Insurance (Insurance Commission) and Cooperatives

(Cooperative Development Authority), Banking and

Financial Institutions (BSP)

In Partial Fulfillment of the Requirements for

Business Logic (GE Elec 6)

Submitted By:
Czaryna Jewel Eugenio
Jasnieh Muriel Galang
Shiela Marie Macalong
Cindy Mauricio
Princess Ann Pahati
Jhoanna Petines
Christine Raiz
Alessandra Jean Rivera
Eriel Mae Vega
BSA 3A
I. Insurance (Insurance Commission)
A. Background
During the Pre-Hispanic Era, the concept of insurance as we know it today is non-
existent. The Pre-Hispanic Filipinos, relying mostly on hunting and gathering for their
subsistence, did not have the need for it as they are more concerned on how they will
survive. Thus, every loss of a family or tribe member was borne alone by the person,
family, or tribe where the deceased belonged to.

When the Spaniards came and colonized our country, insurance, in its present
concept, was introduced in the Philippines. The Lloyd’s of London, simply known as
Lloyd’s, is an insurance market located in London’s primary financial district, the City of
London. It introduced the concept of insurance to the Philippines by appointing
Strachman, Murray & Co., Inc. as its representative in the country.

Along with the introduction of the insurance industry in the country came the need
for laws to regulate it. During the Spanish colonization, the laws on insurance were found
in Title VII of Book II and Section III of Title III of Book III of the Spanish Code of
Commerce; and in Chapters II and IV of Tile XII of Book IV of the Spanish Civil Code
of 1889.

The introduction of the concept of insurance protection brought about by the

establishment of Strachman, Murray & Co., Inc. in the Philippines Islands stimulated the
influx of foreign insurance companies in the country. In 1898, life insurance was
introduced with the entry of Sun Life Assurance of Canada in the local insurance market.

Not long after, in 1906, the first domestic non-life insurance company, the Yek
Tong Lin Insurance Company, was organized. Shortly after, the Insular Life Assurance
Co., Ltd., the first domestic life insurance company in the country, was established in
1910.

Due to the fast-paced growth of the insurance industry in the Philippines, the
Philippine Legislature, on December 11, 1914, enacted Act 2427, also known as the
Insurance Act. This Act took effect on July 1, 1915 and repealed the provisions of the
Spanish Code of Commerce on Insurance. Under the Insurance Act, the Insular
Treasurer, in addition to his official title, was designated as the Insurance Commissioner
ex-officio. The government agency which supervised insurance business in the country
was called the Insurance Division of the Bureau of Treasury.
 The viability of the insurance market in the Philippines encouraged more foreign
insurance companies to open shop in the country. In 1939, the Union Insurance Society
of Canton appointed Russel & Surgis as its agent in Manila, transacting business limited
to non-life insurance.

During the Second World War, the Insurance Division was separated from the
Bureau of Treasury and attached to the Bureau of Banking. After the war, the Division
returned to the Bureau of Treasury. However, in 1947, the government saw the synergy
and practical advantage of merging Insurance Division with the Bureau of Banking.
Hence, the former was detached once more from the Bureau of Treasury and re-merged
with the Bureau of Banking.

As the industry prospered, the state recognized the need to establish an

independent office to administer all matters pertaining to the country’s insurance
industry. Therefore, on January 3, 1949, along with the formal opening of the Central
Bank of the Philippines, the Bureau of Banking was renamed as the Office of the
Insurance Commissioner, by virtue of Republic Act No. 275. Likewise, the Bank
Commissioner and Assistant Bank Commissioner were renamed to Insurance
Commissioner and Assistant Insurance Commissioner, respectively

On December 18, 1974, Presidential Decree No. 612 was promulgated, ordaining
and instituting the Insurance Code of the Philippines, thereby repealing Act 2427 or the
Insurance Act. Presidential Decree Nos. 63, 123, and 317 were issued, amending PD 612.
Among other things, Presidential Decree No. 63 provided that the Office of the Insurance
Commissioner be renamed as the Insurance Commission. Finally, on June 11, 1976,
Presidential Decree No. 1460 took effect and consolidated all insurance laws into a single
code – resulting in what we now know as the Insurance Code of 1978.

The dynamic environment of the insurance industry saw the enactment on July 27,
2009 of Republic Act No. 9829, otherwise known as the Pre-Need Code of the
Philippines. By virtue of the Pre-Need Code, the regulation and supervision of all pre-
need companies conducting business in the country is vested on the Insurance
Commission.

On August 15, 2013, Republic Act No. 10607, otherwise known as the Amended
Insurance Code, was signed by President Benigno S. Aquino III. One of the amendments
included in the said law is the progressive increase of capital requirements for life and
non-life insurance companies every three years until 2012.
 The revisions embodied in the Amended Insurance Code are intended to reinforce
the provisions of the previous code so as to further strengthen the insurance industry and
ensure the economic viability and financial stability of companies operating in the
country, to the end that each and every Filipino is amply protected and secured.

B. Mandate
To regulate and supervise the insurance, pre-need, and HMO industries in accordance
with the provisions of the Insurance Code, as amended, Pre-Need Code of the Philippines, and
Executive Order No. 192 (s. 2015)

❖ Objectives
❖ To promote growth and financial stability of insurance, pre-need, and HMO
companies
❖ To professionalize insurance, pre-need, and HMO services, and develop
insurance, pre-need, and HMO consciousness among the general populace
❖ To establish a sound national insurance market
❖ To safeguard the rights and interest of the insuring public, pre-need and HMO
customers
❖ Vision

Strong, sustainable and globally competitive regulated entities, as pillars of the economy,
to serve every Filipino.

❖ Mission

We are committed to implement prudent and progressive regulatory and supervisory

policies at par with international standards.

❖ Core Values
➢ Integrity
■ The Insurance Commission upholds the highest standard of honesty and
transparency in the fulfillment of its duties and services.
➢ Commitment
■ We sustain highest global standards and best practices in regulation and
supervision.
➢ Responsibility
■ In the achievement of its mandate, the Insurance Commission exercises
accountability, dedication and drive
C. Roles, Structure, and Authorities

Roles

The Insurance Commission is a regulatory body responsible for overseeing and

supervising the insurance industry within a country. Its roles may vary slightly depending on the
country, but the core functions typically include the following:

1. Regulation and Supervision of Insurance Entities

The Insurance Commission (IC) ensures that insurance companies, intermediaries,

mutual benefit associations, and pre-need companies comply with the Insurance Code
and related laws. It issues licenses, monitors financial health, and oversees operations to
protect policyholders.

2. Consumer Protection

The IC safeguards policyholders by ensuring fair practices in the insurance and pre-need
industries. It resolves complaints between policyholders and insurers, educates the public
about their rights, and provides guidance on insurance policies and pre-need plans.

3. Enforcement of Insurance Laws

As mandated by the Insurance Code of the Philippines (Republic Act No. 10607), the IC
enforces insurance laws, rules, and regulations. It imposes administrative sanctions and
penalties on non-compliant entities or individuals.

4. Approval of Insurance and Pre-Need Products

The IC reviews and approves insurance policies, pre-need plans, and other products to
ensure they comply with legal standards, are fair to consumers, and meet the required
coverage.

5. Market Development

The IC promotes a stable and inclusive insurance and pre-need market. It encourages
innovation, competition, and the development of microinsurance and similar products to
serve the needs of marginalized sectors.

6. Risk Management Oversight

The IC monitors risks within the insurance and pre-need industries by evaluating
insurers’ and pre-need providers' risk management systems, ensuring solvency, and
mitigating systemic risks.

7. Data Collection and Reporting

The IC gathers, analyzes, and publishes data on the insurance and pre-need sectors. It
releases annual reports, statistics, and financial statements to inform stakeholders and
support policy decisions.

