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Manual of Rules and Regulationsfor Cooperatives with Savings and Credit

Services in the Philippines


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TABLE OF CONTENTS

MANUAL OF RULES AND REGULATIONS FOR COOPERATIVES 8WITH SAVINGS AND CREDIT SERVICES 8IN THE PHILIPPINES 8INTRODUCTION 8

SCOPE AND LIMITATIONS 9SECTION 1.1. COVERAGE 9SECTION 1.2. DEFINITIONOFTERMS 9 FORPURPOSESOFTHISMANUAL, THETERMSDEFINEDINTHEGENERALGUIDELINESFORTHE

REGISTRATIONANDOPERATIONOFCOOPERATIVES(ANNEXA) ANDTHOSEENUMERATEDBELOWSHALLAPPLY. 9

ORGANIATION OF SCCS 1!SECTION 1.". DEFINITIONOFSAVINGSANDCREDITCOOPERATIVE(SCC). SCCSAREDULYREGISTERED

COOPERATIVESLICENSEDTOOPERATEASAFINANCIALENTITYWITHSAVINGSANDCREDITOPERATIONSTHATAREOWNEDANDOPERATEDBYITSMEMBERSWITHTHEFOLLOWINGOB#ECTIVES$ 1!

SECTION 1.%. MINIMUMRE&UIREMENTS. COOPERATIVES RE&UIREDTOAPPLYFORALICENSETOOPERATEASASCC SHALLSUBMITTOTHECDA ADULYACCOMPLISHED APPLICATIONFORMANDA

RESOLUTIONOFTHEBOARDOFDIRECTORSINDICATINGTHEFOLLOWING$ 1!SECTION 1.'. PROVISIONALLICENSETOOPERATE 11SECTION 1.. RE&UIREMENTSFORREGULARLICENSE. WITHINONE(1) YEARFROMRECEIPTOFTHE

PROVISIONALLICENSETOOPERATE, THEAPPLICANTCOOPERATIVESHALL$ 11 12SECTION 1.. LICENSEFEE. COOPERATIVES SHALLPAYTHEAMOUNTOFTWO THOUSAND PESOS

(P2,!!!.!!) FORTHEPROVISIONALLICENSEANDFIVE THOUSAND PESOS (P',!!!) FORTHEREGULARLICENSE. THECDA SHALLREVIEWTHEAMOUNTOFFEESEVERYTWO(2) YEARSANDSHALLAD#USTSUCHFEESASNECESSARY. 12

SECTION 1.8. ISSUANCEOFLICENSETOOPERATE. WITHINSIXTY(!) DAYSFROMFULLCOMPLIANCEOFTHEMANDATORYRE&UIREMENTS SPECIFIEDUNDERSECTION2.%, ANDUPONPAYMENTOFALLAPPLICABLEFEES, THECDA SHALLISSUETOTHEAPPLICANTCOOPERATIVETHELICENSETOOPERATEASASCC. 1"

SECTION 1.9. VALIDITYOFCONTRACTS. CONTRACTSEXECUTEDBETWEENPRIVATEPERSONSANDTHECOOPERATIVEPRIORTOTHEISSUANCEBYTHECDA OFTHELICENSETOOPERATESHALLREMAINVALIDANDBINDINGBETWEENTHECONCERNEDPARTIES. A FORMALWRITTENCONTRACTSHALLBEENTEREDINTOBYTHECONTRACTINGPARTIESANDBEMADEINTHECOOPERATIVE*SNAMEORONITSBEHALF. 1"

SECTION 1.1!. BUSINESSNAME. DULYREGISTEREDCOOPERATIVES ORGANIEDANDOPERATINGUNDERR.A. 9"8 ANDGRANTEDLICENSEBYTHECDA SHALLINCLUDEINTHEIRNAMESTHETERM+SAVINGSANDCREDITCOOPERATIVE(SCC). SUCHCOOPERATIVESHALLDISPLAYATTHEIRBUSINESSOFFICESALICENSEPLATETOBEISSUEDBYTHECDA. 1"

SECTION 1.11. PROHIBITIONS. 1"SECTION 1.12. SUSPENSION, CANCELLATIONORREVOCATIONOFLICENSE. THECDA MAYSUSPEND,

CANCEL, ORREVO-E, AFTERDUENOTICEANDHEARING, THELICENSETOOPERATEASSCC ONANYVIOLATIONORNONCOMPLIANCEOFTHEPROVISIONSOFTHISMANUAL, THECODE, CIRCULARSANDISSUANCESOFTHECDA. 1"

MANAGEMENT 1"SECTION 1.1". OFFICERSOFTHESCC. THEOFFICERSOFTHESCC SHALLBECOMPRISEDOFTHEMEMBERS

OFTHEBOARDOFDIRECTORS, THESECRETARY, COMMITTEEMEMBERSAND-EYMANAGEMENTOFFICERS. 1"

SECTION 1.1%. APPOINTMENT/HIRINGOFOFFICERS. THEPOSITIONOFSECRETARY, TREASURERANDOTHEROFFICERSMAYBEAPPOINTED/HIREDBYTHEBOARDOFDIRECTORSFROMAMONGTHEMEMBERSOFTHECOOPERATIVE. THETENUREOFTHEAPPOINTEDSECRETARYANDTREASURERSHALLBECLEARLYDEFINEDINTHESCC0SBYLAWS. ALLOFFICERSSHALLSERVEDURINGGOODBEHAVIORANDSHALLNOTBEREMOVEDEXCEPTFORCAUSEAFTERDUEHEARING. LOSSOFCONFIDENCE

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SHALLNOTBEAVALIDGROUNDFORTHEREMOVALUNLESSEVIDENCEDBYACTSOROMISSIONCAUSINGLOSSOFCONFIDENCEINTHEHONESTYANDINTEGRITYOFSUCHOFFICER. 1"

SECTION 1.1'. BOARDOFDIRECTORS. INADDITIONTOTHEPROVISIONOFSECTION.2 OFTHEGENERALGUIDELINESONTHEREGISTRATIONANDOPERATIONSOFCOOPERATIVESPROVIDEDFORINAPPENDIXA, ATLEASTONE(1) OFTHEMEMBERSOFTHEBOARDOFDIRECTORSMUSTHAVE, INADDITIONTOTHEMINIMUM&UALIFICATIONSPRESCRIBEDINTHISMANUAL, ATLEASTONE(1) YEARWOR-ING

EXPERIENCE

IN

CREDIT

AND

LENDING

OPERATIONS

. 1%SECTION 1.1. -EYMANAGEMENTOFFICERS. THE-EYMANAGEMENTOFFICERSSHALLBEAPPOINTEDBYTHEBOARDANDSHALLINCLUDEBUTNOTBELIMITEDTOTHEFOLLOWINGORTHEIRE&UIVALENTRAN-$ 1

SECTION 1.1. COMMITTEES. THESCC BYLAWSSHALLPROVIDEFORTHECREATIONANDESTABLISHMENTOFTHEFOLLOWINGCOMMITTEES$ 1

SECTION 1.18. TRAININGOFDIRECTORSANDOFFICERS. DIRECTORSANDOFFICERSOFTHESCC SHALLBERE&UIREDTOUNDERGOCONTINUOUSTRAININGATANACCREDITEDORGANIATIONOFTHEBSPAND/ORCDA. 1

SECTION 1.19. FUNCTIONSANDRESPONSIBILITIES. THEFUNCTIONSANDRESPONSIBILITIESOFTHEOFFICERSANDMEMBERSOFVARIOUSCOMMITTEESSHALLBETHOSEASPRESCRIBEDINTHESCC0SBYLAWS.(THESEFUNCTIONSARESHOWNINAPPENDIXE.) 1

GOVERNANCE 1SECTION 1.2!. COMPENSATIONOFDIRECTORS, OFFICERSANDCOMMITTEEMEMBERS. DURINGTHEFIRST

YEAROFEXISTENCEOFTHESCC, REC-ONEDFROMTHEDATEOFITSREGISTRATIONASACOOPERATIVE, THEBOARDOFDIRECTORS/COMMITTEEMEMBERSSHALLNOTRECEIVEANYFORMOFCOMPENSATIONOTHERTHANREASONABLEPERDIEMASSETBYTHEGENERALASSEMBLY$PROVIDED, THATPAYMENTOFPERDIEMSHALLNOTEXCEEDTWO(2) MEETINGSINAMONTH. INSUCCEEDINGYEARS, ADDITIONALCOMPENSATIONMAYBEGRANTEDTODIRECTORS/COMMITTEEMEMBERS$ PROVIDED, THATSUCHADDITIONALCOMPENSATIONSHALLBEAPPROVEDBYAMA#ORITYOFTHEMEMBERSWITHVOTINGRIGHTSATAREGULARORSPECIALGENERALASSEMBLYMEETING. 1

SECTION 1.21. DEALINGSOFDIRECTORS, OFFICERSANDCOMMITTEEMEMBERS 1SECTION 1.22. LIABILITYOFDIRECTORS, OFFICERSANDCOMMITTEEMEMBERS 18SECTION 1.2". BONDSOFACCOUNTABLEOFFICERSANDEMPLOYEES. 18

REPORTORIAL RE&UIREMENTS 19SECTION 1.2%. RE&UIREDREPORTS. SCCSSHALLREGULARLYSUBMITTOTHECDA ANDTHESUPERVISING

DEPUTIEDCOOPERATIVEFEDERATIONTHERE&UIREDREPORTSLISTEDINAPPENDIXF OFTHISMANUAL. 19

SECTION 1.2'. AUTHORIEDSIGNATORIES 19SECTION 1.2. MANNEROFFILING. REPORTSSHALLBESUBMITTEDTOTHEAUTHORITYEITHER

PERSONALLY, ORVIAREGISTEREDMAIL, ORSPECIALDELIVERYTHROUGHCOURIERS, ORTHROUGHELECTRONICMEANS. 19

SECTION 1.2. REPORTONCRIME/LOSSES. SCCSSHALLREPORTTOTHEAUTHORITYTHEFOLLOWING$19SECTION 1.28. SANCTIONSFORWILLFULDELAYINSUBMISSIONOFREPORTS. 2!

CAPITALIATION 21SECTION 1.29. DEFINITIONOFNETWORTH. THETERMNETWORTHSHALLREFERTOE&UITYINCLUSIVEOF

MEMBERS0 E&UITY, DONATIONS/GRANTS, ANDRESERVEFUNDSLESSUNBOO-EDALLOWANCEFORPROBABLELOSSESONLOANS, INVESTMENTSANDOTHERASSETS, ANDOTHERCAPITALAD#USTMENTSASMAYBERE&UIREDBYTHECDA. 21

SECTION 1."!. CAPITALADE&UACY(NETWORTHTORIS-ASSETSRATIO). THENETWORTHOFASCCSHALL, ATALLTIMES, NOTBELESSTHANANAMOUNTE&UALTOEIGHTPERCENT(8) OFITSRIS-ASSETSWHICHISDEFINEDASITSTOTALASSETSMINUSTHEFOLLOWINGASSETS$ 21

SECTION 1."1. PROMPTCORRECTIVEACTION. THESCC0SNETWORTHPOSITIONSHOULDBESUFFICIENTTOMEETCOMPETITIVEPRESSUREANDADVERSEECONOMICCONDITIONSASTHEYARISE. ITSHOULDENHANCETHESAFETYOFTHEMEMBERS0 SHARESAND-EEPPACEWITHGROWTHINSCC ASSETS.NETWORTHCATEGORIESFORPURPOSESOFPROMPTCORRECTIVEACTIONARE$ 22

SECTION 1."2. REHABILITATION PLAN. A SCC THATISCATEGORIEDASUNDERCAPITALIED ORSIGNIFICANTLYUNDERCAPITALIED SHALLSUBMITFORAPPROVAL, WITHINTHEDEADLINESETBYTHEAUTHORITY, AREHABILITATION PLANPRIORTOITSIMPLEMENTATION . 22

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SECTION 1."". PERIODTOCORRECTCAPITALDEFICIENCY. WHENEVERTHENETWORTHOFSCCSISDEFICIENTWITHRESPECTTOTHERE&UIREMENTS OFSECTION." ABOVE, THESCC SHALL, WITHINATWO(2) YEARPERIOD, MEETTHEMINIMUMRE&UIREMENTFORNETWORTHTORIS-ASSETRATIO.

