Week 13: Financial Service Cooperatives

Excerpts from the Rules and Regulation Implementing Certain Provisions of the Philippine Cooperative Code Of 2008 (RA No. 9520) Rule 12 Financial Service Cooperative (FSC) 

Sec. 2. Functions of FSC

  FSC is a financial organization owned & operated by its members & authorized to provide the ff. services, exclusively to its members

• functions of credit cooperatives and other cooperatives (inc. multipurpose cooperatives) that provide savings and credit to their member

• other financial services subject to regulation by the BSP

Sec. 4. Registration

1. FSC’s Articles of Cooperation and By-laws shall be registered w/ authority if accompanied by a Certificate of Authority issued by BSP (official seal)

2. Register its amended Articles of Cooperation and By-laws to the authority upon approval of the authority and favorable certification of the BSP 

• When existing cooperative engaged in credit and multi-purpose activities notified the Authority after deciding to exercise enhanced functions and satisfied requirements for conversion to FSC

Sec. 6. Minimum Capitalization Requirements

  Minimum Paid-up capital: P10M 

• This qualifies cooperatives to register FSC w/o prejudice to add. capital req. that maybe prescribed by BSP for particular FS regulated by BSP that will be offered by FSC

Sec. 9. Membership and Affiliation

  Two types of members

1. Regular members - natural persons

2. Associate members - natural persons but not immediately qualify under req. for membership in By-laws of Cooperative. They may open accounts, deposit funds, and withdraw (subject to By-laws and rules of the cooperative and the rules and regulations of the Authority) 

Qualifications: 

• 2 yrs as regular members - Failure to convert means automatic withdrawal of associate membership but can re-apply as regular members after 2 yrs

• Minors/dependents of regular members - qualify as associate members, when reach the age of majority and within 2 yrs from acceptance of their associate membership, they’ll have option to turn as regular members

Sec. 15. Deposit and Borrowing Operations

• Savings and Time Deposits - open with a min. amount to be determined by the BOD

• Savings and  Time Deposit - only members & affiliate laboratory cooperative

• FSC, through BOD as authorized by the General Assembly, may borrow from any source at the best terms or conditions available and any amount that needed

Sec. 16. Reserve Requirements against Deposit Liabilities

  FSC shall maintain a Liquidity Reserve Fund of at least 2% of their savings and time deposit liabilities. 

Sec. 17. Loans

  BOD shall:

1. be responsible for setting loan policies and lending procedures

2. comply w/ provisions of RA 3765/ Truth in Lending Act

3. make true & effective cost of borrowing as integral part of every loan contract

Sec. 18. Investment Program

  The sole responsibility and accountability of BOD is the Sound Investment Program. 

1. Scope: Depend largely on FSC size and extent of its surplus funds

2. Investment policies should be in writing and should address the safety, liquidity and yield, diversification, delegation of authority, and valuation/assessment of securities

3. FSC shan’t invest in any single entity more than 20% of its net worth

Sec. 23. Prohibition

     These ff. terms shall be used exclusively by duly registered under the Code. No person, group, or organization used these unless duly registered with Authority. If violated, they’re punishable by Art. 140 of the Code