8. Policy and Regulation Development

The IC drafts and updates regulations to align with international standards and address
emerging trends. It advises the government on insurance-related policies and legislative
reforms.

9. Promotion of Financial Inclusion

The IC actively promotes financial inclusion by ensuring that insurance products, such as
microinsurance, are accessible and affordable for low-income and underserved
populations in the Philippines.

10. Arbitration and Dispute Resolution

The IC provides a mechanism for resolving disputes between policyholders and insurance
companies or pre-need providers. It ensures a fair, efficient, and cost-effective resolution
process for all parties involved.

11. Oversight of Reinsurance Activities

The IC supervises reinsurance transactions to ensure that insurers manage their risks
appropriately. It evaluates the financial stability and reliability of reinsurance companies
to protect local insurers and policyholders.

12. Anti-Fraud Measures

The IC combats fraudulent activities within the insurance and pre-need industries by
implementing anti-fraud regulations, conducting investigations, and cooperating with law
enforcement agencies.

13. Crisis Management and Intervention

The IC intervenes during crises, such as when an insurer faces insolvency or financial
instability. It may implement rehabilitation plans or take over management to protect
policyholders and maintain industry stability.

14. Monitoring Technological Innovations

The IC regulates the use of technology in the insurance sector, such as digital platforms,
InsurTech solutions, and online sales. It ensures these innovations comply with
regulations and uphold consumer protection.
 15. Collaboration with International and Regional Bodies

The IC engages with international organizations, such as the International Association of

Insurance Supervisors (IAIS), to harmonize standards, adopt best practices, and
strengthen cross-border regulatory cooperation.

16. Training and Capacity Building

The IC conducts training programs for industry professionals and its staff to enhance
technical skills, promote ethical standards, and prepare for emerging trends and
challenges in the insurance sector.

Structure

The Insurance Commission of the Philippines operates with a structured organization that
ensures effective regulation, supervision, and development of the insurance and pre-need
industries. Below is an overview of its organizational structure:

1. Office of the Insurance Commissioner

The Insurance Commissioner serves as the chief executive and policy-maker of the
Commission, overseeing its operations and ensuring compliance with the Insurance Code
and related laws. The Commissioner represents the Commission in various capacities,
including government and international engagements, while also setting regulatory
policies and strategic directions.

As of 2024, the Commissioner of the Insurance Commission is Atty. Reynaldo Averilla

Regalado, who was appointed in early 2024.

2. Deputy Insurance Commissioners

The Deputy Insurance Commissioners assist the Commissioner in managing specific

areas of the Commission's operations. They typically oversee key functions such as
technical services, legal services, regulatory and financial examinations, and
administrative and support services, ensuring that the agency runs smoothly and
efficiently.

The Insurance Commission of the Philippines has several key deputy insurance
commissioners serving under Insurance Commissioner Reynaldo A. Regalado. Among
them are:

● Atty. Randy G. Serrano, who plays an active role in various capacities,

including serving as the keynote speaker at industry events.
 ● Atty. John A. Apatan, who is involved as the Ex-Officio Conservator and
Division Manager for Conservatorship, Receivership, and Liquidation.

3. Legal Services Division

This division handles all legal matters, including interpreting insurance laws, resolving
disputes, and representing the Commission in litigation. It ensures compliance with
regulations, provides legal advice to industry stakeholders, and plays a crucial role in
drafting and updating policies and guidelines.

4. Financial Examination Division

The Financial Examination Division conducts audits and examinations of insurance and
pre-need companies to assess their financial health and solvency. It ensures compliance
with financial regulations and oversees the implementation of the Risk-Based Capital
(RBC) framework, which maintains the stability of the industry.

5. Actuarial Division

This division is responsible for evaluating the actuarial soundness of insurance and pre-
need products. It ensures that reserves are sufficient to meet future liabilities and that
products comply with technical and regulatory requirements, protecting policyholders
and plan holders.

6. Licensing and Regulation Division

The Licensing and Regulation Division manages the issuance, renewal, suspension, and
revocation of licenses for insurance companies, pre-need providers, and intermediaries. It
monitors compliance with licensing requirements and ensures that only qualified entities
operate in the industry.

7. Claims Adjudication Division

This division serves as a quasi-judicial body, resolving disputes and complaints between
policyholders or plan holders and insurance or pre-need companies. It provides an
efficient and impartial process for adjudicating claims, protecting consumer rights and
maintaining trust in the industry.

8. Market Conduct Division

The Market Conduct Division monitors the behavior of insurance and pre-need
companies to ensure compliance with ethical and fair practices. It safeguards consumer
interests by ensuring that companies act transparently and treat clients fairly in all
transactions.

9. Microinsurance and Financial Inclusion Division

This division promotes the development of microinsurance products to serve low-income

and marginalized groups. It works to ensure financial inclusion by making insurance
more accessible and affordable for underserved populations, fostering social protection.

10. Information Technology Division

The Information Technology Division develops and manages the Commission's digital
platforms and database systems. It implements IT solutions to streamline regulatory
processes, enhance efficiency, and improve service delivery to the public and
stakeholders.

11. Administrative and Human Resources Division

This division handles the Commission’s administrative needs, including staff recruitment,
training, and performance evaluation. It ensures that support services operate efficiently
and that employees are equipped to fulfill the Commission’s objectives.

12. Public Assistance and Information Division

The Public Assistance and Information Division provides information and assistance to
the public regarding insurance and pre-need services. It handles inquiries, resolves
complaints, and educates consumers about their rights and responsibilities in insurance
transactions.

13. Planning and Management Services Division

This division develops and implements strategic plans and programs to achieve the
Commission's goals. It monitors the performance and effectiveness of policies and
initiatives, ensuring the alignment of the Commission’s activities with its mission.

14. Regional Offices

The Commission operates regional offices across the Philippines to provide services at
the local level. These offices handle licensing, public assistance, and information
dissemination, ensuring wider coverage and easier access to the Commission’s services.

15. Specialized Units and Committees

 The Commission may establish specialized units or committees to address specific issues,
such as combating fraud, managing disaster risks, and enhancing international
cooperation. These units work on focused tasks to strengthen the industry and respond to
emerging challenges.

Authorities

The Insurance Commission of the Philippines is vested with specific authorities to

regulate and oversee the insurance and pre-need industries in the country. These authorities,
derived from the Insurance Code of the Philippines (Republic Act No. 10607) and the Pre-Need
Code of the Philippines (Republic Act No. 9829), include the following:

1. Licensing Authority

The IC has the authority to issue, suspend, or revoke licenses for insurance companies,
pre-need companies, agents, brokers, actuaries, and other intermediaries operating in the
Philippines.

2. Regulatory and Supervisory Authority

The IC supervises the operations of insurance and pre-need companies to ensure

compliance with the law. This includes monitoring financial solvency, operational
practices, and adherence to established regulations.

3. Rule-Making Authority

The IC has the power to issue circulars, guidelines, and rules to implement the provisions
of the Insurance Code and Pre-Need Code. These rules aim to address industry challenges
and adapt to emerging trends.

4. Adjudicatory Authority

The IC acts as a quasi-judicial body with the authority to hear and decide complaints,
disputes, or controversies involving insurance or pre-need plans. Its decisions can be
appealed to the Court of Appeals.

5. Examination Authority

The IC is authorized to conduct regular or special examinations of the financial condition

and business conduct of insurance companies, pre-need companies, and other regulated
entities.

6. Approval Authority
 The IC has the power to review and approve insurance policies, pre-need plans, and rates
to ensure they comply with legal requirements and provide adequate protection for
policyholders and plan holders.

7. Intervention Authority

In cases of financial distress, insolvency, or mismanagement, the IC can intervene by

taking control of an insurance or pre-need company to protect policyholders, ensure
stability, and rehabilitate or liquidate the company as necessary.

