present and constituting a quorum, 


 
delegate some of its powers to a smaller body of the CB. These powers shall be 
enumerated under the by-laws of the CB. 
 
Section 18. Meetings. -   
 
(a) 
A regular meeting shall be held annually by the general assembly 
on a date fixed in the by-laws, or if not so fixed, on any date within one hundred 
twenty (120) days after the close of each fiscal year: Provided, That notice of 
regular meetings shall be in writing which shall be sent through personal 
delivery, registered mail or other electronic means to all members of record, 
and posted in conspicuous places within the CB premises; 
 
(b) 
Whenever necessary, a special meeting of the general assembly 
may be called at any time by a majority vote of the board of directors or as 
provided for in the by-laws: Provided, That a notice in writing shall be sent one 
(1) week prior to the meeting to all members who are entitled to vote. However, 
a special meeting shall be called by the board of directors after compliance with 
the required notice or by at least ten per centum (10%) of the total members 
who are entitled to vote to transact specific business covered by the call. 
 
If the board fails to call a regular or a special meeting within the given period, 
the CDA, upon petition of ten per centum (10%) of all the members of the CB who are 
entitled to vote, and for good cause shown, shall issue an order to the petitioners 
directing them to call a meeting of the general assembly by giving proper notice as 
required in the Cooperative Code or in the by-laws; 
 
(a) 
In the case of a newly approved CB, a special general assembly 
shall be called, as far as practicable, within ninety (90) days from such approval; 
 
(b) 
The CDA may call a special meeting of the CB for the purpose of 
reporting to the members the result of any examination or other investigation of 
the CB affairs; and 
 
(c) 
Notice of any meeting may be waived, expressly or impliedly, by 
any member. 
 
Section 19. Quorum and Voting System. - The quorum requirement for 
general assembly meetings, whether special or regular, shall be one-half plus one of 
the number of voting shares of all the members in good standing. In the meetings of 
the board of directors, whether special or regular, the quorum requirement shall be 
one-half plus one of all the members of the board of directors. Each director shall only 
have one vote.  
 


 
To amend its articles of cooperation and by-laws, at least three-fourths (3/4) 
vote of all the members with voting rights, present and constituting a quorum shall be 
required. All other voting requirements shall be prescribed by the BSP.  
 
The voting rights of the members shall be proportionate to the number of their 
paid-up shares. 
 
 
CHAPTER V 
POWERS, FUNCTIONS, AND ALLIED UNDERTAKINGS 
 
 
Section 20. Powers and Functions of Cooperative Banks. - CBs shall 
primarily provide a wide range of financial services to cooperative organizations, their 
members, and to the public. A CB may perform any or all of the following banking 
services:  
 
 
(a) 
Extend loans and advances primarily for the purpose of meeting 
the normal credit needs of farmers, fishermen, or farm families as well as 
cooperatives, merchants, and private and public employees; 
 
 
(b) 
Accept savings and time deposits; 
 
 
(c) 
Act as correspondent of other financial institutions;  
 
 
(d) 
Discount and Rediscount paper with the Land Bank of the 
Philippines, Development Bank of the Philippines or any other bank, including 
its branches and agencies. Said banks shall specify the nature of paper 
deemed acceptable for rediscounting, as well as the rediscount rate to be 
charged by any of these banks; 
 
 
(e) 
Act as collection agent;  
 
 
(f) 
Acquire readily marketable bonds and other debt securities; 
 
 
(g) 
Buy and sell foreign exchange; and 
 
 
(i) 
Offer other banking services as provided in Section 53 of R.A. No. 
8791. 
 
In addition to the powers granted to CBs by this Act and other existing laws, 
any CB may perform any or all of the banking services offered by other types of banks 
subject to the prior approval of the BSP. 
 


 
 
Section 21. Investment in Allied Undertakings. - Subject to the 
requirements and restrictions as may be imposed by the Monetary Board under its 
existing rules and regulations, CBs may invest in equities of allied undertakings which 
may include, but are not limited to the following:  
 
(a) 
Banks, 
financial 
institution,s 
and 
non-bank 
financial 
intermediaries; 
 
(b) 
Warehousing and other post-harvest facilities; 
 
(c) 
Fertilizer and agricultural chemical and pesticides distribution; 
 
(d) 
Farm equipment distribution; 
 
(e) 
Trucking and transportation of agricultural products; 
 
(f) 
Marketing of agricultural products; 
 
(g) 
Leasing; 
 
(h) 
Automated teller machine (ATM) networks; 
 
(i) 
Public transportation; 
 
(j) 
Financial technology; and 
 
(k) 
Other undertakings as may be determined by the Monetary Board 
 
Section 22. Limitations on Lending Authority. - Except as the Monetary 
Board may otherwise prescribe, the direct indebtedness to CBs of any person, 
company, corporation, or firm, including the indebtedness of members of a partnership 
and association, for money borrowed, excluding: loans secured by obligations of the 
BSP; loans fully guaranteed by the Government as to the payment of principal and 
interest; loans to the extent covered by the hold-out on, or assignment of, deposits 
maintained in the lending CB and held in the Philippines; and other loans or credits as 
the Monetary Board may, from time to time, specify non-risk assets, shall in no time 
exceed twenty five percent (25%) of unimpaired capital and surplus of the CB.  
 