22SECTION 1."%. RESTRICTIONSFORUNDERCAPITALIED SCCS$ FROMTHETIMETHEAUTHORITYHAS

DECLAREDTHESCC ASUNDERCAPITALIED ANDUNTILSUCHTIMETHATTHESCC ISADE&UATELYCAPITALIED

,IT

SHALL

NOT

BE

PERMITTED

TO

$ 22SECTION 1."'. ACTIONRE&UIREDFORCRITICALLYUNDERCAPITALIED SCCS. THECDA, NOTLATERTHANNINETY(9!) DAYSAFTERTHEDATEONWHICHASCC BECOMESCRITICALLYUNDERCAPITALIED SHALL$ 22

SECTION 1.". INSOLVENCYOFSCCS. A SCC WILLBEDETERMINEDTOBEINSOLVENTWHENTHECASHVALUEOFITSASSETSISLESSTHANITSTOTALLIABILITIES. 22

ARTICLE .DEPOSIT AND BORROWING OPERATIONS 2%SECTION 1.". MINIMUMDEPOSIT. SAVINGSANDTIMEDEPOSITSWITHSSC MAYBEOPENEDWITHA

MINIMUMAMOUNTTOBEDETERMINEDBYTHEBOARDOFDIRECTORS. 2%SECTION 1."8. OPENINGANDOPERATIONOFDEPOSITACCOUNTS. THEFOLLOWINGSHALLGOVERNTHE

OPENINGANDOPERATIONOFDEPOSITACCOUNTSOFSCC$ 2%SECTION 1."9. DEPOSITSOFCHEC-SANDOTHERCASHITEMS. CHEC-SANDOTHERCASHITEMSMAYBE

ACCEPTEDFORDEPOSITBYTHESCC$ PROVIDED, THATWITHDRAWALSFROMSUCHDEPOSITSSHALLNOTBEMADEUNTILTHECHEC-OROTHERCASHITEMSISCOLLECTED. 2'

SECTION 1.%!. PAYMENTOFINTERESTONTIMEDEPOSITS. INTERESTONTIMEDEPOSITSMAYBEPAIDATMATURITYORUPONWITHDRAWALORINADVANCE$ PROVIDED, THATINTERESTPAIDINADVANCESHALLNOTEXCEEDTHEINTERESTFORONE(1) YEAR. 2'

SECTION 1.%1. WITHDRAWALOFDEPOSITS. WITHDRAWALFROM$ 2'SECTION 1.%2. DORMANTSAVINGSDEPOSIT. A SCC MAYCHARGEASERVICEFEEFORTHEMAINTENANCE

OFDORMANTSAVINGSDEPOSITS. SAVINGSDEPOSITSSHALLBECLASSIFIEDASDORMANTIFNODEPOSITORWITHDRAWALHASBEENMADEFORTHELASTTWO(2) YEARS. 2

SECTION 1.%". MATUREDTIMEDEPOSITS. A TIMEDEPOSITNOTWITHDRAWNORRENEWEDONITSDUEDATESHALLBETREATEDASASAVINGSDEPOSITANDSHALLEARNINTERESTFROMMATURITYTOTHEDATEOFACTUALWITHDRAWALORRENEWALATARATEAPPLICABLETOSAVINGSDEPOSITS...2

SECTION 1.%%. RESERVERE&UIREMENTSAGAINSTDEPOSITLIABILITIES 2SECTION 1.%'. BORROWINGS. THESCC, THROUGHTHEBOARDOFDIRECTORSASAUTHORIEDBYTHE

GENERALASSEMBLY, MAYBORROWFROMANYSOURCEATTHEBESTTERMSORCONDITIONS

AVAILABLEANDINSUCHAMOUNTTHATMAYBENEEDED. 2LOANS AND INVESTMENT 2

SECTION 1.%. FINANCIALSERVICE. PROVISIONOFLOANSISANESSENTIALFINANCIALSERVICEPROVIDEDBYTHESCC TOITSMEMBERS. LOANSREPRESENTANSCC0SPRIMARYEARNINGASSET. 2

SECTION 1.%. LENDINGPOLICIES. THEBOARDOFDIRECTORSSHALLBERESPONSIBLEFORSETTINGWRITTENLOANPOLICIES. LENDINGPOLICIESSHOULDCLEARLYREFLECT$ 2

SECTION 1.%8. +TRUTHINLENDINGACT DISCLOSURERE&UIREMENTS. SCCSSHALLCOMPLYWITHTHEPROVISIONSOFR.A. "', OTHERWISE-NOWNASTHETRUTHINLENDINGACT (APPENDIXH),ANDSHALLMA-ETHETRUEANDEFFECTIVECOSTOFBORROWINGANINTEGRALPARTOFEVERYLOANCONTRACT. 2

SECTION 1.%9. BASISINTHEGRANTOFLOANS. THEGRANTINGOFLOANSBYTHECREDITCOMMITTEEANDLOANOFFICERSSHALLBEBASEDONTHEFOURC0S OFCREDIT$ CHARACTER, CAPACITYTOPAY,CIRCUMSTANCES, ANDCOLLATERAL. 2

SECTION 1.'!. LENDINGPROCEDURES 2SECTION 1.'1. LOANMONITORING. WHILELOANCOLLECTIONSMAYBEDELEGATEDTOACOMMITTEEORSTAFFMEMBER(S), THEBOARDHASTHERESPONSIBILITYOFEXERCISINGCLOSECONTROLANDMONITORINGOVERTHESCC LENDINGPROGRAM. 28

SECTION 1.'2. LOANRETENTIONSAVINGSCHEME. SCCSMAYRE&UIREMEMBERBORROWERSTODEPOSITAPORTIONOFTHELOANPROCEEDS, WHETHERINTHEFORMOFSAVINGSORTIMEDEPOSITS.WHERE, SUBSE&UENTTOTHERELEASEOFTHELOANPROCEEDS, MEMBERBORROWERSOPENDEPOSITACCOUNTSORMA-EADDITIONALDEPOSITSTOTHEIREXISTINGACCOUNTS, NOPARTOFSUCHNEWDEPOSITSSHALLBECOVEREDBYASTIPULATIONPROHIBITINGORLIMITINGWITHDRAWALWHILEAPORTIONOFTHEIRLOANSAREOUTSTANDING$ PROVIDED, THATTHIS

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PROHIBITIONSHALLNOTAPPLYINCASESOFLOANSSECUREDBYAHOLDOUTONDEPOSITSTOTHEEXTENTOFTHEUNENCUMBEREDAMOUNTOFTHEDEPOSITEXISTINGATTHETIMEOFTHEABOVEMENTIONEDLOANAPPLICATION. 28

SECTION 1.'". INTERESTANDOTHERCHARGES. THEFOLLOWINGSHALLGOVERNTHERATESOFINTERESTANDOTHERCHARGESONLOANSGRANTEDBYSCC$ 28

SECTION 1.'%. SECUREDLOANS 28

SECTION

1.''. UNSECURED

LOANS

. BEFORE

GRANTING

UNSECURED

LOANS

, SCCSMUST

EXERCISE

PROPER

CAUTIONBYASCERTAININGTHATTHEBORROWERS, COMA-ERS, ENDORSERS, SURETIESAND/ORGUARANTORSPOSSESSGOODCREDITSTANDINGANDAREFINANCIALLYCAPABLEOFFULFILLING THEIRCOMMITMENTTOTHESCC. SCCSSHALLRE&UIRE$ "!

SECTION 1.'. RESTRICTIONONDIRECTORS, OFFICERSANDCOMMITTEEMEMBERS. NODIRECTORORCOMMITTEEMEMBERSHALLVOTEONALOANRE&UESTEDBYAMEMBEROFHIS/HERFAMILY, BYCONSANGUINITYORBYAFFINITYTOTHESECONDDEGREE, ORCANHE/SHEBECOMEACOMA-ER,SURETYORENDORSERONANYLOANCONTRACTEDBYAMEMBERWITHTHESCC. THEAPPLICATIONFORALOANBYAMEMBEROFTHECREDITCOMMITTEESHALLBESUB#ECTTOTHEAPPROVALOFTHEBOARDOFDIRECTORS. "1

SECTION 1.'. LOANLIMITS/MATURITYOFLOANS. "1SECTION 1.'8. DEPOSITSINBAN-S/FEDERATIONS. THESCC SHALLMAINTAINDEPOSITSINATLEASTTWO

(2) BAN-S/FEDERATIONS, BUTINNOCASESHALLDEPOSITSINONEBAN-/FEDERATION EXCEEDFIFTYPERCENT('!) OFTHESCC0SNETWORTH. "1

SECTION 1.'9. LOANS/CREDITACCOMMODATIONSTODIRECTORS, OFFICERS, STAFFANDTHEIRRELATEDINTERESTS(DOSRI) "1

SECTION 1.!. SANCTIONS. ANYVIOLATIONOFTHELOANCEILINGSPRESCRIBEDINSECTION8.11 AND/ORTHEPROVISIONSOFSECTION8.12 ABOVESHALLBESUB#ECTTOTHEIMPOSITIONOFAFINEOFONETENTHOFONEPERCENT(1/1! OF1) OFTHEEXCESSOVERTHELOANCEILINGORTHEAMOUNTOFTHEDOSRI ACCOUNTPERDAYBUTNOTTOEXCEEDP'!! PERDAYONEACHOFTHEDIRECTORSANDOFFICERSVOTINGFOR THEAPPROVALOFTHELOANORCREDITACCOMMODATION. THEPENALTYFOREXCEEDINGTHECEILINGSHALLBECOMPUTEDONTHEAVERAGEAMOUNTOFLOANSINEXCESSOFSAIDCEILINGDURINGTHESAMEWEE-. "2

SECTION 1.1. SUBMISSIONOFCREDITINFORMATIONTOACREDITBUREAU. SCCSSHALLREGULARLYSUBMITINFORMATIONONTHECREDITTRANSACTIONSOFAMEMBERBORROWERTOACREDITBUREAURECOGNIEDBYTHECDA. INFORMATIONFROMTHECREDITBUREAUMAYBEOBTAINEDANDUSEDBYTHESCCSINDETERMININGTHECREDITWORTHINESSOFABORROWER. "2

SECTION 1.2. PASTDUEACCOUNTS. ANYAMORTIATION/INSTALLMENTNOTCOLLECTEDONDUEDATESHALLBEBOO-EDASPASTDUEANDSHALLREMAININTHISACCOUNTUNTILPAID. "2

SECTION 1.". LOANPORTFOLIOANDOTHERRIS-ASSETSREVIEWSYSTEM. THESCC SHALLTA-ETIMELYANDADE&UATEMANAGEMENTACTIONTOMAINTAINTHE&UALITYOFLOANPORTFOLIOANDOTHERRIS-ASSETS. TOENSURETHIS, THEMANAGEMENTSHALL$ "2

SECTION 1.%. LOANLOSSPROVISIONING. THEALLOWANCEFORPROBABLELOSSESONLOANS(APLL)SHALLBEBOO-EDBASEDONTHEPORTFOLIOATRIS-(PAR) WITHA"!DAYGRACEPERIOD. PARISTHEAMOUNTOFTHELOANPORTFOLIOWITHONEDAYMISSEDPAYMENT. THEAPLL SHALLBECOMPUTEDINACCORDANCEWITHTHEPRESCRIBEDFORMULAANDALLOCATIONPERCENTAGEPROVIDEDFORINAPPENDIX# HEREIN. THEAMOUNTOFALLOWANCEFORPROBABLELOSSESONLOANSALREADYBOO-EDFORONEACCOUNTMAYBEUSEDTOCOVERRE&UIREDAPLL FOROTHERNONPERFORMINGACCOUNTS. ""