8. Sanctioning Authority

The IC can impose administrative sanctions, fines, or penalties on entities or individuals

who violate the provisions of the Insurance Code, Pre-Need Code, or related rules and
regulations.

9. Anti-Fraud Authority

The IC is empowered to investigate and take action against fraudulent practices in the
insurance and pre-need industries. It collaborates with other agencies to combat insurance
fraud.

10. Reinsurance Oversight Authority

The IC oversees reinsurance transactions and ensures that local insurers have adequate
reinsurance coverage from financially stable reinsurance companies.

11. Consumer Protection Authority

The IC has the mandate to ensure fair treatment of policyholders and pre-need plan
holders. It facilitates dispute resolution, educates the public on their rights, and ensures
transparency in industry practices.

12. Policy-Making Authority

The IC has the authority to recommend and implement policies to improve the insurance
industry. It works closely with the government to draft amendments to laws and adapt to
global best practices.

D. Key Applicable Laws

The Insurance Commission of the Philippines operates under several key laws and
regulations that establish its authority and guide its functions. These laws ensure the proper
regulation, supervision, and development of the insurance and pre-need industries. Below are the
key applicable laws:

1. Presidential Decree No. 612 (The Insurance Code of the Philippines)

This law serves as the foundational legal framework for regulating insurance operations
in the Philippines. It covers a wide range of topics, including the establishment of
insurance companies, the licensing of insurance agents and brokers, the requirements for
financial stability, and the rights and obligations of both insurers and policyholders. The
Insurance Commission is empowered by this law to oversee the conduct of the industry,
ensuring compliance with financial, legal, and regulatory requirements.

2. Republic Act No. 10607 (Amendments to the Insurance Code)

Enacted in 2013, RA 10607 introduced significant amendments to the original Insurance

Code to update and modernize the regulation of the insurance industry. The amendments
include raising the minimum capitalization requirements for insurance companies,
expanding the powers of the Insurance Commission, improving consumer protection
measures, and enhancing solvency standards. It also aimed to align the Philippine
insurance industry with international standards to encourage competitiveness and protect
policyholders more effectively.

3. Republic Act No. 9829 (The Pre-Need Code of the Philippines)

This law governs the regulation of pre-need companies offering products such as
educational, pension, and memorial plans. Pre-need plans involve long-term financial
commitments, so RA 9829 was enacted to safeguard plan holders' interests by setting
minimum capital requirements, regulating trust fund management, and ensuring the
financial viability of pre-need companies. The Insurance Commission monitors these
companies to ensure that they meet their obligations to plan holders, protecting
consumers from potential financial losses.

4. Republic Act No. 10601 (The HMO Law)

Although health maintenance organizations (HMOs) provide healthcare services rather

than traditional insurance, this law brought HMOs under the supervision of the Insurance
Commission. The law ensures that HMOs are financially capable of delivering the
healthcare services they promise to their members. It mandates the proper capitalization
and financial stability of HMOs and establishes guidelines for their operations, ensuring
that HMO members receive the medical benefits they are entitled to.

5. Republic Act No. 9178 (Barangay Micro Business Enterprises Act)

This law provides incentives to barangay micro-business enterprises (BMBEs) by
exempting them from certain taxes and offering financial support through government
institutions. It also facilitates the provision of micro-insurance products to these small
businesses, which helps protect them from risks such as property loss or business
interruption. The Insurance Commission regulates the micro-insurance industry, ensuring
that the products offered are affordable, accessible, and suitable for small enterprises.

6. Republic Act No. 10000 (Agri-Agra Reform Credit Act of 2009)

This law requires banks and insurance companies to allocate a portion of their investable
funds to the agriculture and agrarian reform sectors. The goal is to promote financial
support for these critical sectors, which are often underserved by the financial industry.
The Insurance Commission oversees compliance with this law, ensuring that insurance
companies contribute to agricultural development through targeted financial instruments
and insurance products tailored to farmers and agrarian reform beneficiaries.

7. Republic Act No. 10641 (Liberalization of the Entry of Foreign Insurers)

RA 10641 allows foreign insurance companies to operate in the Philippines, subject to

specific regulatory conditions. The law aims to increase competition in the local
insurance market, encouraging innovation and improving the quality of services provided
to consumers. Foreign insurers must meet certain capitalization and operational
requirements set by the Insurance Commission, ensuring they are financially stable and
able to protect policyholders' interests.

8. Republic Act No. 11127 (National Payment Systems Act)

While this law primarily governs payment systems in the country, it has important
implications for the insurance industry, particularly in how insurance companies handle
premium payments and disbursements. The Insurance Commission ensures that insurers
comply with the legal requirements for handling electronic payments, safeguarding the
integrity and security of financial transactions in the insurance sector, and protecting
consumers' financial information.

9. Republic Act No. 10173 (Data Privacy Act of 2012)

The Data Privacy Act mandates the protection of personal information collected and
processed by businesses, including insurance companies. Insurers collect a vast amount
of personal and financial information from policyholders, making them subject to
stringent data privacy regulations. The Insurance Commission ensures that insurance
companies comply with this law by implementing data security measures, appointing data
protection officers, and adhering to guidelines that protect consumers' personal data from
misuse or unauthorized access.
 10. Republic Act No. 7641 (Retirement Pay Law)

This law mandates the payment of retirement benefits to qualified private-sector

employees. Many employers use group insurance policies to fund retirement benefits, and
insurance companies are often involved in providing retirement-related financial
products. The Insurance Commission oversees these retirement products, ensuring that
insurance companies are financially capable of meeting their obligations to retirees and
that retirement plans comply with legal requirements to protect the interests of
employees.

E. Key Regulatory Requirements and Penalties for Non-Compliance

1. Capitalization Requirements

● Requirement: Insurance companies must meet minimum capitalization standards as

defined under the Amended Insurance Code (Republic Act No. 10607).
● Penalty for Non-Compliance: Failure to meet capitalization requirements can lead to
suspension or revocation of licenses, as well as fines and legal action.

2. Solvency and Reserve Requirements

● Requirement: Insurance firms are required to maintain a certain level of reserves and
comply with solvency ratios to ensure they can meet their liabilities. The Insurance
Commission periodically assesses this through Risk-Based Capital (RBC) ratios and
other solvency metrics.
● Penalty for Non-Compliance: Companies failing to meet solvency standards may face
fines, restrictions on business activities, and eventual suspension or liquidation.

3. Licensing and Registration

● Requirement: Insurance companies, brokers, agents, and other intermediaries must

obtain licenses from the Insurance Commission to operate legally in the Philippines.
● Penalty for Non-Compliance: Operating without proper licensing can lead to penalties,
suspension, or permanent ban from conducting insurance business, alongside possible
criminal charges.

4. Anti-Money Laundering (AML) Compliance

● Requirement: Insurance companies are required to implement AML programs in line

with the Anti-Money Laundering Act (AMLA) of 2001 and subsequent amendments,
including customer due diligence (CDD) and reporting suspicious transactions.
 ● Penalty for Non-Compliance: Failure to comply with AML obligations can result in
substantial fines, imprisonment of responsible officers, or cancellation of the company’s
operating license.

5. Corporate Governance and Compliance Reporting

● Requirement: Insurance companies must adhere to IC’s corporate governance standards,

ensuring the presence of an independent board, internal audit functions, and timely
reporting of financial statements and annual reports.
● Penalty for Non-Compliance: Non-compliance can lead to administrative fines, public
reprimands, and restrictions on business activities.

6. Product and Policy Approval

● Requirement: Insurance products and policies must be filed and approved by the
Insurance Commission before being marketed to the public. This includes ensuring policy
terms, premium rates, and benefits are fair and transparent.
● Penalty for Non-Compliance: Selling unapproved products can lead to suspension,
fines, and even cancellation of the insurer's license.

