BANGKO SENTRAL NG PILIPINAS

Circular No. 682, s. of 2010

Rules and Regulations for Cooperative Banks

Date Adopted: 15 Feb. 2010
Date Filed: 16 March 2010


Pursuant to Monetary Board Resolution No. 192 dated 11 February 2010, following are the revised
rules and regulations governing the organization, membership, establishment, administration, activities,
supervision and regulation of Cooperative Banks to implement the provisions of Chapter XII of Republic
Act No. 9520 otherwise known as the Philippine Cooperative Code of 2008, which amends Republic Act
No. 6938 otherwise known as the Cooperative Code of the Philippines.

SECTION 1. Statement of Policy - The Bangko Sentral is committed to developing a sound and
vibrant cooperative banking sector to support the growth of rural economies and communities. Toward
this end, these rules and regulations recognize the unique nature and character of Cooperative Banks
while at the same time ensure that they are operating within a level playing field with other types of banks
and thereby comply with banking laws, rules and regulations.

SECTION 2. Definition of Cooperative Banks - A Cooperative Bank is one organized for the primary
purpose of providing a wide range of financial services to cooperatives and their members. It shall be
organized only by cooperative organizations that are duly established and registered under the Philippine
Cooperative Code of 2008 (R.A. No. 9520)

A cooperative organization is a duly registered association of persons with a common bond of
interest, who have voluntarily joined together to achieve their social, economic and cultural needs and
aspirations by making equitable contributions to the capital required, patronizing their products and
services and accepting a fair share of the risks and benefits of the undertaking in accordance with
universally accepted cooperative principles.

For purposes of these regulations, a Cooperative Bank shall, likewise, be considered a cooperative
that should be registered with the Cooperative Development Authority (CDA), subject to the requirements
and requisite authorization of the BSP.

SECTION 3. Registration, Application Procedures and Pre-Operating Requirements for Cooperative
Banks

1. A prospective Cooperative Bank shall file its application for licensing as a bank with the BSP, and upon
approval, shall be registered with the CDA.

2. Duly registered cooperatives applying for authority to establish a Cooperative Bank shall submit the
documents enumerated in Section 4, Appendix 38 of the MORB to the Central Applications and Licensing
Group, SES.

3. A Cooperative Bank established under R.A. No. 9520 shall comply with the pre-operating requirements
specified in Section 11, Appendix 38 of the MORB.

SECTION 4. Capital Requirements - Cooperative Banks that will be established under R.A. No.
9520 shall have a minimum paid in capital of Ten Million Pesos (Php 10,000,000.00).

No cooperative member shall own or control more than forty percent (40%) of the total capital
contributions of a Cooperative Bank. This limitation shall also apply to cooperatives purchasing
government-held preferred shares of Cooperative Banks which are converted into common shares.

Cooperative Banks shall issue par value shares only.

SECTION 5. Members of the Board of Directors, Officers, Quorum and Voting Rights -

1. The definition, qualifications, responsibilities and duties of the Board of Directors and Officers that are
generally applicable to all banks under Sections X141 to X143 of the Manual of Regulations for Banks
(MORB) shall also apply to Cooperative Banks.

2. Cooperative Banks shall, likewise, comply with the following regulations on the minimum qualification
requirements of the members of its Board of Directors and Officers:

a. At least one (1) member of the Board of Directors of a Cooperative Bank shall have one (1)
year experience in banking; and
b. The manager of a Cooperative Bank must have actual banking experience (at least
manager or assistant manager).

3. 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.

The quorum requirements for amendments of articles of cooperation and by-laws shall be three-
fourths (3/4) of the number of voting shares of all the members with voting rights, present and constituting
a quorum.

4. The voting rights of members shall be proportionate to the number of their paid-up shares. Existing
Cooperative Banks shall amend their Articles of Cooperation to conform to this provision within a period
of one (1) year from the effectivity of this Circular.

5. 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.

SECTION 6. Membership in a Cooperative Bank

Membership in a cooperative bank shall either be regular or associate. Regular membership shall
be limited to cooperative organizations which are holders of common shares of the bank. Such common
shares shall not be withdrawable but may be sold or transferred to qualified member cooperative
organizations.

Associate members are those that subscribe and hold preferred shares of the bank, the features of
which shall be defined in the Articles of Cooperation. Associate members may include, but shall not be
limited to, individual members of the banks member-primary cooperatives.

In the case of Samahang Nayon (SN) and Municipal Katipunan ng mga Samahang Nayon (MKSN)
which held common shares of Cooperative Banks prior to the effectivity of R.A. No. 9520, they shall apply
for conversion to full-fledged cooperatives in order to maintain their status as regular members of
cooperative banks.