SECTION 1.'. EXTENSION/RENEWALOFLOANS. EXCEPTFORHOMEBUILDINGANDHOMEDEVELOPMENT

LOANS, EXTENSIONOFTHEPERIODOFPAYMENTOFLOANSSHALLNOTEXCEEDONEHALF(1/2) OFTHEORIGINALPERIOD$ PROVIDED, THATTHIRTYPERCENT("!) OFTHELOANSHALLHAVEBEENPAID. A SECONDEXTENSIONMAYBEFURTHERGRANTEDBUTNOTTOEXCEEDONEHALF(1/2) OFTHEPERIODOFTHEFIRSTEXTENSION. NOFURTHEREXTENSIONSHALLBEGRANTEDAFTERTHESECONDEXTENSION. ""

SECTION 1.. WRITEOFFOFLOANS/OTHERCREDITACCOMODATIONS. THEWRITINGOFFOFLOANS/OTHERCREDITACCOMMODATIONSBYSCCSSHALLBEGOVERNEDBYTHEFOLLOWINGREGULATIONS$ ""

SECTION 1.. TREATMENTOFASSETSAC&UIREDINSETTLEMENTOFLOANS ""SECTION 1.8. APPRAISALOFPROPERTIESTOBEFORECLOSEDORAC&UIRED. BEFOREFORECLOSINGOR

AC&UIRINGANYPROPERTYINSETTLEMENTOFLOANSANDOTHERADVANCES, ITMUSTPROPERLYBE

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APPRAISEDTODETERMINEITSTRUEECONOMICVALUE. IFTHETOTALAMOUNTTOBEBOO-EDASROPOA EXCEEDSP' MILLION, ANINDEPENDENTLICENSEDAPPRAISERMUSTCONDUCTTHEAPPRAISAL. ANINHOUSEAPPRAISALOFSUCHPROPERTYSHALLBEMADEATLEASTEVERYOTHERYEAR$ PROVIDED, THATIMMEDIATEREAPPRAISALSHALLBECONDUCTEDONROPOASWHICHMATERIALLYDECLINEINVALUE. DISPOSALOFTHEFORECLOSEDPROPERTYSHALLBETHERESPONSIBILITYOFTHEBOARDOFDIRECTORS. "%

SECTION

1.9. INVESTMENTS

. A SCCMAY

,AT

TIMES

,HAVE

FUNDS

IN

EXCESS

OF

ITS

NEEDS

FOR

LOANS

TO

MEMBERSTHATMAYBEINVESTEDINSAFEANDSOUNDBUSINESSACTIVITIESTOMAXIMIERETURNS."%

SECTION 1.!. ALLOWABLEINVESTMENTS. A SCC MAYINVESTINTHEFOLLOWING$ "%SECTION 1.1. INVESTMENTPROGRAM. A SOUNDINVESTMENTPROGRAMSHALLBETHESOLE

RESPONSIBILITYANDACCOUNTABILITY OFTHEBOARDOFDIRECTORS. THESCOPEOFTHEPROGRAMWILLDEPENDLARGELYONTHESCC SIEANDTHEEXTENTOFITSSURPLUSFUNDS.INVESTMENTPOLICIESSHOULDBEINWRITINGANDSHOULDADDRESSTHEFOLLOWING$ "%

SECTION 1.2. CEILINGONSCC INVESTMENTS. THESCC SHALLNOTINVESTINANYONEENTITYOFMORETHAN2! OFITSNETWORTH. "'

INTERNAL CONTROL "'SECTION 1.". DEFINITIONOFINTERNALCONTROL. INTERNALCONTROLCOMPRISESTHEPLANOF

ORGANIATIONANDALLOFTHECOORDINATEMETHODSANDMEASURESADOPTEDTOSAFEGUARDTHESCC0SASSETS, CHEC-THEACCURACYANDRELIABILITYOFITSACCOUNTINGDATA, PROMOTEOPERATIONALEFFICIENCY, ANDENCOURAGEADHERENCETOPRESCRIBEDMANAGERIALPOLICIES. "'

SECTION 1.%. COMPONENTSOFINTERNALCONTROL "'SECTION 1.'. INTERNALCONTROLSTANDARDS. THEFOLLOWINGPROVISIONSARETHEMINIMUM

INTERNALCONTROLSTANDARDSFORSCCSTOATTAINEFFICIENCYANDPROVIDECHEC-SANDBALANCES$ "

SECTION 1.. INDEPENDENCEOFTHEINTERNALAUDITOR %"SECTION 1.. HIRINGOFEXTERNALAUDITOR %"SECTION 1.8. DISCLOSUREOFEXTERNALAUDITOR0SADVERSEFINDINGS %%SECTION 1.9. MISCELLANEOUS PROVISIONSONINTERNALCONTROL %'SECTION 1.8!. STANDARDAUDITSYSTEMFORCOOPERATIVES (SASC). ASMANDATEDUNDERARTICLE81

OFRA 9"8, SCCSSHALLBEANNUALLYSUB#ECTEDTOAFINANCIALAUDITBYANEXTERNALANDINDEPENDENTAUDITORDULYACCREDITEDANDRECOGNIEDBYTHEAUTHORITY. %'

PERFORMANCE STANDARDS FOR SCCS (COOPPESOS) %

SECTION 1.81. FINANCIALTRANSPARENCY %SECTION 1.82. PERFORMANCESTANDARDS %SECTION 1.8". COMPUTATIONOFCOOPPESOS. THEE&UIVALENTRAWSCOREFORBOTHTHECOOP AND

PESOS INDICATORSAREGIVENTHEAPPROPRIATERATING. THEOVERALLRATINGWILLBECOMPUTEDUSINGA2! PERCENTWEIGHTFORTHECOOP RATINGAND8! PERCENTWEIGHTFORTHEPESOS RATING. THEEVALUATOR, INASSESSINGTHEPERFORMANCEOFTHESCC, WILLUSETHEFORMULAANDINDICATORSSHOWNINAPPENDIX#. %8

SECTION 1.8%. OVERALLRATING. THERAWSCOREFOREACHOFTHECOMPONENTS ISGIVENANE&UIVALENTRATING. THERESULTINGRATINGFOREACHOFTHECOMPONENTISGIVENTHEAPPROPRIATEWEIGHTTOARRIVEATTHEOVERALLRATING. THEFOLLOWINGRATINGSCALEISUSED$ %8

MISCELLANEOUS %9SECTION 1.8'. CONFIDENTIALINFORMATION. %9

SECTION 1.8. COOPERATIVEPREMISESANDPROPERTYANDE&UIPMENT. THEFOLLOWINGRULESSHALLGOVERNTHEPREMISESANDOTHERFIXEDASSETSOFSCCS$ %9

SECTION 1.8. BRANCHINGFORSCCS '!SECTION 1.88. SUPERVISIONANDEXAMINATIONOFSCCS '1

GENERAL PROVISIONS ON SANCTIONS '"SECTION 1.89. SANCTIONS. ANYVIOLATIONOFTHEPROVISIONSOFTHISMANUALSHALLBESUB#ECTTO

THEAPPLICABLESANCTIONSASPROVIDEDFORBELOWANDARTICLE12% OFRA 9"8, WHENEVERAPPLICABLE. '"

SECTION 1.9!. DEFINITIONOFUNSAFEORUNSOUNDPRACTICE. A SCC MAYBEDEEMEDTOBEENGAGEDINANUNSAFEORUNSOUNDPRACTICEIFSUCHPRACTICEORPRACTICESRESULTINDEFICIENCIESOR

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LESSTHANSATISFACTORY(POOR) RATINGINTHECOOPPESOS THAT, IFNOTCORRECTED, MAYMATERIALLYORADVERSELYAFFECTTHEFINANCIALHEALTHOFTHESCC. '"

SECTION 1.91. MONETARYPENALTY. THERULESANDPROCEDURESOFTHISSECTIONSHALLAPPLYTOPROCEEDINGSTOASSESSPENALTIESAGAINSTANYPERSONORSCC FORVIOLATIONOFTHEPROVISIONSOFTHISMANUALORANYREGULATION, CIRCULARORORDERISSUEDBYTHECDAPURSUANTTHERETO, INCONNECTIONWITHTHECONDUCTOFTHEAFFAIRSOFTHESCC. '"

SECTION

1.92. SANCTIONS

AGAINST

ERRING

DIRECTORS

AND

OFFICERS

. IN

DETERMINING

WHETHER

AN

OFFICERORDIRECTORSHOULDBEREMOVED, PROHIBITEDORSUSPENDED, PRIMARYCONSIDERATIONSHALLBEMADEBYTHECDA ASTOWHETHERTHESCC, OFFICER, ORDIRECTORTOO-APPROPRIATEACTIONTOSTOPORTOPREVENTTHERECURRENCEOFAVIOLATIONDESCRIBEDHEREIN$ '%

SECTION 1.9". CEASEANDDESISTORDER 'TRANSITORY PROVISIONS '8

SECTION 1.9%. TRANSITORYPROVISIONS. ALLPRIMARYCREDITANDOTHERTYPESOFCOOPERATIVES WITHSAVINGSANDCREDITSERVICESSHALL, FROMTHEEFFECTIVEDATEOFTHISMANUAL, CONFORMTOTHEPROVISIONSOFTHISMANUALOFRULESANDREGULATIONSINACCORDANCEWITHTHEFOLLOWINGSCHEDULE$ '8

'9'9

SEPARABILITY CLAUSE '9 ALLCDA ISSUANCES, RULESANDREGULATIONSAPPLICABLETOSCCSTHATAREINCONSISTENTWITHTHE

PROVISIONSOFTHISMANUALAREHEREBYREPEALEDORMODIFIEDACCORDINGLY. '9 EFFECTIVITY'9 THISMANUALOFRULESANDREGULATIONSSHALLTA-EEFFECTUPONAPPROVALBYTHEPRESIDENTOF

THEPHILIPPINESORHISDULYDESIGNATEDREPRESENTATIVE ANDFIFTEEN(1') DAYSAFTERPUBLICATIONINTHEOFFICIALGAETTEORINTWO(2) NEWSPAPERSOFGENERALCIRCULATION..'9

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MANUAL OF RULES AND REGULATIONS FOR COOPERATIVESWITH SAVINGS AND CREDIT SERVICES

IN THE PHILIPPINES

INTRODUCTION

It is the declared policy of the State under R.A. 6938 (An Act to Ordain A Cooperative Code of the

Philippines to foster the creation and !ro"th of cooperatives as a practical vehicle for pro#otin! self$reliance and

harnessin! people po"er to"ards the attain#ent of econo#ic develop#ent and social %ustice.

Cooperatives "ith savin!s and credit services (hereinafter referred to as Savin!s and Credit Cooperatives &

SCCs have esta'lished the#selves to 'e effective vehicles in the i#prove#ent of the social and econo#icconditions of their #e#'ers. y providin! their #e#'ers access to financial services includin! savin!s)

cooperatives have encoura!ed thrift and opened opportunities to the poor) "hich other for#al financial institutions

#ay not 'e "illin! to provide.

As !overn#ent veers a"ay fro# direct intervention in the provision of financial services) the need to

further develop and stren!then cooperatives into via'le and sustaina'le financial institutions 'eco#es #oreapparent. Safe and sound operations of cooperatives "ill have to 'e ensured in order to protect the invest#ents and

savin!s of their #e#'ers. *ith stron! credit cooperatives operatin! in a via'le and efficient #anner) creative andinnovative loan products and financial services suited to the needs of the poor "ill continuously 'e offered and

enhanced. y providin! !reater access to +uality financial products and services) cooperatives "ith savin!s and

credit activities can !reatly contri'ute to the i#prove#ent of the lives and "elfare of their constituents.