7. Claims Processing and Settlement Standards

● Requirement: The Insurance Code mandates insurers to process claims within a

specified time frame and adhere to fair claims settlement practices. Insurers must respond
to claims within a 15- to 30-day period, depending on the claim's complexity.
● Penalty for Non-Compliance: Delays or denial of legitimate claims can result in fines,
additional interest on claims payable, and potential civil lawsuits by affected
policyholders.

8. Data Privacy Compliance

● Requirement: Under the Data Privacy Act of 2012, insurance companies are required to
protect policyholders' personal information and have measures in place for data security
and privacy.
● Penalty for Non-Compliance: Violations can lead to penalties from both the Insurance
Commission and the National Privacy Commission, including fines, license suspension,
or revocation, as well as potential criminal charges.

9. Timely Submission of Reports and Documents

● Requirement: Insurance companies must submit various reports to the IC, including
audited financial statements, actuarial reports, and annual compliance certifications.
 ● Penalty for Non-Compliance: Failure to submit required documentation can lead to
penalties, including late fees, restrictions on operations, or possible revocation of the
company’s license.

10. Consumer Protection and Market Conduct

● Requirement: Insurers must adhere to fair practices regarding advertising, sales, and
disclosures to protect consumers. Misleading advertisements, misrepresentation, and
fraud are strictly prohibited.
● Penalty for Non-Compliance: Violations may lead to fines, suspension, mandatory
corrective actions, and restrictions on the sale of certain products.

F. Latest Updates and News

IC ISSUES FIRST TAKAFUL OPERATOR'S LICENSES

The Insurance Commission (IC) has issued the first takaful operator's licenses to Pru Life
Insurance Corporation of U.K. and Etiqa Life and General Assurance Philippines, Inc. This
licensure is the first under the IC's Circular Letter No. 2024-13, providing guidelines for Takaful
Window Operation.

Takaful, an Islamic insurance model based on Sharia law, involves members contributing to a
mutual fund to protect against loss or damage, instead of paying traditional premiums. The
management of takaful funds is conducted by operators who charge fees for various services,
including marketing and claims management.

Insurance Commissioner Reynaldo A. Regalado emphasized that takaful is accessible to all

individuals, irrespective of their faith, promoting financial inclusivity. The IC plans to introduce
microtakaful, akin to microinsurance, to further enhance accessibility to affordable, Sharia-
compliant financial coverage.

II. Cooperatives (Cooperative Development Authority)

A cooperative is an autonomous and 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 risks and benefits of the
undertaking in accordance with the universally accepted cooperative principles.

A. Introduction
 The Cooperative Development Authority (CDA) is a proactive and responsive lead
government agency for the promotion of sustained growth and full development of the
Philippines cooperatives for them to become broad - based instruments of social justice, equity
and balanced national progress.

History of the Cooperative Development Authority (CDA)

● 1915 - The Rural Credit Cooperatives Association Act (P.A. 2508) was enacted to
promote credit cooperatives, but the responsibility was transferred to the Bureau of
Agriculture on 1916.
● 1940 - The National Cooperatives Administration (NCA) was created in 1941,
unfortunately, World War Il hindered the operations of many cooperatives. NCA was re-
enacted in 1945, but was converted to the National Cooperatives and Small Business
Corporation (NSCB) in 1947.
● 1950 - the NSCB was abolished and replaced by the Cooperatives Administration Office
(CAO) under the Department of Commerce and Industry.
● 1952 - Several measures were enacted in 1952 such as the Agricultural Credit and
Cooperative Financing Administration (ACCFA) and the Code of Agrarian Reform.
● 1957 - In 1957, the Philippine Non-agricultural Cooperatives Act was enacted that
governed all non-agricultural cooperatives.
● 1968 - The Agriculture Cooperative Development Office was created in 1968
● 1972 - During the martial law, Presidential Decree No. 1 abolished the CAO and
organized the Bureau of Cooperatives Development or BCOD.
● 1986 - The 1986 people power revolution made way for cooperative leaders to lobby for
the adoption of a cooperative-friendly legislation.
● 1987 - The Philippine Constitution was enacted and in Section 15 of Article XII
mandated Congress to create an agency to promote the viability and growth of
cooperatives as instruments of equity, social justice and economic development. The
Bureau of Agricultural Cooperatives Development or BACOD was created in 1987 under
Executive Order No. 116.
● 1988 - In 1988, the late Cong. Pedro P. Romualdo, Representative of the Province of
Camiguin, authored a Cooperative Code house bill, together with the late Cebu
Representative Cong. Pablo P. Garcia as its co-author. The late Sen. Aquilino Q.
Pimentel, Jr. authored and co-sponsored a bill to enact the Cooperative Code. The late
Senator Heherson Alvarez authored the CDA Charter bill. After the twin measures were
introduced in the Senate Floor by both solons, both measures were sponsored by the late
Senator Agapito "Butz" Aquino being the Chairman of the Senate Committee on
Cooperatives.
● 1990 - The bill was passed and signed into law by the late President Corazon Aquino, on
March 10, 1990, the Republic Act No. 6938 or the Cooperative Code of the Philippines,
and Republic Act No. 6939 or the CDA Charter.
 ● 2019 - The amendment of the CDA Charter was initiated by Senator Juan Miguel "Migz"
Zubiri, which paved the way for the passage of RA 11364 or the Cooperative
Development Charter of 2019, which strengthened the CDA. It was signed into law by
President Rodrigo Roa Duterte last August 08, 2019 and took effect on August 29, 2019.

Categories of Cooperative
Cooperative shall be categorized according to membership and territorial consideration. In terms
of membership, cooperatives shall be categorized into:
1. Primary - the members of which are natural persons.
2. Secondary - the members of which are primaries.
3. Tertiary - the members of which are secondary cooperatives.

Thus, those with cooperative memberships are considered federations or unions as the
case may be. In terms of territory, cooperatives shall be categorized according to areas of
operation which may or may not coincide with the political subdivisions of the country. Those
organized by minors shall be considered a laboratory cooperative and must be affiliated with a
registered cooperative. It is governed by special guidelines promulgated by the CDA.

Members of Cooperative
A cooperative has two kinds of members: regular members and associate members.
1. A regular member is one who has complied with all the membership requirements and
entitled to all the rights and privileges of membership as stated in the Cooperative Code
and the cooperative by laws.
2. An associate member has no right to vote and be voted upon and is entitled only to such
rights and privileges provided by the cooperative's by laws.

B. Objectives
The primary objective of every cooperative is to help improve the quality of life of its
members. Towards this end, the cooperative shall aim to:
1. Provide goods and services to its members to enable them to attain increased income,
savings, investments, productivity, and purchasing power, and promote among
themselves equitable distribution of net surplus through maximum utilization of
economies of scale, cost-sharing and risk-sharing;
2. Provide optimum social and economic benefits to its members;
3. Teach them efficient ways of doing things in a cooperative manner;
4. Propagate cooperative practices and new ideas in business and management;
5. Allow the lower income and less privileged groups to increase their ownership in the
wealth of the nation; and
6. Cooperate with the government, other cooperatives and people-oriented organizations to
further the attainment of any of the foregoing objectives.
Mandate
Promote the viability and growth of cooperatives as instruments of equity, social justice and
economic development in fulfillment of the mandate in section 15, Article XII of the
Constitution.

Vision
By 2025, CDA is ASEAN’s benchmark of EXCELLENCE in Cooperative Development.

Mission
To provide developmental, regulatory and quasi-judicial services to cooperatives thereby giving
access to socio-economic opportunities to their members.

Empowering Cooperatives, Empowering the Filipino People!

Core Values
1. Excellence - Giving one’s best performance and achieve the desired outcome through
effective and efficient management of resources.
2. Commitment - High dedication and proactive involvement in the realization of the
Agency’s mandate.
3. Integrity - Maintain personal conduct, beyond reproach.
4. Teamwork - Working collectively and harmoniously to achieve synergy in an
environment conducive to the achievement of organizational goals.

