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BSP Issues Rules on Cooperative Banks


The Monetary Board has approved the rules and regulations for Cooperative Banks implementing Republic Act 9520, otherwise known as the Philippine Cooperative Code of 2008. The issuance takes into consideration the unique character of cooperatives while aligning the rules and regulations with other types of banks, with the end goal of strengthening cooperatives as vehicles for social and economic progress.

In recognizing the need for a wide range of financial services by the clients of cooperative banks, the BSP has provided cooperative banks with the scope to perform any or all of the banking functions of other types of banks, subject to certain rules and regulations.  The BSP also provided for liberalization in the establishment and branching guidelines which presents an opportunity for cooperative banks to serve areas beyond their province that are determined to be underserved or unserved.  While the law states that only one cooperative bank may be established in each province, it also provided the flexibility for the establishment of another cooperative bank in the same province provided that it shall not be in the city or municipality where the head office of the first cooperative bank is located.  The liberalization of the branching rules allow cooperative banks to establish branches/ extension offices/ other banking offices depending on their combined capital requirements. For cooperative banks with at least PhP 10 Million, they can establish anywhere within the province where their head office is located. For cooperative banks with at least PhP 50 Million, they can establish offices in any of the island group (i.e. Luzon, Visayas, Mindanao) where their head office is located. Cooperative Banks with over PhP 100 Million can establish offices anywhere in the country except in restricted areas.  These provisions will better ensure that no area will be left wanting for much needed financial services. 

Hand in hand with this liberalization are rules to ensure that cooperative banks are operating in a professional, sound and sustainable manner.  A minimum paid in capital requirement of PhP 10 Million was set for any cooperative bank that will be established under the new law. Guidelines on governance and membership were also espoused to ensure the professional management and operations of the cooperative bank.  Voting rights of members shall be proportionate to their paid up shares as opposed to the previous practice of “one man, one vote”.  Membership in a cooperative bank was also clarified by clearly defining regular and associate membership. 

With this issuance, the BSP envisions a more level playing field among cooperative banks and other types of banks; as well as a clearer regulatory framework for their operations.   The end goal is a strong and vibrant cooperative banking sector that will provide much needed financial services in the countryside.

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