Reco!ni,in! these realities) the Cooperative -evelop#ent Authority (C-A has put in place #easures to

develop and stren!then cooperatives. hese include) a#on! others) the esta'lish#ent of an effective re!ulatory and

supervisory environ#ent for credit and savin!s cooperatives. he C-A) in colla'oration "ith the /ational Credit

Council (/CC$-epart#ent of 0inance (-O0) the an!1o Sentral /! Pilipinas (SP) other relevant !overn#enta!encies and the #a%or federations of cooperatives) have initiated "or1 to"ards this end. 0ollo"in! the

esta'lish#ent of the Standard Chart of Accounts (SCA and the perfor#ance standards for credit cooperatives

(COOP$P2SOS) as "ell as the adoption of the fra#e"or1 for effective re!ulation and supervision of credit andother types of cooperatives "ith credit services this 4anual of Rules and Re!ulations "as developed.

he rules and re!ulations set forth in this 4anual and the attached Appendices are in accordance "ith the

rule #a1in! authority of the C-A (Section 13 of RA 6939). hese "ill provide SCCs "ith specific rules for the

safe and sound conduct of their operations. Any chan!e or a#end#ent to the la"s) circulars or issuances shall

su'se+uently 'e inte!rated and for# part of the affected sections or su'sections of this 4anual) "hile repealed rules

shall henceforth 'e deleted so that the user of this 4anual shall no lon!er refer to a separate issuance (e.!.) circular)#e#orandu# 'ut shall instead cite the particular section or su'sections of the 4anual) includin! its appendices.

he 4anual is divided into #a%or types of headin!s "hich introduce the correspondin! sections and

su'sections that "ill #a1e up the provisions !overnin! the operations and activities of SCCs su'%ect to the related

re!ulations.

his 4anual is useful for 'oth the supervisory and re!ulatory authorities and the 4ana!e#ent of SCCs

the#selves. he perfor#ance indicators and standards esta'lished herein shall ensure that the SCCs have thefinancial discipline for the safety and soundness of the institution. In the end) this "ill result in stron!er) via'le and

sustaina'le SCCs "ith hi!her de!ree of pu'lic trust and confidence.



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1.2.1. Authorit' refers to either the Cooperative -evelop#ent Authority (C-A as the pri#ary

re!ulatory authority or the cooperative federation or union deputi,ed 'y C-A follo"in! an

approved accreditation criteria to supervise and e?a#ine pri#ary SCCs.

1.2.2. Credit acco""odation includes 'orro"in!s of #e#'ers and advances #ade 'y officers and

e#ployees.

1.2.3. #e$entures are serial o'li!ations or notes issued on the 'asis of the !eneral credit of thecorporation. Since they are not secured 'y the corporations propertyBies) they are not 'onds

under Section 38 of the Corporation Code.

1.2.4. Loans in Litigationare total collecti'les fro# past due loans under le!al action.

1.2.5. Loans restructured are past due loans "hose ter#s and conditions have 'een #odified)

e?tended or rene"ed after full pay#ent of interestBsurchar!es due thereon. Ite#s in liti!ation

and loans su'%ect of %udicially approved co#pro#ise) as "ell as those covered 'y petitions for

suspension or a ne" plan of pay#ent approved 'y the court shall not 'e classified as

restructured loans.

1.2.6. Loansshall include all types of credit acco##odations !ranted to the 'orro"er.

1.2.7. Past due accountsshall refer to loan accounts "here one a#orti,ationBinstall#ent has not 'een

paid on the due date.

1.2.8. %avings deposits are deposits #ade 'y #e#'ers evidenced 'y a pass'oo1 or any other

e+uivalent financial docu#ent consistin! of funds deposited to the credit of one (7 or #ore

#e#'ers that can 'e "ithdra"n anyti#e at the option of the #e#'er$depositor.

1.2.9. Ti"e depositsare deposits #ade 'y the #e#'ers over a specified period of ti#e as evidenced

'y a ti#e deposit certificate or any other e+uivalent financial instru#ent that provides on its

face that the a#ount of such deposit is "ithdra"a'le at a predeter#ined date.

ARTICLE 1.ORGANIATION OF SCC@

Section 1.3. D5


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1.4.1. Savin!s and credit operations shall 'e a function of the Cooperative and

1.4.2. he a#ount of paid$in capitali,ation that shall 'e allocated for savin!s and credit operations

Provided) hat such a#ount shall not 'e lo"er than R22 4I55IO/ P2SOS (P3)).

0or this purpose) the follo"in! additional docu#ents shall 'e su'#itted to the C-A

7.>.;.7. In the case of a ne" cooperative) a -epository an1 Certificate of deposits of thecooperatives paid$in capital allotted for this purpose

7.>.;.;. In the case of e?istin! cooperative) the duly audited financial state#ent of thei##ediate precedin! year and

7.>.;.3. -uly notari,ed reasurers Affidavit indicatin! that the paid$in capital has 'eenallocated.

;.;.3 Separate 'oo1s of accounts shall 'e #aintained for the savin!s and credit operations in the caseof #ulti$purpose cooperatives.

Section 1.5.P634


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7.6.>.>. iodata sheets (A5:;..8. 4anual of Operations e#'odyin! the cooperatives policies and operatin!procedures

7.6.>.9. Pro$for#a Dt"o (; setsE of accountin! and other for#s in confor#ity "ith theStandard Chart of Accounts (SCA and the Accountin! 4anual

7.6.>.7. Copy of Contract for the use of the cooperatives pre#ises

7.6.>.77. Copy of the insurance covera!e of the cooperatives office and pre#ises

7.6.>.7;. Copy of the onds of accounta'le officersBe#ployees. his #ay 'e e?ecuted in thefor# of an insurance 'ond (such as fidelity) surety) or !uarantee 'ond) cash 'ond or

real estate 'ond.

7.6.>.73. 2?cerpts of the #inutes of #eetin!s confir#in! all transactions relative to activities

underta1en to prepare the cooperative to operate as SCC (e.!. appoint#ent of officers)contract of lease) etc

7.6.>.7>. Certification 'y the Secretary of the oard that no person "ho is the spouse or arelative "ithin the ;nd de!ree of consan!uinity or affinity of any officer of thecooperative as defined in Section 3.7 includin! the Chief Cashier or any position of

e+uivalent ran1 has 'een appointed to said positions in the cooperative

7.6.>.7=. Appoint#ent of officer of the re!istered cooperative "ho shall have under!oneorientation on the reportorial re+uire#ents "ith the C-A) and a certification 'y the4ana!er that he is fully a"are of said reportorial re+uire#ents and the respective

deadlines for su'#ission to the C-A and

7.6.>.76. Other docu#entsBpapers "hich #ay 'e re+uired 'y the C-A.

Section 1.7. L


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Section 1.8. I@@?7:5 3 L) and upon pay#ent of all applica'le fees)

the C-A shall issue to the applicant cooperative the 5icense to Operate as a SCC.

Section 1.9. V7>7


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Section 1.15. B376; 3 D


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7.7=.3.;.>. Persons "ho are delin+uent in the pay#ent of their o'li!ations as definedhereunder

7.7=.3.;.>.7. O'li!ations "ith the cooperative "here heBshe is a director or officer or "ithother cooperativesBfinancial institutions.

7.7=.3.;.>.;. O'li!ations fro# a SCCB'an1B+uasi$'an1 or another cooperative o'tained'y

7.7=.3.;.>.;.7. A director or officer for his o"n account or as the representative or

a!ent of others or "here heBshe acts as a !uarantor) co$#a1er) endorser) orsurety for loans fro# such financial institutions

7.7=.3.;.>.;.;. he spouse or child under the parental authority of the director or

officer

7.7=.3.;.>.;.3. Any person "hose 'orro"in!s or loan proceeds "ere credited to the

account of) or used for the 'enefit of a director or officer

7.7=.3.;.>.;.>. A partnership of "hich a director or officer) or hisBher spouse is the#ana!in! partner or a !eneral partner o"nin! a controllin! interest in the

partnership and

7.7=.3.;.>.;.=. A corporation) association) or fir# "holly$o"ned or #a%ority of the

capital of "hich is o"ned 'y any or a !roup of persons #entioned in the

fore!oin! ite#s!, ii!, iv!. his dis+ualification shall 'e in effect as lon! as

the delin+uency persists.

7.7=.3.;.=. Persons convicted for offenses involvin! dishonesty) 'reach of trust) or violationof cooperativeB'an1in! la"s 'ut "hose conviction has not yet 'eco#e final and

e?ecutory

7.7=.3.;.6. -irectors and officers of closed cooperativesB'an1sB+uasi$'an1sBtrust entitiespendin! their clearance 'y the C-A or 4onetary oard

7.7=.3.;.


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7.7=.3.;.77. Persons "ith dero!atory records "ith the /ational ureau of Investi!ation (/I)court) police) Interpol) and #onetary authority (central 'an1 of other countries

involvin! violation of any la") rule) or re!ulation of the overn#ent or any of its

instru#entalities adversely affectin! the inte!rity andBor a'ility to dischar!e the

duties of a cooperativeB'an1B+uasi$'an1Btrust entity directorB officer. his

dis+ualification applies until they have cleared the#selves of involve#ent in the

alle!ed irre!ularity.

Section 1.16. -5 M7:755: O


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2ducationBrainin! and 4e#'ership

4ediation and Conciliation and

Other co##ittees necessary for the proper conduct of the affairs of the SCC.

1.17.1. Appointment/0!ection of Committee Memers

7.7


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7.;7.7.>. hat in the case of an officer or co##ittee #e#'er) the contract "ith the officer orco##ittee #e#'er has 'een previously authori,ed 'y the eneral Asse#'ly or 'y

the oard.

1.21.2. *here any of the first t"o conditions set forth in the precedin! para!raph is a'sent in the case

of a contract "ith a director) such contract #ay 'e ratified 'y t"o$thirds (;B3 vote of all the

#e#'ers "ith votin! ri!hts in a #eetin! called for the purpose Provided) hat full disclosureof the adverse interest of the director involved is #ade at such #eetin!) and that the contract is

fair and reasona'le under the circu#stances.

Section 1.22. L.;. Accounta'le to the SCC for any direct 'enefit or advanta!e received or yet to 'ereceived 'y hi# or his associate) as a result of the transaction.

1.22.5. he SCC shall ta1e all the necessary steps and #easures to enforce the lia'ilities descri'ed in

this section.

Section 1.23. B3:;@ 3 A3?:7>5 O355@.

7Associate as referred in this %ection shall refer to an) person connected or has *oined such directors and officers

in a co""on purpose or to parta+e or share in a co""on design of "a+ing use of confidential infor"ation

pre*udicial to the condition of the cooperative.



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1.23.1. 2very officer or e#ployee handlin! funds) securities) or property on 'ehalf of a SCC shall)

'efore perfor#in! such duties) e?ecute and deliver ade+uate and appropriate 'onds for the

faithful perfor#ance of hisBher duties and o'li!ations and provide inde#nity to the SCC

a!ainst the loss of #oney or securities 'y reason of their dishonesty or !ross ne!li!ence. he

oard of -irectors shall deter#ine the ade+uacy of such 'onds.

1.23.2. he 'ond of the cashier) assistant cashier) treasurer and other e#ployees havin! #oneyaccounta'ility shall not 'e less than their avera!e daily accounta'ility for i##ediately

precedin! a three (3 #onth period. he 'ond #ust 'e issued 'y a reputa'le 'ondin! co#pany

duly licensed 'y the Insurance Co##ission. Capital contri'ution or a cash 'ond deposited

"ith the SCC or "ith a 'an1 #ay also 'e allo"ed.

ARTICLE %.REPORTORIAL RE&UIREMENTS

Section 1.24. R5?


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1.27.3. Incidents involvin! #aterial loss) destruction or da#a!e to the SCC propertiesBfacilities) other

than arisin! fro# a cri#e) "hen the a#ount involved per incident is P7). or #ore.

1.27.4. he follo"in! !uidelines shall 'e o'served in the preparation and su'#ission of the report on

cri#eBloss

7.;.7. he report shall 'e prepared in t"o (; copies and shall 'e su'#itted to the Authority"ithin five (= days fro# the 1no"led!e of the cri#e or incident

7.;.;. *here a thorou!h investi!ation and evaluation of facts is necessary to co#plete thereport) an initial report su'#itted "ithin the deadline #ay 'e accepted Provided)hat a co#plete report is su'#itted not later than fifteen (7= 'usiness days fro#

ter#ination of investi!ation.