CDA Logo
The CDA Logo has a striking resemblance to the logo of the President of the Philippines
as it suggests that the CDA, upon creation, was placed under the Office of the President —
giving historical significance to the emergence of a lead agency of the government tasked to
promote the viability and growth of cooperatives as instrument of equity, social justice and
economic development.
As we likewise adopted the four elemental colors of the Philippine Flag, the meaning of
the colors are inferred to be the same as in the CDA logo.
1. Blue - represents traits such as justice, peace, sacrifice, and truth .
2. Red - symbolizes valor, courage, and patriotism.
3. White - stands for fraternity, liberty, and equality.
4. Yellow - on the other hand is symbolic of freedom, unity, democracy, and sovereignty.
5. Outline of three persons (arranged in a triangle linking their arms) - symbolizes the
three sectors working hand in hand towards nation building: the Public, the Private
(which includes POs, NGOs and CSOs) and the emerging third sector – the Co-op Sector.
 6. Seven cogs in the wheel of industry - represent the six clusters under RA 11364 and the
CDA as an organization.
7. Eight rays of the sun - symbolize the seven statements of the cooperative identity and
the principle of subsidiarity.

C. Roles, Structure, and Authorities

Roles and Functions

Developmental Functions

1. Formulates, adopt and implement integrated and comprehensive plans and programs on
cooperative development consistent with the national policy on cooperatives and the
overall socio-economic development plans of the Government;
2. Develops and conduct management and training programs upon request of cooperatives
that will provide members of cooperatives with the entrepreneurial capabilities,
managerial expertise, and technical skills required for the efficient operation of their
cooperatives and inculcate in them the true spirit of cooperativism; and
3. Provides, when necessary, technical and professional assistance to ensure the viability
and growth of cooperatives with special concern for agrarian reform, fishery and
economically depressed sectors.

Regulatory Functions

1. Registers all cooperatives and their federations and unions, including their division,
merger, consolidation, dissolution or liquidation. It shall also register the transfer of all or
substantially all of their assets and liabilities and such other matters as may be required
by the Authority;
2. Requires all cooperatives, their federations and unions to submit their annual financial
statements, duly audited by certified public accountants, and general information sheets;
and
3. Orders the cancellation after due notice and hearing of the cooperative’s certificate of
registration for non-compliance with the administrative requirements and in cases of
voluntary dissolution.

RA6939 has granted the CDA the powers, functions and responsibilities:

1. Formulate, adopt and implement integrated and comprehensive plans and programs on
cooperative development consistent with the national policy on cooperatives and the
overall socio-economic development plans of the Government;
2. Develop and conduct management and training programs upon request of cooperatives
that will provide members of cooperatives with the entrepreneurial capabilities,
managerial expertise, and technical skills required for the efficient operation of their
cooperatives and inculcate in them the true spirit of cooperativism and provide, when
necessary, technical and professional assistance to ensure the viability and growth of
cooperatives with special concern for agrarian reform, fishery and economically
depressed sectors;
3. Support the voluntary organization and consensual development of activities that promote
cooperative movements and provide assistance towards upgrading managerial and
technical expertise upon request of the cooperatives concerned;
4. Coordinate the efforts of the local government units and the private sector in the
promotion, organization and development of cooperatives;
5. Register all cooperatives, their federations and unions, including their divisions,
consolidations, dissolutions or liquidation. It shall also register the transfer of all or
substantially all of their assets and liabilities and such other matters as may be required
by the authority;
6. Require all cooperatives, their federations and unions to submit their annual financial
statements, duly audited by certified public accountants, and general information sheets;
7. Order the cancellation after due notice and hearing of the cooperatives certificate of
registration for non-compliance with administrative requirements and in case of voluntary
dissolution;
8. Assist cooperatives in arranging for financial and other forms of assistance under such
terms and conditions as are calculated to strengthen their viability and autonomy;
9. Establish extension offices as may be necessary and financially viable to implement this
Act. Initially, their shall be extension offices in the Cities of Dagupan, Manila, Naga,
Iloilo, Cebu, Cagayan de Oro and Davao;
10. Impose and collect reasonable fees and charges in connection with registration of
cooperatives;
11. Administer all grants and donations coursed through the Government for cooperative
development, without prejudice to the right of cooperatives to directly receive and
administer such grants and donations upon agreement with the grantors and donor
thereof;
12. Formulate and adopt continuing policy initiatives consultations with the cooperative
sector through public hearing;
13. Adopt rules and regulations for the conduct of its internal operations;
14. Submit an annual report to the President and Congress on the state of the cooperative
movement; and
15. Exercise such other functions as may be necessary to implement the provisions of
cooperative laws and, in the performance thereof, the Authority may summarily punish
for direct contempt any person guilty of misconduct in the presence of the Authority
 which seriously interrupts any hearing or inquiry with a fine of not more than Five
hundred pesos (P500.00) or imprisonment of not more than ten (10) days, or both. Acts
consisting indirect contempt as defined under Rule 71 of the Rules of Court shall be
punished in accordance with the said rule.

Structure

The Cooperative Development Authority (CDA) in the Philippines is led by a Board of Directors
with specific roles focused on promoting and regulating cooperatives. The CDA's board includes
the following roles and responsibilities:

1. Chairperson USEC Joseph B. Encabo: Leads the board in setting strategic direction
and overseeing the overall functioning of the CDA. The chairperson ensures that CDA's
activities align with its mission of promoting cooperative growth and development.
2. Board Members: Each board member, often holding the title of Assistant Secretary, has
oversight and leadership responsibilities in specific areas:
○ Asec. Pendatun B. Disimban focuses on legal and compliance issues to ensure
cooperatives adhere to regulations.
○ Asec. Abdulsalam A. Guinomla is involved in public relations, managing the
agency’s relationship with various cooperatives.
○ Asec. Myrla B. Paradillo focuses on cooperative development programs.
 ○ Asec. Virgilio R. Lazaga, M.D oversees health-related cooperative initiatives.
○ Asec. Vergel M. Hilario manages cooperative education and advocacy efforts.

The Board collectively works to support cooperatives through policy-making, regulation, and the
promotion of cooperative education and financial assistance, aiming for social equity and
economic growth through cooperative development.

Assistant Secretary Santiago S. Lim is the new Administrator of the Cooperative Development
Authority. Prior to his appointment at CDA, he was the Executive Vice President and Chief
Operating Officer of Small Business Corporation (SBCorp) and he served also as a member of
the Board of Directors of SBCorp for a combined six years. SBCorp is providing capacity
building and financing programs to the cooperative sector.

D. Key Applicable Laws

1. Cooperative Code of the Philippines (R.A. 9520)

The Cooperative Code of the Philippines, or Republic Act No. 9520, is the
cornerstone law that governs all cooperatives in the country. It provides a detailed
framework for the formation, operation, and dissolution of cooperatives, ensuring
they are run transparently and in the best interests of their members. The law
defines cooperatives in various categories—credit, consumer, agricultural,
workers’, and more—each with specific operational guidelines. The Code also
provides provisions on the rights and duties of cooperative members, including
voting rights, participation in decision-making, and obligations related to financial
management. It emphasizes the importance of proper governance structures,
including the roles of the Board of Directors, officers, and various committees.

Additionally, the law facilitates the growth of cooperatives by offering incentives

such as tax exemptions and financial support from the government.
Cooperatives are encouraged to engage in socially responsible activities that
contribute to the well-being of their communities. It also mandates regular audits
and financial reporting to ensure accountability and transparency in their
operations. The law contains provisions for conflict resolution within
cooperatives, establishing a system of mediation and arbitration. By outlining the
legal framework for the establishment and management of cooperatives, RA 9520
aims to foster cooperative development and make cooperatives a key tool in
socio-economic development.

