House OKs bill regulating cooperative banks

RG Cruz, ABS-CBN News

Posted at Jan 17 2022 11:43 PM

MANILA - The House of Representatives has approved on second reading House Bill 9541 which provides for the registration, regulation and operation of cooperative banks.

According to its congressional fact sheet, HB 9541 provides for the establishment, management, and regulation of cooperative banks under the supervision of the Bangko Sentral ng Pilipinas as primary regulator, conformably with the provisions of the General Banking Law of 2000.

The same fact sheet says it expands the membership of cooperative banks by opening up the sector to foreign cooperatives, provided that such foreign cooperatives may not own more than forty percent (40%) of the total outstanding voting shares of a cooperative bank.

It also authorizes cooperative banks to engage in a wide range of financial services such as extending credit, deposit taking, discounting and rediscounting, correspondent banking, dealing in debt securities, acting as collection agent, dealing in foreign exchange transactions, acting as government depository and conduit bank for government lending programs, and participating in government allocation programs geared towards the promotion of financial inclusion.

It also authorizes cooperative banks to invest in equities of allied undertakings such as banks, financial institutions and non-bank financial intermediaries; warehousing and other post-harvest facilities; distribution of farm implements and equipment; transportation of agricultural products, leasing, Automated Teller Machine network operations, public transportation, and financial technology.

The fact sheet also lists the following mandates:

  • Prescribes limitations on the lending authority of a cooperative bank by imposing on private borrowings a ceiling of twenty-five percent (25%) of its unimpaired capital and surplus.
  • Authorizes the conversion of funds collected and administered by the Cooperative Development Authority under P.D. 175 as capital, for purposes of augmenting the capitalization of qualified cooperative banks.
  • Provides for escheat proceedings for the funds of Samahang Nayon (SNs) and Municipal Katipunan ng mga Samahang Nayon (MKSNs) which hold shares in cooperative banks should they fail to convert into cooperatives within three (3) years from the effectivity of this Act.
  • Grants incentives and privileges to cooperative banks including, among others, exemption from all national and local taxes, fees and charges as provided under the Cooperative Code and related laws, subject to certain conditions; exemption from publication requirements on foreclosed lands, and; exemption from maximum landholding limits under existing agrarian laws.
  • Grants unto cooperative banks accredited as Rural Financial Institutions (RFls) under Republic Act No. 10000 ("Agri-Agra Reform Credit Act of 2009") unrestricted branching rights, automatic eligibility with government agencies providing agriculture-related risk mitigation services such as the Philippine Guarantee Corporation and Philippine Crop Insurance Corporation, priority status as credit delivery partners or conduits for government-directed agricultural programs, free participation in capacity building activities in agricultural lending such as study tours, best practices exposure, and technology transfer among ASEAN member States and in other fora of international cooperation.

The fact sheet says the bill seeks to foster the creation and growth of cooperatives as a vehicle for the promotion of self-reliance, communal unity, and the attainment of economic development and social justice; to encourage the private sector to engage in the formation and organization of cooperatives in order to create an atmosphere conducive to the growth and development of these cooperatives; to encourage thrift and savings mobilization for purposes of sustainable economic development among cooperatives and their members; and to regulate the activities of cooperative banks to ensure sound, stable, sustainable and efficient operations, and to protect public interest.

The House is expected to approve the bill on third and final reading next week.