Section 1.28. Sanctions for "illful delay in su'#ission of reports.

1.28.1. efinition of terms. 0or purposes of this su'section) the follo"in! definitions shall apply

7.;8.7.7. Reportsshall refer to any report or state#ent re+uired of SCCs to 'e su'#itted to theAuthority periodically or "ithin a specified period.

7.;8.7.;. #ela) in the su$"ission of reportsshall refer to the failure of SCCs to su'#it a reporton ti#e. 0ailure to su'#it a report on ti#e due to fortuitous events such as fire and

other natural cala#ities) syste# 'rea1do"n and pu'lic disorders) includin! stri1e orloc1out affectin! the SCCs as defined in the 5a'or Code or a national e#er!ency

affectin! the operations of SCCs shall not 'e considered as delay.

1.28.2. ines for de!a' in sumission of reports.

7.;8.;.7. SCCs incurrin! delay in the su'#ission of re+uired reports (A7 and A; shall pay a

fine of P7. per report per 'usiness day of default.

7.;8.;.;. -elay or default shall start to run on the day follo"in! the last day re+uired for thesu'#ission of reports. o"ever) should the last day of filin! fall on a non$"or1in!

day in the locality "here the reportin! SCC is situated) delay or default shall start torun on the day follo"in! the ne?t "or1in! day.

7.;8.;.3. 0or the purpose of esta'lishin! delay or default) the date of ac1no"led!e#ent 'y theAuthority appearin! on the copies of such reports filed or su'#itted or the date of

#ailin! post#ar1ed on the envelopeBthe date of re!istry or special delivery receipt) asthe case #ay 'e) shall 'e considered as the date of filin!.

7.;8.;.>. -elayed schedules or attach#ents and a#end#ents shall 'e considered late reportin!su'%ect to the a'ove penalties.

1.28.3. Manner of pa'ment or co!!ection of fines.

7.;8.3.7. SCCs shall) "ithin thirty (3 calendar days fro# receipt of the state#ent of accountfro# Authority) pay the fines i#posed.

Manual of Rules and Regulations for SCCs 2!


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7.;8.3.;. 0ailure to settle the full a#ount of the fines "ithin the period or on the day prescri'edherein shall 'e su'%ect to additional penalties) fines and surchar!es.

1.28.4. +ther pena!ties$ he i#position of the penalties shall 'e "ithout pre%udice to the i#position

of other ad#inistrative sanctions and to the filin! of a cri#inal case as provided for in other

provisions of la".

1.28.5. Appea! to the A4&5+R&. SCCs #ay re+uest for a reconsideration of the i#position ofsanctions to the C-A "ithin thirty (3 calendar days upon receipt of notice. he oard of

Ad#inistrators of the C-A shall) upon receipt of the re+uest for reconsideration) act "ithin

si?ty (6 calendar days) other"ise the i#position of sanctions shall 'e dee#ed lifted. he

decision of the oard of Ad#inistrators of theC-A shall 'e final and e?ecutory.

ARTICLE '.CAPITALIATION

Section 1.29. D5


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Section 1.31. P63 C3665


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1.36.2. Appointment of Conservator

7.36.;.7. *henever on the 'asis of a report su'#itted 'y the appropriate supervisin! ore?a#inin! depart#ent of the C-A or upon the re+uest of the dele!ated supervisin!

and e?a#inin! federation or union in accordance "ith S5. he conservator shall receive re#uneration to 'e fi?ed 'y the C-A in an a#ount notto e?ceed t"o$thirds (;B3 of the salary of the #ana!er of the pri#ary cooperative or

its e+uivalent in one (7 year) paya'le in t"elve (7; e+ual #onthly install#ents

Provided) hat) at any ti#e "ithin the one (7 year period) the conservatorship ister#inated on the !round that the institution can operate on its o"n) the conservator

shall receive the 'alance of the re#uneration "hich heBshe "ould have received up to

the end of the year) 'ut if the conservatorship is ter#inated on other !rounds) the

conservator shall not 'e entitled to such re#ainin! 'alance.

7.36.;.=. he C-A shall not appoint a conservator fro# the unit or depart#ent of the Authorityreco##endin! conservatorship.

7.36.;.6. he C-A shall) on the 'asis of its findin!s or the report of the conservator andBor thereport of the e?a#iner) ter#inate the conservatorship "hen

7.36.;.6.7. It is satisfied that the SCC can continue to operate on its o"n or

7.36.;.6.;. he continuance in 'usiness of the SCC "ould result in additional loss to its#e#'ers or creditors) in "hich case) the process of receivership and li+uidation

shall apply.

1.36.3. Proceedin.s in Receivership and %i#uidation

7.36.3.7. he C-A #ay su##arily) and "ithout need for prior hearin!) for'id the SCC fro#

doin! 'usiness in the Philippines and desi!nate a receiver of the SCC concerned)"henever the C-A finds that a SCC

7.36.3.7.7. Is una'le to pay its lia'ilities as they 'eco#e due in the ordinary course of'usiness Provided) hat this shall not include ina'ility to pay caused 'ye?traordinary de#ands induced 'y financial panic

Manual of Rules and Regulations for SCCs 2"


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7.36.3.7.;. Cannot continue in 'usiness "ithout resultin! in pro'a'le losses to its #e#'ers orcreditors or

7.36.3.7.3. as "illfully violated a cease and desist order that has 'eco#e final) involvin!acts or transactions "hich a#ount to fraud or the dissipation of the assets of the

SCC.

7.36.3.;. Any person of reco!ni,ed co#petence in finance and cooperativis# #ay 'edesi!nated as receiver.

7.36.3.3. he receiver shall i##ediately !ather and ta1e char!e of all the assets and lia'ilitiesof the SCC) ad#inister the sa#e for the 'enefit of its #e#'ers and creditors) and

e?ercise the !eneral po"ers of a receiver under the Revised Rules of Court 'ut shall

not) "ith the e?ception of ad#inistrative e?penditures) pay or co##it any act that

"ill involve the transfer or disposition of any asset of the SCC Provided) hat the

receiver #ay deposit or place the funds of the SCC in non$speculative invest#ents.

7.36.3.>. he receiver shall deter#ine) as soon as possi'le 'ut not later than ninety (9 daysfro# ta1eover) "hether the SCC #ay 'e reha'ilitated or other"ise placed in such a

condition so that it #ay 'e per#itted to resu#e 'usiness "ith safety to its #e#'ersand creditors) and the !eneral pu'lic Provided) hat any deter#ination for the

resu#ption of 'usiness of the SCC shall 'e su'%ect to prior approval of the C-A.

7.36.3.=. If the receiver deter#ines that the SCC cannot 'e reha'ilitated or per#itted to resu#e'usiness in accordance "ith the precedin! para!raph) the C-A shall notify in "ritin!

the SCCs oard of -irectors of its findin!s and direct the receiver to proceed "ith

the li+uidation of the SCC. he receiver shall

7.36.3.=.7. 0ile eparte "ith the proper Re!ional rial Court) and "ithout re+uire#ent ofprior notice or any other action) a petition for assistance in the li+uidation of theSCC pursuant to a li+uidation plan adopted 'y the C-A. he receiver shall pay

the cost of the proceedin!s fro# the assets of the SCC.

7.36.3.=.;. he desi!nation of a conservator under the precedin! Section or the appoint#entof a receiver under this Section shall 'e vested e?clusively "ith the C-A.0urther#ore) the desi!nation of a conservator is not a precondition to the

desi!nation of a receiver.

1.36.4. L


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1.38.1. Who ma' open deposit accounts. Only #e#'ers of the SCC and its affiliate la'oratorycooperative #ay open savin!s andBor ti#e deposit accounts. he cashier) 'oo11eeper and their

assistants) and other e#ployees and officers of the SCC "hose duties entail the handlin! of

cash or chec1s) can deposit and "ithdra" Provided,hat another officer processes such

transactions. Any "ithdra"al fro# SCCs accounts has to 'e approved 'y the eneral

4ana!er or hisBher desi!nated officer.

1.38.2. dentification of memer-depositors. A SCC shall 'e responsi'le for the proper identificationof its #e#'er$depositors.

1.38.3. 8umer of deposit accounts. A #e#'er$depositor #ay open and #aintain several depositaccounts in hisBher o"n na#e. In the case of savin!s deposits) the accountsopened and

#aintained shall 'e on a per savin!s product 'asis) "hile ti#e deposit accounts shall 'e opened

and #aintained on the 'asis of its ter#s and conditions. eBshe #ay also open an account in

other capacities as !uardian) a!ent) or trustee for hisBher i##ediate fa#ily #e#'ers "ho are

#inors andBor incapacitated and cannot 'e +ualified as a #e#'er.

1.38.4. Si.nature card$ A si!nature card 'earin! at least three (3 speci#en si!natures of each#e#'er$depositor shall 'e re+uired upon openin! of a deposit account.

1.38.5. Savin.s Passoo and certificate of time deposits$

7.38.=.7. A savin!s deposit pass'oo1) si!ned 'y the receivin! teller and an authori,ed officer)shall 'e issued to a #e#'er$depositor sho"in!) a#on! other thin!s) hisBher na#e and

address) account nu#'er) date) a#ount of depositB"ithdra"al) interest credits and

'alance.

7.38.=.;. In the case of a ti#e deposit) a certificate of ti#e deposit or its e+uivalent instru#entsi!ned 'y at least t"o (; authori,ed officers shall 'e issued to the #e#'er$depositor

containin!) a#on! other thin!s) hisBher na#e) a#ount of deposit) date "hen thedeposit "as #ade) its due date) and interest rate.

7.38.=.3. Savin!s deposit pass'oo1s and certificates of ti#e deposit shall 'e pre$nu#'ered.

Section 1.39. D53@


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Section 1.42. D367: S74


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1.47.2. 2ffective loan collection policies desi!ned "ith the follo"in! characteristics

7.>


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1.50.4. %oan Approva!s. 5oans shall 'e approved in accordance "ith the Codified Approvin! and

Si!nin! Authority (CASA (A5:;


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1.54.2. Rea! 0state Securit' Without &orrens &it!e. 5oans #ay also 'e !ranted on the security oflands "ithout orrensitle "here

7.=>.;.7. he o"ner of the private property can sho" = years or #ore of peaceful) continuous)and uninterrupted possession in the concept of an o"ner

7.=>.;.;. Portions of friar land estates or other lands ad#inistered 'y the ureau of 5ands arecovered 'y sales contracts) and the purchasers have paid at least five (= yearsinstall#ent thereon) "ithout the necessity of prior approval and consent 'y the

-irector of the ureau of 5ands

7.=>.;.3. Portions of other estates under the ad#inistration of the -epart#ent of A!rarianRefor# (-AR or other !overn#ental a!ency are li1e"ise covered 'y sales contracts)

and the purchaser has paid at least five (= years install#ents thereon) "ithout the

necessity of prior approval and consent of the -AR or correspondin! !overn#ental

a!ency

7.=>.;.>. o#esteads or free patent lands have approved titles that are yet to 'e issued) theprovisions of any la" or re!ulations to the contrary not"ithstandin!Provided) hat

7.=>.;.>.7. *hen the correspondin! titles are issued) the sa#e shall 'e delivered to theRe!ister of -eeds of the province "here such lands are situated for the annotation

of the encu#'rance

7.=>.;.>.;. Copies of notices for the presentation of the final proof shall also 'e furnished tothe SCC) and if the 'orro"er applicants fail to present the final proof "ithin thirty

(3 days fro# date of notice) the SCC #ay do so for the# at their e?pense

7.=>.;.>.3. he applicant for ho#estead or free patent has already #ade i#prove#ents on theland) and the loan applied for is to 'e used for further develop#ent of the sa#e or

for other productive econo#ic activities and

7.=>.;.>.>. he appraisal and verification of the status of a land is a full responsi'ility of theSCC) and any loan !ranted on any land "hich shall 'e found later to 'e "ithin the

forest ,ones shall 'e for the sole account of the SCC.