2. Local Government Code of 1991 (R.A. 7160)

 The Local Government Code of 1991 (Republic Act No. 7160) gives local
government units (LGUs) the authority to support and promote cooperatives
within their respective regions. This law emphasizes the role of LGUs in
promoting cooperative development as a means of boosting local economies and
improving community welfare. It encourages the creation of Cooperative
Development Offices within LGUs to provide technical and financial assistance
to cooperatives. Through these offices, LGUs can help cooperatives access
training, legal assistance, and financial resources, thereby enabling their growth
and sustainability.

The law also provides fiscal incentives to cooperatives, allowing LGUs to grant
tax exemptions or subsidies to cooperatives operating within their jurisdiction.
Furthermore, the Local Government Code facilitates job creation and poverty
alleviation through cooperatives, which can contribute to local economic
development. By providing the framework for local governments to actively
engage in cooperative promotion, this law strengthens the cooperative movement
in the Philippines and ensures its integration into local economic development
plans.

3. National Economic and Development Authority (NEDA) Act (R.A. 10744)

Republic Act No. 10744 is aimed at integrating cooperatives into the national
economic development strategies of the Philippines. Under this law, the
National Economic and Development Authority (NEDA) is tasked with
ensuring that cooperatives are recognized as key drivers of economic growth and
development. The law promotes the participation of cooperatives in various
sectors, including agriculture, housing, and small and medium-sized enterprises
(SMEs). By encouraging cooperatives to engage in economic activities, the
government aims to boost both local and national economic performance,
particularly in underserved and rural areas.

The law also supports the creation of policies that facilitate the growth and
sustainability of cooperatives. NEDA works alongside other government agencies
to ensure that cooperatives have access to the resources they need, including
financing, training, and technology. It promotes the idea that cooperatives are not
just tools for economic growth but also instruments for social development,
providing a framework that ensures they are part of broader national efforts to
reduce poverty and foster inclusive growth.

4. Agriculture and Fisheries Modernization Act of 1997 (R.A. 8435)

 Republic Act No. 8435, also known as the Agriculture and Fisheries
Modernization Act (AFMA), aims to modernize the agricultural and fisheries
sectors in the Philippines. One of the primary mechanisms for achieving this goal
is the promotion of agricultural cooperatives. The law encourages the formation
of cooperatives within these sectors to improve productivity, income, and the
overall well-being of farmers and fisherfolk. AFMA outlines various support
mechanisms, including access to modern farming and fishing technologies,
financial assistance, and technical services to ensure the competitiveness of
Filipino agriculture in the global market.

The law emphasizes capacity-building programs for agricultural cooperatives,

ensuring that their members are well-equipped to manage and operate
cooperatives effectively. This includes the provision of training in cooperative
management, financial literacy, and other essential skills. By supporting
agricultural cooperatives, the AFMA contributes to rural development and helps
address challenges such as poverty, food security, and low agricultural
productivity. In doing so, it plays a key role in ensuring the sustainability of
agriculture and fisheries in the Philippines.

5. University of the Philippines Charter of 2008 (R.A. 9500)

Republic Act No. 9500, which is the University of the Philippines Charter of
2008, highlights the role of educational institutions in promoting cooperative
principles. It mandates the University of the Philippines (UP) to establish and
support cooperative education programs aimed at enhancing the knowledge and
skills of students and professionals in the cooperative sector. This initiative allows
UP to offer courses and training programs focused on cooperative management,
governance, and development, with the goal of nurturing future leaders in the
cooperative movement.

Moreover, the law emphasizes the importance of research in improving

cooperative practices and policies. It directs UP to collaborate with government
agencies, particularly the Cooperative Development Authority (CDA), to
conduct studies that would lead to better governance and more efficient
cooperative operations. The research generated by UP contributes to policy
formulation and the advancement of cooperatives in the country, making
cooperatives a stronger part of the national development agenda.

6. Philippine National Cooperative Bank Act (R.A. 6848)

Republic Act No. 6848 established the Philippine National Cooperative Bank
(PNCB) to provide specialized financial services for cooperatives across the
 country. The PNCB serves as the main financial institution supporting
cooperatives by offering low-interest loans, savings accounts, and other
financial products specifically designed for cooperative needs. Through this bank,
cooperatives can access much-needed capital for their operations and expansion,
ensuring that they have the financial resources to thrive and sustain their activities
in various sectors, including agriculture, retail, and housing.

PNCB also provides financial consultancy services to cooperatives, assisting

them in managing their finances more effectively and ensuring their long-term
financial health. This financial support is crucial in helping cooperatives compete
in the market and provide better services to their members. By offering targeted
financial products and services, the Philippine National Cooperative Bank plays a
vital role in enhancing the overall cooperative ecosystem in the Philippines.

7. An Act Establishing a Cooperative Development Fund (R.A. 9267)

Republic Act No. 9267 established the Cooperative Development Fund (CDF),
which is designed to provide financial assistance to cooperatives in their growth
and sustainability. The fund allocates resources for the capitalization and
development of cooperatives, particularly those in their early stages or those
requiring restructuring. The law enables the government to provide financial
support for cooperatives, especially those that contribute to poverty alleviation
and rural development.

Through this fund, the government aims to strengthen cooperatives by ensuring

they have the resources to operate efficiently and effectively. The CDF serves as a
vital mechanism for improving the access to credit for cooperatives, allowing
them to engage in income-generating projects and services for their members.
This law is part of the government’s broader efforts to foster a more robust
cooperative sector, which is seen as a key component of inclusive economic
growth and development.

8. Public Employment Service Office (PESO) Act of 1999 (R.A.8759)

Republic Act No. 8759, also known as the Public Employment Service Office
(PESO) Act of 1999, establishes PESO as the government agency responsible for
employment facilitation. One of PESO's key roles is to promote cooperative-
based employment, linking cooperatives with job seekers and facilitating
employment opportunities through their networks. PESO assists cooperatives by
matching members with job opportunities within the cooperative or in sectors that
align with cooperative operations, enhancing the overall employment rate and
economic opportunities.
 In addition to job matching, PESO provides training and technical assistance to
cooperatives, enabling them to build sustainable employment programs that
benefit their members. This includes programs that help improve the skill sets of
cooperative members, equipping them with the necessary tools to contribute
effectively to cooperative businesses. The law ensures that cooperatives play an
active role in employment generation, particularly for marginalized sectors, thus
contributing to poverty alleviation and regional development.

9. Social Reform and Poverty Alleviation Act (R.A.8425)

Republic Act No. 8425, known as the Social Reform and Poverty Alleviation
Act, integrates cooperatives into national poverty alleviation programs. The law
recognizes cooperatives as an effective tool in reducing poverty by providing
economic empowerment to marginalized groups, particularly farmers, fisherfolk,
and informal sector workers. Cooperatives allow these groups to pool resources,
share risks, and collectively improve their socio-economic conditions, fostering a
sense of self-reliance and mutual support.

The law mandates the inclusion of cooperatives in social reform programs,

ensuring they receive both financial and technical support from government
agencies. By encouraging the formation of cooperatives in poverty-stricken areas,
the law aims to create sustainable livelihoods and improve access to basic
services. Cooperatives, as engines of social reform, are integral in achieving the
government's goal of improving living standards and addressing income
inequality in the country.

E. Key Regulatory Requirements and Penalties for Non-Compliance

Key Regulatory Requirements for Cooperatives

1. Legal Registration and Operational Compliance

Every cooperative must be registered with the CDA, providing detailed

documentation such as the Articles of Cooperation, By-laws, and a list of initial
members and officers. The registration process also includes an assessment of the
cooperative's proposed business plan and its alignment with CDA regulations

Regular audits and assessments are conducted by the CDA to ensure cooperatives
are adhering to their stated objectives and are not violating their Articles of
Cooperation.
2. Member Education and Capacity Building

One of the CDA’s main requirements is continuous education for cooperative

members and officers. This involves regular training programs, which must be
documented and reported annually. These trainings are designed to improve
governance, financial management, and cooperative development skills, ensuring
members are well-informed and active participants in decision-making processes.