Cooperative Banks shall inform their member SN and MKSN that they have to convert to full-fledged
cooperatives within a period of one year from 22 March 2009 (effectivity of R.A. No. 9520). If the SN or
MKSN fails to do so, the Cooperative Bank concerned shall convert the common shares held by such
associations to preferred shares. The conversion to full-fledged cooperatives and conversion of common
shares to preferred shares shall both be reported to the BSP within six (6) months from effectivity of this
Circular.

SECTION 7. Establishment of Cooperative Banks

1. At least five (5) cooperatives may form a Cooperative Bank: Provided, That majority of the Cooperative
Banks voting shares of stock shall be held by member-cooperatives located in the said province where
the head office is located. The said majority requirement shall be maintained on an ongoing basis, except
in meritorious cases as may be allowed by the Monetary Board.

2. Only one Cooperative Bank may be established in each province. However, an additional Cooperative
Bank may be established in the same province: Provided, That the additional Cooperative Bank shall be
located in a city or municipality other than the city or municipality where the first Cooperative Bank is
located. The establishment of another Cooperative Bank will be authorized depending on the economic
conditions of the province as may be determined by the BSP.

3. The Articles of Cooperation and By-Laws of any Cooperative Bank, or any amendment thereto, shall
be registered with the CDA only when accompanied by a certificate of authority issued by the Monetary
Board, under its official seal.

SECTION 8. Establishment of Branches and Other Offices

1. The Cooperative Bank of the province may set up branches/extension offices/other banking offices
(OBOs) anywhere within the province subject to compliance with the applicable branching rules and
regulations as provided in Section X151 of the MORB.

2. Cooperative Banks from other provinces may set up branches/extension offices/OBOs in cities or
municipalities where there are no other Cooperative Bank head office/branch/extension office.

3. The establishment of branches/extension offices mentioned in Items 1 and 2 above shall be subject to
the following minimum combined capital requirement.

a. At least Php 10 Million (PHp 10,000.000.00) to establish branches/extension offices
anywhere within the province where its head office is located;

b. At least Php 50 Million (Php 50,000,000.00) to establish branches/extension offices in any
island group (i.e. Luzon, Visayas, Mindanao) where the head office is located, except in Metro
Manila;

c. At least Php 100 Million (Php 100,000,000.00) to establish branches/extension offices
anywhere in the country except in Metro Manila unless the Cooperative Bank is qualified to
establish a branch/extension office in Metro Manila and/or restricted areas as provided in Items
d.1 and d.2 of Subsection X151.4 of the MORB on the branching guidelines.

4. Other relevant branching rules and regulations which are not inconsistent with the above provisions
shall continue to be governed by Section X151 of the MORB.

SECTION 9. Powers, Functions and Allied Undertakings of Cooperative Banks -

1. A Cooperative Bank shall primarily provide financial, banking and credit services to cooperatives and
their members, although it may provide the same services to non-members or the general public.

2. The powers and functions of a Cooperative Bank shall be subject to such rules and regulations as may
be promulgated by the BSP. In addition to the powers granted to Cooperative Banks under existing laws,
any Cooperative Bank may perform any or all of the banking services offered by other types of banks,
subject to prior approval of the BPS.

Consistent with existing rules and regulations applicable to banks other than universal banks on
limits on investments in the equities of financial allied undertakings under Section X 378 of the MORB, a
Cooperative Bank with existing investments in insurance companies, including insurance cooperatives
shall not increase but may reduce and once reduced, shall not inrease such equity
holdings: Provided, that the entire equity holdings shall be divested within a period of five (5) years from
the effectivity of this Circular.

SECTION 10. Privileges, Incentives and Assistance for Cooperative Banks - The Cooperative Banks
shall be given the same privileges and incentives granted to rural banks, thrift banks, commercial banks,
and universal banks to rediscount notes with the BSP, the Land Bank of the Philippines, and other
government banks.

The foreclosure of mortgages covering loans granted by Cooperative Banks and execution of
judgment thereon involving real properties levied upon by a sheriff shall be exempt from the publications
in newspapers now required by law where the total amount of loan, excluding interests due and unpaid,
does not exceed Php250 Thousand (Php250,000.00) or such amount as the BSP may prescribe as may
be warranted by prevailing economic conditions and by the nature and character of the Cooperative
Banks. It shall be sufficient publication in such cases if the notices of foreclosure and execution of
judgment are posted in conspicuous areas in the banks premises, municipal hall, the municipal public
market, the barangay hall and the barangay public market, if any, where the property mortgaged is
situated during the period of sixty (60) days immediately preceding the public auction or execution of
judgment. Proof of publication as required herein shall be accomplished by an affidavit of the sheriff or
officer conducting the foreclosure sale or execution of judgment and shall be attached to the records of
the case.

SECTION 10. Applicability of Banking Laws - With respect to the operations and governance of
cooperative banks, the provisions of the banking laws, rules and regulations shall prevail, notwithstanding
Section 71 of RA 8791, otherwise known as the General Banking Act of 2000.