1.54.3. %oans Secured ' Chatte!s$ 5oans secured 'y chattels shall not e?ceed fifty percent (= of

the appraised value of the security) and such loans shall not 'e #ade unless title to the chattels

shall 'e in the na#e of the #ort!a!or.

1.54.4. %oans Secured ' Persona! Properties. 5oans #ay 'e secured 'y unencu#'ered personalproperty "hich #ay consist of

7.=>.>.7. onds and securities issued 'y the overn#ent. Such 'onds and securities #ay 'eaccepted at their face value

7.=>.>.;. Kuedans or "arehouse receipts issued 'y 'onded "arehouses coverin! stoc1deposited in said "arehouses up to ei!hty percent (8 of the calculated #ar1et

value of the stoc1 and



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7.=>.>.3. Any other personal property up to fifty percent (= of the fair #ar1et value. If theproperty is ne"ly purchased and the purchase price thereof appears in a 'ill of sale)

then the a'ove percenta!e shall 'e 'ased on the price of the said 'ill of sale.

1.54.5. %oans Secured ' Certificates of &ime eposits (C&s)$ he follo"in! rules shall !overn the

!rant of loans secured 'y hold$out on andBor assi!n#ent of C-s issued 'y the lendin!

cooperative or any other financial institution

7.=>.=.7. he ori!inal copy of the C-s su'%ect to hold$out or assi!n#ent shall 'e surrenderedto the lendin! cooperative

7.=>.=.;. If the ter#s of the C-s su'%ect to hold$out or assi!n#ent is shorter than the ter# ofthe loan) there shall 'e an a!ree#ent in "ritin! that rene"al of the ti#e deposit upon

#aturity shall 'e #ade at least co$ter#inus "ith the ter# of the loan

7.=>.=.3. he depository 'an1) other than the lendin! 'an1) shall 'e furnished a copy of the-eed of Assi!n#ent or hold$out a!ree#ent on the deposit used as collateral

7.=>.=.>. here shall 'e no pre$ter#ination of the ti#e deposit "ithout the consent of thelendin! cooperative and unless an accepta'le su'stitute collateral for the loan has

'een #ade

7.=>.=.=. he SCC shall 1eep a co#plete record of all pertinent loan docu#ents) such as) 'utnot li#ited to) the ori!inal copy of the C-s su'%ect to assi!n#ent or hold$out

a!ree#ent deed of assi!n#ent or hold$out a!ree#ent and "ritten "aiver of the

depositor re+uired in section 8.9.=.6 'elo") "hich shall 'e #ade availa'le for

inspection andBor e?a#ination 'y the Authority and

7.=>.=.6. he loan docu#ents shall include a "aiver on the part of the depositor of hisBherri!hts under e?istin! la" to the confidentiality of hisBher deposits.

1.54.6. nsurance on Rea! 0state mprovements. he re+uired insurance on i#prove#ents used ascollateral for loan should 'e such as shall 'e sufficient to secure seventy percent (


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7.==.7.;. If the 'orro"er is en!a!ed in 'usiness) a copy of the 'orro"ers financial state#ents)if applica'le) and if the 'orro"er "ill en!a!e in 'usiness) afeasi'ility study of the

pro%ect to 'e financed.

1.55.2. %oan Si.natories. 5oan docu#ents of credit acco##odations shall 'e si!ned 'y the principal

'orro"er and at least one (7 co$#a1er e?cept the spouse of the 'orro"er. he co$#a1er shall)

at all ti#es) 'e a #e#'er of the SCC.

Section 1.56. R5@6


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Section 1.60. S7:


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1.63.1. Set up and #aintain ade+uate loan reserves at a level sufficient to a'sor' the loss inherent in

the loan portfolio

1.63.2. 2sta'lish a syste# of identifyin! and #onitorin! e?istin! or potential pro'le# loans and other

ris1 assets and

1.63.3. 2valuate credit policies vis$L$vis prevailin! circu#stances and e#er!in! portfolio trends.

Section 1.64. L37: >3@@ P634


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1.67.3. /on$refunda'le capital !ains ta? and docu#entary sta#p ta? paid in connection "ith

foreclosureBpurchase of the ac+uired real estate property #ay 'e included in the 'oo1 value of

the ac+uired real estate Provided,hat the total 'oo1 value does not e?ceed the appraised

value of the ac+uired real estate Provided -urther,hat if the a#ount to 'e 'oo1ed as

ROPOA e?ceeds P= #illion) the appraisal of the foreclosedBpurchased asset shall 'e conducted

'y an independent licensed appraiser.

1.67.4. Any e?cess in loan 'alance over the a#ount 'oo1ed shall 'e char!ed to GAllo"ance for

Pro'a'le 5osses on 5oans) if previously provided. Other"ise) such a#ount shall 'e char!ed to

4iscellaneous 2?pense Account.

1.67.5. Clai#s arisin! fro# deficiency %ud!#ents rendered in connection "ith the foreclosure of

#ort!a!ed properties shall 'e 'oo1ed "hen collected as 4iscellaneous Inco#e.

Section 1.68. A67 3 P63563@5; 36 7?>3K7>5 I:45@5:@. A SCC #ay invest in the follo"in!

1.70.1. Shares or de'entures of the federation or union of "hich it is a #e#'er

1.70.2. Securities issued 'y SCC as #ay 'e authori,ed 'y la"

1.70.3. Any reputa'le 'an1

1.70.4. onds) securities) and other o'li!ations issued 'y the overn#ent of the Philippines) or any of

its political su'divisions) instru#entalities or corporations includin! !overn#ent o"ned or

controlled corporations) su'%ect to such rules and re!ulations as the Authority #ay provide) inan a!!re!ate a#ount not e?ceedin! at any one ti#e ten percent (7 of the total assets of

such SCC

1.70.5. Real estate and i#prove#ents) includin! e+uip#ent) "hich shall not e?ceed fifty percent

(= of the SCCs net "orth as re+uired in Section 77.;.; of this 4anual or

1.70.6. In any other #anner as #ay 'e authori,ed 'y the C-A.

Section 1.71. I:45@5: P6367. A sound invest#ent pro!ra# shall 'e the sole responsi'ility andaccounta'ility of the oard of -irectors. he scope of the pro!ra# "ill depend lar!ely on the

SCC si,e and the e?tent of its surplus funds. Invest#ent policies should 'e in "ritin! andshould address the follo"in!

Manual of Rules and Regulations for SCCs "%


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1.71.1. Safet'7 %i#uidit' and ie!d$ Sound invest#ent policies assu#e a conservative approach in

'alancin! safety) li+uidity) and yield. In this connection) li+uidity #eans the a'ility to respond

+uic1ly to anticipated and unanticipated shifts in the SCCs flo" of funds. Safety and yield

should 'e carefully "ei!hed prior to underta1in! any invest#ent that could result in a loss to

the SCC. If a 'ro1era!e fir# is used) the oard of -irectors should satisfy itself as to the

relia'ility and financial soundness of the fir#.

1.71.2. iversification$ A policy of diversification shall 'e e#ployed to #a?i#i,e returns on

invest#ents and #ini#i,e ris1s. Such policy is particularly useful for SCC that invests in

#ar1eta'le securities. he 'oards policies should clearly address diversification and specially

note any li#itations it #ay place on the types of invest#ents) +uantities and #aturities to 'e

purchased.

1.71.3. e!e.ation of Authorit'.he 'oard #ay dele!ate specific invest#ent authority to an e?ecutive

co##ittee) an invest#ent co##ittee) or a #ana!e#ent official.

1.71.4.


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1.74.2. Accountin. S'stem. Accountin! syste# pertains to the series of tas1s in an entity 'y "hichtransactions are processed as a #eans of #aintainin! financial records. If supple#ented 'y

internal control) it provides #ana!e#ent "ith reasona'le assurance that assets are safe!uarded

fro# unauthori,ed use or disposition. he essential purpose of an accountin! syste# is to

provide #ana!e#ent "ith the co#plete and accurate financial infor#ation it needs to conduct

sound and effective operations. he financial state#ents produced 'y the syste# are used 'y

#ana!e#ent to account to the #e#'ers) creditors) the Authority) and the !eneral pu'lic thefinancial condition of the SCC.

1.74.3. Administrative contro!$ his includes) 'ut is not li#ited to) the plan of or!ani,ation and the

procedures and records that are concerned "ith the decision processes leadin! to

#ana!e#ents authori,ation of transactions.

Section 1.75. I:56:7> C3:63> S7:;76;@. he follo"in! provisions are the #ini#u# internal controlstandards for SCCs to attain efficiency and provide chec1s and 'alances

1.75.1. Si.nin. Authorities$he oard of -irectors shall approve si!nin! authorities for the different

levels of officers to si!n for and in 'ehalf of the SCCs and the e?tent of each level of authority

shall 'e clearly defined. hese si!nin! authorities shall include) 'ut need not 'e li#ited to) the

follo"in!

5endin!

Invest#ent

-is'urse#ents

:arious supervisory reports

Chec1s

Certificate of i#e -eposits and

Contracts or A!ree#ents.

1.75.2. Mana.ement Structure$ he internal or!ani,ation should provide for a #ana!e#ent structure"ith clear accounta'ility) a 'oard of directors "ith a'ility to provide independent chec1 on

#ana!e#ent and independent audit and co#pliance functions) and should follo" the GfoureyesH principle i.e.) se!re!ation of various functions) cross chec1in!) dual control of assets and

dou'le si!natures. In this re!ard) #ana!e#ent shall have a re!ular revie" of the internal

control procedures.

1.75.3. Records for Compi!ation$ he follo"in! recordsBdata shall 'e co#piled and #ade availa'le

for the inspection of duly authori,ed e?a#iner

7.


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7.


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7.)A5:;


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7. 'oo1sof accounts (cash receipt 'oo1) cash dis'urse#ent 'oo1) !eneral %ournal and

!eneral led!er and su'sidiary led!ers

7.


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7.


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7.


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7.


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7.


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1.77.3. SCCs "hich have en!a!ed their respective e?ternal auditors for a consecutive period of three

(3 years or #ore as of date of the effectivity of this 4anual shall have a one$year period fro#

said date "ithin "hich to either chan!e their e?ternal auditors or rotate the lead andBor

concurrin! partner.

1.77.4. A SCC shall not en!a!e the services of an e?ternal auditor "hose partner or auditor$in$char!e

of audit en!a!e#ent durin! the precedin! year has 'een hired or e#ployed 'y the SCC asChief 2?ecutive Officer) Chief 0inancial Officer) Controller) Chief Accountin! Officer or any

position of e+uivalent ran1.

1.77.5. It shall not also en!a!e the services of an e?ternal auditor "ho is a #e#'erBofficer of the SCC

to "hich heBshe 'elon!s to or of any federationBunion to "hich the SCC is affiliated.

1.77.6. he e?ternal auditor shall not 'e related to any officer and e#ployee of the SCCs up to the

fourth de!ree of consan!uinity or affinity

1.77.7. *hen "arranted) the Authority #ay) at the e?pense of the SCC) re+uire the e?ternal auditor to

underta1e a specific revie" of a particular aspect of the operations of the SCC. he report

shall 'e su'#itted to the Authority and to the audited SCC si#ultaneously "ithin thirty (3

calendar days after the conclusion of the revie".

Section 1.78. D3@?65 3 5=56:7> 7?;


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1.78.3. he #ana!e#ent of the SCC shall 'e infor#ed of the adverse findin!s. he e?ternal auditors

report to the Authority shall include the e?planation andBor reco##ended corrective action.

1.78.4. he #ana!e#ent of the SCC shall 'e !iven the opportunity to 'e present in the discussions

'et"een the Authority and the e?ternal auditor re!ardin! the audit findin!s) e?cept incircu#stances "here the e?ternal auditor 'elieves that the SCCs #ana!e#ent is involved in

fraudulent conduct.