3. Mandatory Annual Report Submission

Cooperatives are required to file an Annual Report that includes the following:

● Audited Financial Statements (prepared by a CDA-accredited auditor).

● General Information Sheet, outlining the cooperative’s key activities,
board meetings, and member participation.
● Reports on training activities and compliance with member education
requirements, as part of the cooperative’s mandate to enhance financial
literacy among members

This report must be filed within 60 days from the end of the cooperative’s
fiscal year. The failure to meet this deadline triggers immediate penalties

4. Member Education and Capacity Building

One of the CDA’s main requirements is continuous education for cooperative

members and officers. This involves regular training programs, which must be
documented and reported annually. These trainings are designed to improve
governance, financial management, and cooperative development skills, ensuring
members are well-informed and active participants in decision-making processes.

5. Compliance with Financial Management Standards

Cooperatives must maintain accurate and up-to-date financial records, including a

general ledger, cash flow statements, and member share capital records. The CDA
mandates the use of standardized accounting practices to ensure consistency and
transparency in financial reporting. Periodic audits by accredited auditors are also
required to verify the accuracy of these records.

6. General Assembly (GA) Meeting Requirements:

Cooperatives are obligated to hold at least one General Assembly (GA) meeting
each year, where key decisions are made, including the approval of the annual
budget, election of board members, and review of financial statements. The
 minutes of these meetings must be submitted to the CDA as part of the
compliance report.

Penalties for Non-Compliance

1. Monetary Fines

Cooperatives that fail to submit their annual reports on time are subject to daily
fines of PHP 100 per day. This penalty increases based on the cooperative’s asset
size. For instance, while small and medium cooperatives face daily fines, micro-
cooperatives (with assets below PHP 3 million) are exempt from monetary
penalties but may face other sanctions like the suspension of their Certificate of
Compliance.

2. Suspension or Revocation of Registration

Persistent failure to comply with reporting requirements can result in the

suspension of the cooperative’s registration. If the non-compliance continues, the
CDA may proceed to revoke the cooperative’s Certificate of Registration. This
effectively bars the cooperative from operating and accessing legal protections or
benefits under the Cooperative Code.

3. Legal Consequences

Beyond administrative sanctions, the CDA can initiate legal proceedings against
delinquent cooperatives. For severe violations, such as fraudulent reporting or
misappropriation of funds, the cooperative’s officers may face criminal charges.
In some cases, the CDA may file a petition for mandamus, compelling the
cooperative to fulfill its obligations through a court order.

4. Grace Periods and Exemptions

The CDA recognizes that certain delays in compliance may arise due to force
majeure (e.g., natural disasters). In such cases, cooperatives can request
extensions or exemptions, provided they notify the CDA within 15 days of the
event and submit a formal application for relief. The request must include
supporting documents, such as a damage assessment report and certification from
local authorities

F. Latest Updates and News

Partnership with BSP

 The CDA signed a memorandum of agreement with the Bangko Sentral ng Pilipinas
(BSP) in October 2023 to enhance the oversight and regulation of cooperatives,
especially those involved in financial services. This partnership aims to improve the
integration of cooperatives into the national retail payment system, making digital
financial transactions more accessible for cooperative members. The initiative is expected
to increase financial inclusion, particularly in underserved communities.

Streamlined Cooperative Registration

The CDA has been actively working on simplifying the registration process for
cooperatives. In October 2024, a write-shop was conducted to develop streamlined
guidelines. This effort aligns with the CDA's commitment to ease of doing business and
to foster the growth of cooperative enterprises in the country

Recognition and Awards

The CDA recently held its Gawad Parangal Awards, recognizing outstanding
cooperatives and their contributions to economic and social development. This annual
event underscores the CDA’s focus on promoting best practices and inspiring
cooperatives to adhere to higher standards of performance and governance.

III. Banking and Financial Institutions (BSP)

A. Introduction

The Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of the
Philippines. It was established on 3 July 1993 pursuant to the provisions of the 1987 Philippine
Constitution and the New Central Bank Act of 1993.

The BSP took over from Central Bank of Philippines, which was established on 3
January 1949, as the country’s central monetary authority. The BSP enjoys fiscal and
administrative autonomy from the National Government in the pursuit of its mandated
responsibilities.

Vision

The BSP aims to be recognized globally as the monetary authority and primary financial system
supervisor that supports a strong economy and promotes a high quality of life for all Filipinos.

Mission
To promote and maintain price stability, a strong financial system, and a safe and efficient
payments and settlements system conducive to a sustainable and inclusive growth of the
economy.

Core Values
● Excellence - Consistently doing our best to master our craft, continually improving our
competencies and learning new things in pursuit of the organizational goals, comparable
to the best practices of other central banks.
● Patriotism - Selfless commitment to the service of the Filipino people and the country.
● Integrity - Performing mandate with sincerity, honesty and uprightness, worthy of
respect and emulation from other.
● Solidarity - Performing with team spirit; acting and thinking as one in the pursuit of
common goals and objectives.
● Accountability - Taking full responsibility for one's or group's actions.

B. Objectives

1. Maintaining Price Stability

The BSP’s primary goal is to keep prices stable, preventing sharp increases in the cost of goods
and services. This creates a reliable environment for businesses to grow and helps consumers
manage their budgets more effectively.

2. Ensuring Monetary Stability and Peso Convertibility

The BSP carefully manages the money supply to support economic growth while keeping
inflation in check. It also ensures the Philippine peso remains stable, which attracts investments
and supports international trade.

3. Promoting Financial Stability

To maintain a strong financial system, the BSP collaborates with agencies like the DOF, SEC,
IC, and PDIC. This cooperation helps reduce risks and strengthens the country's economic
resilience.

4. Overseeing Payment and Settlement Systems

The BSP supervises the payment systems to ensure secure and smooth transactions across banks,
businesses, and consumers. This is essential for maintaining trust in the financial system.
 5. Expanding Access to Financial Services

The BSP is committed to promoting financial inclusion, ensuring that more Filipinos, especially
in underserved areas, have access to banking services through digital finance and microfinance
initiatives.

6. Prioritizing Public Interests

The BSP focuses on consumer protection, ensuring that financial institutions operate
transparently and fairly. It also promotes financial literacy to help the public make informed
decisions.

C. Roles, Structure, and Authorities

Authorities and Functions

Currency Management
● The BSP has the exclusive power and authority to issue the national currency. BSP’s
notes and coins are issued against, and in amounts not exceeding, the assets of the BSP.
All notes and coins issued by the BSP are fully guaranteed by the government and are
considered legal tender for all private and public debts.

Financial Supervision
● The Bangko Sentral has supervision over the operations of banks and exercises such
regulatory powers as provided in the New Central Bank Act and other pertinent laws over
the operations of finance companies and non-bank financial institutions performing
quasi-banking functions.

Responsibilities
The BSP provides policy directions in the areas of money, banking and credit. It
supervises operations of banks and exercises regulatory powers over non-bank financial
institutions with quasi-banking functions.