SECTION 11. Effectivity - This Circular shall take effect fifteen calendar days following its
publication either in the Official Gazette or in a newspaper of general circulation.

FOR THE MONETARY BOARD

(SGD.) DIWA C. GUINIGUNDO
Officer-In-Charge

--o0o


Homepage: http://www.bsp.gov.ph
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BSP Circular No. 683 03/16/2010Hits: 3
BANGKO SENTRAL NG PILIPINAS

Circular No. 683, s. of 2010

Marketing, Sale and Servicing of Microinsurance Products

Date Adopted: 23 Feb. 2010
Date Filed: 16 March 2010

In order to better serve microfinance clients pursuant to the financial inclusion thrust of National
Strategy and Regulatory Framework for Microinsurance, a rural, cooperative or thrift bank, including its
authorized branch/es, extension office/s and other banking offices (OBOs), can present, market and sell
microinsurance products as defined under the Insurance Commissions Memorandum Circular (IMC) No.
1-2010
1
, provided that the microinsurance product is duly approved by the Insurance Commission.

The presentation, marketing and sale of microinsurance products by rural, cooperative and thrift
banks has been determined to be a necessary and complementary component of the primary business of
rural, cooperative and thrift banks considering the relationship of the latter with their microfinance clients.
For this purpose, the Monetary Board has defined that for rural, cooperative and thrift banks,
microinsurance products as defined under IMC No. 9-2006
2
and 1-2010
3
shall serve as a financial product
of an allied undertaking under Section 20 of the General Banking Law.

A rural, cooperative or thrift bank can also service (i.e., collect premiums and pay claims)
microinsurance products as collection and payment agents pursuant to Section 53.3 of the General
Banking Law.

A rural, cooperative or thrift bank which intends to avail of the option to market or sell
microinsurance products shall ensure that microinsurance products presented and marketed are clearly
distinguishable from bank products. Towards this end, all organic documents, informational and
promotional materials used in the presentation and sale of these products shall prominently display both
the name of the issuing insurance provider and a clause stating that the insurance product/s of (name of
issuing insurance provider) is/are not insured by the Philippine Deposit Insurance Corporation and is/are
not guaranteed by the (name of bank). The bank shall also ensure compliance with pertinent laws and
rules on the sale of microinsurance products set by the Insurance Commission. As part of product due
diligence, the bank should check whether the microinsurance product-issuing insurance provider has a
functioning customer care and claims-handling mechanism to handle consumer protection issues.

A bank, prior to selling and/or marketing microinsurance products, shall submit the following
documents to the BSP as bases for the latters evaluation:

1. Copy of the approval of the banks board of directors on the presentation, sale and servicing (i.e.
collect premiums and pay claims) of microinsurance products;

2. Copy of duly executed written agreement between the bank and the insurance provider on the
presentation, sale and servicing by the bank of the financial products of the latter, including the terms of
compensation for the services;

3. Copy of the letter of approval from the Insurance Commission covering each of the microinsurance
product to be marketed or sold by the bank;

4. Copy of the corresponding Certificate of Authority from the Insurance Commission of the insurance
provider/s issuing the microinsurance products to be marketed or sold;

5. Banks license from the Insurance Commission as a microinsurance agent or broker, as may be
applicable.

6. Certification from the bank president that he/she ascertained and will ensure continuing compliance
with the following:

a. The product is authorized for cross selling under existing BSP rules and regulations;
b. The microinsurance product is approved by the Insurance Commission and issued by an
entity duly licensed and held in good standing by the Insurance Commission;

c. The bank conducted product due diligence to be suitable to its customers;

d. The organic, informational and promotional materials for the microinsurance products
comply with BSP requirements; and

e. The bank personnel concerned has undertaken the necessary training and passed the
qualifying examination for the presentation and sale of microinsurance products, in compliance
with the requirements set forth by the Insurance Commission on marketing personnel for
insurance products.

7. A letter of undertaking from the bank president that he/she will ensure the retention of the following :

a. Copies of the latest Certificate of Authority from the Insurance Commission covering all
insurance companies whose microinsurance products are being marketed or sold by the bank;

b. Copies of the letters of approval from the Insurance Commission covering all the
microinsurance products to be marketed or sold;

c. Banks license from the Insurance Commission as a microinsurance agent or broker or in
lieu of a banks license as a microinsurance agent or broker, copies of the license from the
Insurance Commission covering all its marketing personnel for microinsurance products; and

8. Such other information that may be required by the Bangko Sentral.

This Circular shall take effect 15 days followings its publication in either the Official Gazette or a
newspaper of general circulation.

FOR THE MONETARY BOARD

(SGD.) ARMANDO L. SURATOS
Officer-In-Charge