Section 1.79. M>7:53?@ P634

1.79.1. 5oan applications and related docu#ents shall 'e verified to ensure their authenticity

particularly the na#e) residence) e#ploy#ent and current reputation of the 'orro"er and co$

#a1er) if any

1.79.2. /o e#ployee shall 'e per#itted to process transaction affectin! his o"n account

1.79.3. ellers and other e#ployees shall 'e prohi'ited fro# preparin! deposit slip) "ithdra"al slip or

other for#s for the custo#ers

1.79.4. At any !iven ti#e) tellers shall 'e allo"ed to have under their custody only up to a specific

#a?i#u# a#ount of accounta'ility as #ay 'e deter#ined 'y the oard of -irectors of the

SCC. All cash in e?cess of this #a?i#u# a#ount shall 'e turned over to the cashier as the#a?i#u# li#it is 'reached

1.79.5. All chec1s received 'y the tellers shall 'e i##ediately sta#ped G0or -epositH to a specific

deposit account of the SCC. hese chec1s shall 'e deposited on the sa#e day) e?cept those

that "ere received after the close of 'an1in! hours of the SCCs depository 'an1Bs and the

depository 'an1 is not readily availa'le. Such chec1s shall 'e 1ept under the %oint custody of

oard$desi!nated officers "ho shall see to it that the sa#e are pro#ptly deposited on the

follo"in! 'usiness day

1.79.6. All SCCs shall have a sound personnel policy and

1.79.7. All accounta'le officers and e#ployees shall 'e 'onded.

Section 1.80. S7:;76; A?;


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7.8.;.;. Strict o'servance of the /otes to 0inancial State#ents and other disclosures

7.8.;.3. Indirect #ethod presentation of the State#ent of Cash 0lo"s and State#ent ofChan!es in Statutory 0unds "ith co#parative fi!ures of the i##ediately precedin!

year

7.8.;.>. Su##ary of auditors findin!s) to include financial ratios and reco##endations and

7.8.;.=. State#ent of representation of the e?ternal auditor to the Auhority.

1.80.3. 8on-!iai!it' of efamation. An auditor is not lia'le to any person for defa#ation 'ased onany act done) or any state#ent #ade 'y hi#Bher in !ood faith in connection "ith any #atter

heBshe is authori,ed or re+uired to do or pursuant to the Code.

ARTICLE 9.PERFORMANCE STANDARDS FOR SCC@ (COOPPESOS)

Section 1.81. F. Accessi'le to the concerned user and usa'le to the #ana!e#ent andBor the oard of-irectors.

7.87.;.=. Co#para'le infor#ation that "ill allo" the cooperative to co#pare results over ti#eand a#on! peer institutions.

1.81.3. Standard Chart of Accounts$ All SCCs shall adopt the Standard Chart of Accounts and itsacco#panyin! Accountin! 4anual for Credit and Other ypes of Cooperatives "ith Credit

Services issued 'y the Authority. he use of the co##on account title in their financial

state#ents "ill facilitate co#parison of their financial perfor#ance over ti#e and across peers.

he Accountin! 4anual "hich defines and prescri'es the accountin! syste#s and procedures

to 'e adopted) "ill ena'le SCCs to co#e up "ith a coherent and relia'le set of infor#ation to

'e used in acco#plishin! the Chart of Accounts.



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Section 1.82. P56367:5 S7:;76;@

1.82.1. ndicators on mana.ement comp!iance to administrative re#uirements$ hese indicators

co#prise a set of +uestions that shall !ive infor#ation on the SCCco#pliance "ith the le!al

and ad#inistrative re+uire#ents.

7.8;.7.7. Comp!iance :ith Administrative and %e.a! re#uirements$ his includes a set of+uestions that loo1s at "hether the SCC co#plies "ith the various le!al re+uire#entsi#posed 'y various institutions) i.e. C-A) IR) 5ocal overn#ent @nit and -O52.

7.8;.7.;. +r.ani"ationa! Structure and %ina.e$ his includes +uestions on the SCCs!overnance policies (A5:;. P!ans and Pro.rams$ his includes the para#eters that deter#ine "hether the SCChas a develop#ent plan and an approved annual plans and 'ud!et. his also loo1s at

"hether the SCC revie"s its perfor#ance vis$L$vis the pro%ections in its 'usiness

plan.

1.82.2. ndicators on inancia! Performance

7.8;.;.7. Portfo!io ua!it'$ his provides the #ana!ers and oard of -irectors of SCCsappropriate tools in #onitorin! the +uality and the level of ris1s of the loan portfolio

of the SCCs. his should 'e closely #onitored inas#uch as the loan portfolio

constitutes the 'ul1 of the SCCs assets. In vie" of this) it is also i#portant that the

ris1 of default is ade+uately protected. Protection is #easured 'y co#parin! theade+uacy of the allo"ance provided for loan losses a!ainst the a#ount of delin+uent

loans. he status of the health of the portfolio of the SCC "ill either propel the SCC

to !ro" or i#peril the "hole sustaina'ility pro!ra# of the SCC. "o indicators areincluded in this !roup. hese are

Portfolio at Ris+

Allowance for Pro$a$le Losses on Loans

7.8;.;.;. 0fficienc'$ his focuses on the operational and ad#inistrative efficiency of thedelivery of financial services) i.e.) loans and savin!s products to its #e#'ers.

Indicators under this cate!ory deter#ine the a'ility of the SCC to !enerate sufficient

inco#e to cover e?penses on operations. 2fficiency is i#portant 'ecause it affects the

profita'ility of the SCCs portfolio and the return on #e#'ers shares. Si? (6ratiosBindicators are included in this !roup

Asset 1ield Operational

%elf%ufficienc)

Rate of Return on e"$ers2 %hare

Loan Portfolio Profita$ilit)

Cost per peso loan

Ad"inistrative 3fficienc)



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7.8;.;.3. Stai!it'$his deter#ines "hether financial services can 'e delivered to its #e#'ersin a sustained #anner. One "ay to do this is to increase the institutional capital of the

SCC instead of purely relyin! on the #e#'ers share capital. his "ill allo" the SCC

to #aintain sufficient li+uidity to #eet the financial needs of its #e#'ers in a ti#ely

#anner. *here the SCCleadership co##its itself to ascertain the sustaina'ility in the

SCC structure) the #e#'ership of the SCC "ill also 'e serious in stron!ly supportin!their o"n SCCs. 5isted 'elo" are three (3 ratiosBindicators under this cate!ory

%olvenc)4

Li/uidit)4 and

5et nstitutional Capital.

7.8;.;.>. +perations$ his hi!hli!hts the ne" thrust for Philippine SCCs. he indicators andstandards in this !roup call for #ini#i,in! dependence on e?ternal 'orro"in!s and

!reater e#phasis on #o'ili,in! voluntary savin!s fro# its #e#'ers. Stron! e#phasis

on #o'ili,in! voluntary savin!s "ill ena'le SCCs to have continuous and cheaper

sources of funds for its operations and) at the sa#e ti#e) provide its #e#'ers an

alternative invest#ent #echanis# for their e?cess funds. his "ill result in the SCCs

less dependence on e?ternal 'orro"in!s and lo"er financial costs. he indicators are

Perfor"ance of e"$ership Growth4 and

Trend in 3ternal 6orrowings

7.8;.;.=. Structure of Assets$his helps ascertain the +uality and the structure of the assets ofthe SCC. hese indicators and standards deter#ine the e?tent of the share of the

SCCs various assets to its total assets and assess the effective use of these assets to

!enerate revenues. he follo"in! four (> indicators are

5onearning Assets 0 Total Assets4

Total #eposits 0 Total Assets4

5et Loans Receiva$les 0 Total Assets Total4 and e"$ers2 %hare Capital 0 Total Assets.

Section 1.83. C3?7


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1.84.2. Ratin. @ (> to !ess than 9>) ; ) ; P++R.he SCC has unsatisfactory perfor#ance and is in need of

i##ediate re#edial attention. SCCs in this !roup have a very hi!h pro'a'ility of failure and"ill li1ely re+uire li+uidation.

ARTICLE 1!.MISCELLANEOUS

Section 1.85. C3:


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7.86.;.7. Cooperative Pre#ises & 5and) uildin!s) 0urnitures) 0i?tures and 2+uip#entincludin! i#prove#ents and depreciation thereof) o"ned and used 'y the SCC in the

conduct of its 'usiness includin! staff houses) recreational facilities and landscapin!

costs) net of accu#ulated depreciation.

7.86.;.;. Real properties, e+uip#ent or other chattels purchased 'y the SCC in its na#e for the

'enefit of its officers and e#ployees) net of depreciation and in the case of land orother non$deprecia'le property) net of pay#ents already #ade to the SCC 'y the

officers and e#ployees for "hose 'enefits the property "as 'ou!ht) "here such

property has not yet 'een fully paid and o"nership has not yet 'een transferred to

the#.

7.86.;.3. he cost of real estate leased in "hole or in part 'y the SCC fro# a corporation) otherthan a corporation pri#arily en!a!ed in real estate in "hich the SCC has e+uity)

e+uivalent to the a#ount o'tained 'y applyin! the percenta!e of the e+uity of the

SCC in the lessor to the cost of that portion of the property 'ein! leased) or thea#ount of e+uity in the lessor) "hichever is lo"er.

1.86.3. Rec!assification of rea! and other properties o:ned or ac#uired as SCC premises.

7.86.3.7. Real and other properties o"ned or ac+uired (ROPOA reclassified as SCC pre#ises

shall 'e 'oo1ed at costProvided, hat only such ac+uired asset or a portion thereof

that "ill 'e i##ediately used or ear#ar1ed for future use #ay 'e reclassified and

'oo1ed as SCC pre#ises.

7.86.3.;. Prior to the reclassification of the ROPOA accounts to SCC pre#ises) prior approvalof the Authority shall 'e secured 'efore effectin! the reclassification and the SCCshall su'#it) in case of future use) %ustification and plans for its e?pansionBuse.

Section 1.87. B67:


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7.8


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7.88.3.;. In cases "here a SCC is a #e#'er of t"o or #ore deputi,ed federations andBorunions) such SCC shall choose only one (7 deputi,ed federation andBor union "here

it "ill 'e su'%ect to supervision and e?a#ination.

7.88.3.3. he C-A shall re!ularly #onitor and validate the perfor#ance of deputi,edfederations andBor unions "ith re!ards to its supervision and e?a#ination of its

pri#ary SCC #e#'ers.

1.88.4. 02amination of 8on-memers of eputi"ed ederation/4nion$ SCCs that are not #e#'ersof a deputi,ed cooperative federation andBor union "ill 'e supervised and e?a#ined 'y the

C-A until such ti#e that the SCC 'eco#es a #e#'er of a deputi,ed cooperative federation

andBor union.

1.88.5. Supervision and 02amination ees$ SCC shall pay to the deputi,ed cooperative federation

andBor union a supervision and e?a#ination fee e+uivalent to 1/1>th of 1E of the SCCs

Avera.e Assessa!e Assets (AAAs)$ SCCs that "ill 'e supervised and e?a#ined 'y the C-A

shall pay a supervision and e?a#ination fee e+uivalent to 7B9 thof 7 of the SCCsAAAs. he

ter# GAAAsH shall 'e the su# of the end$of$#onth total assessa'le assets divided 'y the

nu#'er of #onths in operation durin! the particular assess#ent period. he ter# F&ota!

Assessa!e AssetsGshall refer to total assets (end$of$#onth total assets per 'alance sheet) afterdeductin! cash on hand and cash in 'an1. he fees shall 'e revie"ed every t"o (; years and

#ay 'e ad%usted 'y the C-A) in consultation "ith the deputi,ed federationsBunions) as it #ay

dee# reasona'le.

7.88.=.7. he Authority shall 'ill the SCC for the full a#ount of the supervision ande?a#ination fees.

7.88.=.;. *ithin thirty (3 days fro# receipt of the 'ill) the SCC shall #a1e the correspondin!re#ittance to the Authority. /on$pay#ent of the fees "ithin the prescri'ed period

shall su'%ect the concerned SCC to the sanctions prescri'ed in Article 7; of this

4anual and fines and penalties) thereon) shall 'e paya'le to the C-A.