CHAPTER VI 
CAPITALIZATION AND CAPITAL STRUCTURE 
 
 
Section 23. Capital Requirement for Cooperative Banks. - A CB shall have 
a minimum paid-up capital in such amount as may be required by the BSP. The BSP 
may prescribe rules and regulations on the types of shares a CB may issue, including 


 
the terms thereof and rights appurtenant thereto to determine compliance with laws 
and regulations governing capital and equity structure of banks. Provided, That CBs 
shall issue par value shares only.  
 
 
No cooperative member shall own or control more than forty percent (40%) of 
the total capital contributions of a CB. This limitation shall also apply to cooperatives 
purchasing government-held preferred shares of CBs which are converted into 
common shares. 
 
 
The maximum allocation of preferred share shall not be more than forty percent 
(40%) of the total capitalization. 
 
Section 24. Barrio Savings Fund (“BSF”), Barrio Guarantee Fund 
(“BGF”), Cooperative Development Loan Fund (“CDLF”), Cooperative Marketing 
Program (“CMP”), and other funds administered by CDA. - In order to augment 
the capitalization of CBs, the aforementioned funds collected/deducted by various CBs 
throughout the country from the loan proceeds of farmer borrowers in compliance with 
P.D. 175, which are still floating and outstanding either as active or dormant accounts 
in the books of those banks, shall be converted as capital of the CB located in the 
province where the depository banks of the BSF and BGF are located. The BSP, in 
coordination with the CDA, shall come up with the implementing guidelines on how to 
credit the owners of those. Those whose owners could not be located or identified 
shall be subject to escheat. 
 
Section 25. Samahang Nayon and Municipal Katipunan ng mga 
Samahang Nayon. - Samahang Nayon (“SN”) and Municipal Katipunan ng mga 
Samahang Nayon (“MKSN”) which held common shares of CBs prior to the effectivity 
of R.A. No. 9520 shall apply for conversion to cooperatives in order to maintain their 
status as regular members of CBs: Provided, That the CBs shall exert efforts to inform 
and assist the SN and MKSN to convert within a period of five (5) years from the 
effectivity of this Act. Upon failure of the SN and MKSN to finally convert to a 
cooperative within said period, the funds held in the name of such SN and MKSN shall 
be subject to escheat.   
 
Section 26. Funds held in the name of cooperatives whose certificates of 
registration have already been cancelled. - The funds or common shares in CBs 
held in the name of cooperatives whose certificates of registration have already been 
cancelled by the CDA and which failed to liquidate such funds or shares during its 
liquidation shall remain in said CBs. In case of dissolution and liquidation of the CBs, 
such funds or shares shall be subject to escheat. 
 
 
 
 


 
CHAPTER VII 
SUPERVISION 
 
 
Section 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 
provisions and governance of the CBs, the provisions of the banking laws, rules, and 
regulations shall prevail, notwithstanding Section 71 of R.A. No. 8791. 
 
CHAPTER VIII 
PRIVILEGES AND INCENTIVES  
 
 
Section 28. Privileges of Cooperative Banks. - CBs registered under this 
Act and under the Cooperative Code shall be given the same privileges and incentives 
granted to rural banks, thrift banks, commercial banks, and all other banks to 
rediscount notes with the BSP, the Land Bank of the Philippines and other government 
banks without affecting in any way the provisions of this Act. 
 
The same privileges and incentives generally granted 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 shall be granted to CBs organized under this Act.. Provided, however, that 
when a CB has reached an undivided net savings of more than One Hundred Million 
Pesos (Php 100,000,000.00), transactions to non-member will become taxable. 
 
Section 29. Separability Clause. - If any provision or section of this Act or the 
application thereof to any person or circumstance is held invalid, the other provisions 
or sections of this Act shall remain valid, and the application of such remaining 
provisions or sections to the other persons or circumstances shall not be affected 
thereby. 
 
Section 30. Repealing Clause. - All laws, issuances, rules, and regulations 
inconsistent with this Act are hereby repealed accordingly. 
 
Section 31. Effectivity. - This Act shall take effect fifteen (15) days from the 
date of its publication in the Official Gazette or in at least two (2) newspapers of general 
circulation. 
 
Approved,