1.88.6. Refusa! to permit e2aminationshall #ean any act or o#ission "hich i#pedes) delays) or

o'structs the duly authori,ed e?a#iner fro# conductin! an e?a#ination) includin! the act of

refusin! to accept or honor a letter of authority to e?a#ine presented 'y the Authority.

1.88.7. ines for refusa! to permit e2amination$

7.88.


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ARTICLE 11.GENERAL PROVISIONS ON SANCTIONS

Section 1.89. S7:


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7.97.7.3. Miti.atin. and A..ravatin. actors$ In assessin! the a#ount of the penalty) theC-A shall consider the !ravity of the violation) the history of previous violations) the

respondentFs financial resources) !ood faith) and any other #atters as fairness and

%ustice #ay re+uire.

1.91.2. i!in. of Appea!$ he a#ount of penalty to 'e i#posed shall 'e assessed upon the receipt 'y

the personBs or SCC of a /otice of Assess#ent sent 'y the C-A) "hich shall 'eco#e final ande?ecutory unless the person or persons involved re+uests for reconsideration or su'#its a

"ritten appeal to the C-A "ithin thirty (3 days fro# receipt of the /otice.

1.91.3. ai!ure to fi!e an Appea! for Reconsideration$ 0ailure of a person or SCC to file an appeal

for consideration re+uired 'y this section "ithin the ti#e provided constitutes a "aiver of his

or her ri!ht to appeal and contest the alle!ations in the notice of disapproval. A final order

issued 'y the C-A oard of Ad#inistrators 'ased upon a respondentFs failure to ans"er is

dee#ed to 'e an order issued upon consent.

1.91.4. 0ffective date of7 and pa'ment under7 an order to pa'$ Penalties assessed pursuant hereto are

due and paya'le "ithin 6 days after an order to pay) issued after the hearin! or upon default)

is served upon the personBs or SCC) unless the order provides for a different schedule of

pay#ent. A surchar!e of five percent (= shall 'e i#posed on the assessed a#ount of penaltythat "as not paid on the prescri'ed deadline.

1.91.5. Co!!ection of pena!ties$ he C-A #ay collect any penalty assessed pursuant to this Section'y a!ree#ent "ith the respondent) or the C-A #ay 'rin! an action a!ainst the personBs orSCC to recover the penalty a#ount in the appropriate courts.

Section 1.92. S7:


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7.9;.7.7.;.7. he SCC has suffered or "ill pro'a'ly suffer financial loss or other da#a!eor

7.9;.7.7.;.;. he interests of the SCCs #e#'ers have 'een or could 'e pre%udiced or

7.9;.7.7.;.3. he director or officer has received financial !ain or other 'enefit 'y reason

of such violation) practice) or 'reach and

7.9;.7.7.3. %uch violation, practice, or $reach7

7.9;.7.7.3.7. Involves personal dishonesty on the part of the director or officer or

7.9;.7.7.3.;. -e#onstrates "illful or continuin! disre!ard for the safety or soundness ofthe SCC.

7.9;.7.;. 8otice of ntention. /otice of intention to re#ove fro# office shall i##ediately 'eserved to the director or officer concerned. Such notice shall contain a state#ent of

the facts constitutin! !rounds for re#oval) and shall fi? a ti#e and place at "hich a

hearin! "ill 'e held thereon.

7.9;.7.3. Conduct of 5earin.$ he hearin! shall 'e fi?ed for a date not earlier than thirty daysnor later than si?ty days after the date of service of such notice) unless an earlier or a

later date is set 'y the C-A at the re+uest of the concerned director or officer) and for

!ood cause sho"n.

7.9;.7.>.


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7.9;.;.7.;. *henever a director or officer is char!ed in a court of la" "ith the co##ission ofor participation in a

7.9;.;.7.;.7. Cri#e involvin! dishonesty or 'reach of trust "hich is punisha'le 'yi#prison#ent or

7.9;.;.7.;.;. Cri#inal violation of any provision of the Cooperative Code or any othere?istin! la" that #ay pose a threat to the interests of the SCCs depositorsand or #ay threaten to i#pair pu'lic confidence in the SCC.

7.9;.;.;. Prohiited Acts. 0or as lon! as the prohi'ition or suspension or re#oval fro# officeorder re#ains in effect) any person or persons su'%ect to such order issued 'y the

C-A) shall not

7.9;.;.;.7. Continue or co##ence to hold any office in nor participate) in any #anner) in theconduct of the affairs of the SCC and

7.9;.;.;.;. 2?ercise any votin! ri!hts and privile!es in the SCC.

7.9;.;.3. 0ffectivit' of Prohiition or Suspension +rder$ Any prohi'ition and suspensionorder issued shall 'eco#e effective upon receipt and shall re#ain in effect and

enforcea'le until such ti#e that the C-A dis#isses the char!es contained in thenotice) unless specifically provided for in the order.

7.9;.;.>. A57>@.

7.9;.;.>.7. *ithin thirty days fro# service of any notice of prohi'ition) suspension) or orderof re#oval) the director or person concerned #ay re+uest in "ritin! an

opportunity to appear 'efore the C-A to sho" that the continued service to or

participation in the conduct of the affairs of the SCC 'y such director or officerdoes not) or is not li1ely to) pose a threat to the interests of the #e#'er$depositors

or threaten to i#pair pu'lic confidence in the depository institution.

7.9;.;.>.;. @pon receipt of any such re+uest) the C-A shall fi? a ti#e (not #ore than thirtydays after receipt of such re+uest) unless e?tended at the re+uest of such party

and place at "hich the director or officer #ay appear) personally or throu!h

counsel) 'efore a duly$desi!nated officer of the C-A to su'#it "ritten #aterials

(or) at the discretion of the C-A) oral testi#ony and oral ar!u#ent.

7.9;.;.>.3. *ithin si?ty days fro# such hearin!) the C-A shall notify the parties concerned"hether the suspension or prohi'ition fro# participation in any #anner in the

conduct of the affairs of the SCC "ill 'e continued) ter#inated) or other"ise

#odified) or "hether the order re#ovin! the director or officer fro# office has

'een rescinded or other"ise #odified.

7.9;.;.>.>. Such order shall 'e !iven to all parties concerned and contain a state#ent of the'asis for the C-As decision.

Section 1.93. C57@5 7:; D5@


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7.93.7.7. 2n!a!in! or has en!a!ed or is a'out to en!a!e) in an unsafe or unsound practice inconductin! its 'usiness or

7.93.7.;. :iolatin! or has violated) or is a'out to violate) a la") rule) or re!ulation) or anycondition i#posed in "ritin! 'y the C-A in connection "ith the !rantin! of the

5icense to Operate as a Savin!s and Credit Cooperative)

the C-A #ay issue and serve upon the SCC a notice of char!es in respect thereof. he notice

shall contain a state#ent of the facts constitutin! the alle!ed violation or violations or the

unsafe or unsound practice or practices.

1.93.2. Schedu!e of 5earin.s$ he C-A shall fi? a ti#e and place at "hich a hearin! "ill 'e held to

deter#ine "hether an order to cease and desist should 'e issued a!ainst the SCC. Such

hearin! shall 'e fi?ed for a date not earlier than thirty days nor later than si?ty days after

service of such notice) unless an earlier or a later date is set 'y the C-A at the re+uest of any

party so served.

7.93.;.7. ssuance of Cease and esist +rder 4pon 5earin.$ he C-A #ay issue and serveupon the SCC an order to cease and desist fro# any violation or practice and to ta1e

affir#ative action to correct the conditions resultin! fro# any such violation orpractice under any of the follo"in! situation

7.93.;.7.7. -urin! the hearin!) the party or parties so served consent to the issuance of acease$and$desist order or the C-A finds that the violation or unsafe or unsound

practice specified in the notice of char!es has 'een esta'lished or

7.93.;.7.;. he SCC) throu!h its duly desi!nated representative) failed to appear at thescheduled hearin!.

7.93.;.;. Affirmative Action$ he C-A #ay re+uire the SCC to ta1e affir#ative action tocorrect or re#edy any condition resultin! fro# any violation or practice "ith respect

to "hich such order is issued includin! an order for the SCC or any other person to

7.93.;.;.7. 4a1e restitution or provide rei#'urse#ent) inde#nification) or provide provisionsa!ainst loss if

7.93.;.;.7.7. Such depository institution or any other party "as un%ustly enriched inconnection "ith such violation or practice or

7.93.;.;.7.;. he violation or practice involved a rec1less disre!ard for the la" or anyapplica'le re!ulations or prior order of the C-A.

7.93.;.;.;. Restrict the !ro"th of the institution

7.93.;.;.3. Place li#itations on the activities or functions

7.93.;.;.>. -ispose of any loan or asset

7.93.;.;.=. Rescind a!ree#ents or contracts

7.93.;.;.6. 2#ploy +ualified officers or e#ployees ("ho #ay 'e su'%ect to approval 'y theC-A and

7.93.;.;.


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7.93.;.3. 0ffectivit'$ A cease$and$desist order shall 'eco#e effective thirty (3 days uponreceipt of such order (e?cept in the case of a cease$and$desist order issued upon

consent) "hich shall 'eco#e effective at the ti#e specified therein and shall re#ain

effective and enforcea'le as provided therein) e?cept to such e?tent as it is stayed)

#odified) ter#inated) or set aside 'y action of the C-A.

1.93.3. &emporar' ssuance of +rder :ithout 5earin.$ Pendin! the holdin! and co#pletion of ahearin! as provided for a'ove) the C-A #ay issue a cease and desist order that shall 'eco#e

effective upon receipt of such order 'y the SCC) should it deter#ine that

7.93.3.7. he violation or threatened violation or the unsafe or unsound practice or practices) asspecified in the notice of char!es served upon the SCC) or the continuation thereof) is

li1ely to

7.93.3.7.7. Cause insolvency or si!nificant dissipation of assets or earnin!s of the SCC) or

7.93.3.7.;. *ea1en the condition of the SCC or other"ise pre%udice the interests of its#e#'er$depositors.

7.93.3.;. he SCCs 'oo1s and records are inco#plete or inaccurate that

7.93.3.;.7. he Authority is una'le) throu!h the nor#al supervisory process) to deter#ine thefinancial condition of that SCC or

7.93.3.;.;. he details or the purpose of any transaction or transactions #ay have an adverse#aterial effect on the financial condition of the SCC.

1.93.4. 0ffectivit' of &emporar' +rder :ithout 5earin.$ Any te#porary cease and desist order

issued under Section 7;.=.3 of this 4anual is in force and in effect

7.93.>.7. @nless set aside) li#ited) or suspended 'y a court of la" or

7.93.>.;. @ntil the earlier occurrence of any of the follo"in! circu#stances

7.93.>.;.7. he co#pletion of the proceedin!s initiated in Section =.>.> a'ove in connection"ith the notice of char!es or

7.93.>.;.;. he date the C-A deter#ines that the circu#stances or violations for "hich theOrder has 'een issued) no lon!er e?ist.

1.93.5. ai!ure to Comp!'$ Should the SCC fail to co#ply "ith the cease$and$desist order) the C-A

#ay revo1e the license to operate as SCC or cancel the cooperatives re!istration.

ARTICLE 12.TRANSITORY PROVISIONS

Section 1.94. T67:@


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S5


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Approved per CA *oard Reso!ution 8o$ 3@7 S-@>>B$

LECIRA V. #UAREChair"an

SALAMAN D. MANGCA FULGENCIO A. VIGARE, #R.Ad"inistrator Ad"inistrator

MANUEL C. LAPEA SEGFREDO O. BUAGASAd"inistrator Ad"inistrator

ROSALINDA E. VILLASECA BEN#AMIN T. YUAd"inistrator Ad"inistrator

Recommendin. Approva!$

MARGARITO B. TEVES%ecretar) of -inance

ApprovedH

GLORIA MACAPAGAL ARROYO

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