Functions of the BSP

Under the New Central Bank Act of 1993, the BSP performs the following functions, all of
which relate to its status as the Republic’s central monetary authority.
a. Liquidity Management.
The BSP formulates and implements monetary policy aimed at influencing money
supply consistent with its primary objective to maintain price stability.
b. Currency issue.
 The BSP has the exclusive power to issue the national currency. All notes and
coins issued by the BSP are fully guaranteed by the Government and are
considered legal tender for all private and public debts.
c. Lender of last resort.
The BSP extends discounts, loans and advances to banking institutions for
liquidity purposes.
d. Financial Supervision.
The BSP supervises banks and exercises regulatory powers over non-bank
institutions performing quasi-banking functions.
e. Management of foreign currency reserves.
The BSP seeks to maintain sufficient international reserves to meet any
foreseeable net demands for foreign currencies in order to preserve the
international stability and convertibility of the Philippine peso
f. Determination of exchange rate policy.
The BSP determines the exchange rate policy of the Philippines. Currently, the
BSP adheres to a market-oriented foreign exchange rate policy such that the role
of Bangko Sentral is principally to ensure orderly conditions in the market.
g. Other activities.
The BSP functions as the banker, financial advisor and official depository of the
Government, its political subdivisions and instrumentalities and GOCCs.

Structure

The Monetary Board exercises the powers and functions of the BSP, such as the conduct
of monetary policy and supervision of the financial system. Its chairman is the BSP Governor,
with five full-time members from the private sector and one member from the Cabinet.
 Monetary Board Chairman
Eli M. Remolona, Jr.
Monetary Board Members
Ralph G. Recto
Benjamin E. Diokno
Romeo L. Bernardo
Rosalia V. De Leon
Walter C. Wassmer
Jose L. Querubin
Governor Eli M. Remolona, Jr.
● Is the chief executive officer of the BSP and is required to direct and supervise the
operations and internal administration of the BSP.
Deputy Governor
1. Heads each of the BSP's operating sectors as follows:
a. Monetary and Economics Sector (MES) - mainly responsible for the
operations/activities related to monetary policy formulation, implementation, and
assessment.
Deputy Governor of MES: Francisco G. Dakila, Jr.
b. Financial Supervision Sector (FSS) - mainly responsible for the regulation of banks and
other BSP-supervised financial institutions, as well as the oversight and supervision of
financial technology and payment systems.
Deputy Goverbor of FSS: Chuchi G. Fonacier
c. Corporate Services Sector (CSS) – mainly responsible for the effective management of
BSP’s human, financial, and physical resources to support the BSP’s core functions,
including oversight of the operations of the New Clark City – Program Management
Office.
Deputy Governor of CSS: Elmore O. Capule
d. Payments and Currency Management Sector (PCMS) – mainly responsible for
maintaining the safety and integrity of the Philippine currency and ensuring a well-
functioning payments and cash ecosystem that facilitates the economic activity and
supports long-run economic growth.
Deputy Governor of PCMS: Mamerto E. Tangonan
e. Regional Operations and Advocacy Sector (ROAS) - mainly responsible for the
management of activities related to regional operations, consumer empowerment and
advocacy, and communications.
Deputy Governor of ROAS: Mamerto E. Tangonan

Senior Assistant Governor/Assistant Governor : Johnny Noe Estanislao Ravalo

Edna C. Villa
 ● Assists the Governor and/or the Deputy Governor in formulating and implementing
programs and policies, and manages the overall operations of his/her Sub-Sector/Office.

D. Key Applicable Laws

Key Laws and Regulations Governing Banking and Financial Institutions in the
Philippines

1. Republic Act No. 7653 – The New Central Bank Act

This law established the Bangko Sentral ng Pilipinas (BSP) as the central monetary
authority of the Philippines. It outlines the powers, duties, and functions of the BSP,
including the regulation and supervision of financial institutions.

Key Provisions:
 Licensing and supervision of banks and non-bank financial institutions.
 Setting capital adequacy requirements for banks.
 Regulating foreign exchange transactions and ensuring the stability of the banking
sector.

2. Republic Act No. 8791 – The General Banking Law of 2000

This law regulates the establishment, operation, and governance of banks in the
Philippines.

Key Provisions:
 Defines requirements for bank organization, governance, and management.
 Establishes regulatory frameworks for banking operations, capital adequacy, and
internal controls.
 Mandates banks to establish sound business practices, including risk management
systems.

3. Republic Act No. 9160 – The Anti-Money Laundering Act (AMLA) of 2001
This law aims to prevent money laundering and other financial crimes in the
Philippines.

Key Provisions:
 Requires financial institutions to implement Know-Your-Customer (KYC)
procedures.
  Mandates the reporting of suspicious transactions to the Anti-Money Laundering
Council (AMLC).
 Establishes penalties for institutions and individuals involved in money
laundering activities.
 Provides for the freezing of assets involved in money laundering activities.

4. Republic Act No. 10173 – The Data Privacy Act of 2012

This law regulates the collection, processing, and storage of personal data by
businesses, including financial institutions, to ensure the privacy and protection of
individuals’ information.

Key Provisions:
 Mandates financial institutions to secure and protect customer data.
 Requires institutions to establish data protection officers and implement proper
security measures to prevent data breaches.
 Imposes penalties for unauthorized access to, or disclosure of, personal data.

5. Republic Act No. 3765 – The Truth in Lending Act

This law protects consumers from deceptive and unfair lending practices by
requiring financial institutions to disclose the true cost of borrowing.

Key Provisions:
 Requires lenders to provide clear and truthful information about interest rates,
fees, and the total cost of loans.
 Ensures that consumers understand the financial terms before agreeing to a loan
or credit contract.
 Provides for penalties for non-compliance.

6. Republic Act No. 7394 – The Consumer Act of the Philippines

This law protects the rights of consumers, including those of financial products
and services.

Key Provisions:
 Ensures that financial institutions engage in fair practices and provide accurate
information about their products and services.
 Mandates financial institutions to establish mechanisms for resolving consumer
complaints.

7. Republic Act No. 10744 – The Investment and Incentives Code for Financial
Institutions
 This law promotes the development of the financial sector by offering incentives for
investment in the sector, including tax benefits and other forms of support.

Key Provisions:
 Encourages investments in banks and financial institutions by providing
incentives.
 Regulates the issuance of bonds, securities, and other financial instruments.

8. Securities Regulation Code (Republic Act No. 8799)

This law regulates the securities markets, including the operations of the Securities
and Exchange Commission (SEC) and market participants like brokers, dealers, and
financial institutions.

Key Provisions:
 Requires public companies to disclose financial and operational information
regularly.
 Regulates trading activities, including the issuance and sale of stocks, bonds, and
other securities.
 Imposes penalties for violations of securities laws, including fraud and insider
trading.

9. Republic Act No. 9510 – The Credit Information System Act

This law establishes a system for credit information to help improve the availability
and access to credit by individual and corporate borrowers.

Key Provisions:
 Requires financial institutions to report borrowers' credit information to a central
credit registry.
 Establishes a Credit Information Corporation (CIC) to oversee the collection and
sharing of credit data.
 Aims to improve transparency and the efficiency of the credit system in the
Philippines.

10. Republic Act No. 10446 – The Financial Rehabilitation and Insolvency Act
This law provides a legal framework for the rehabilitation and resolution of
distressed financial institutions.

Key Provisions:
 Outlines the procedures for the restructuring or liquidation of banks and other
financial institutions.
  Provides mechanisms for creditors and stakeholders to recover their investments
or claims in the event of a financial institution's insolvency.

11. Republic Act No. 10870 – The Philippine Deposit Insurance Corporation (PDIC)
Charter
This law strengthens the mandate of the Philippine Deposit Insurance Corporation
(PDIC), which insures deposits in member banks.

Key Provisions:
 Establishes deposit insurance for the protection of depositors in case of bank
failure.
 Expands the role of PDIC in the resolution of failing banks and financial
institutions.

E. Key Regulatory Requirements and Penalties for Non-Compliance

Key Regulatory Authorities in the Philippine Banking and Financial Sector

1. Bangko Sentral ng Pilipinas (BSP)

The Bangko Sentral ng Pilipinas (BSP) is the central monetary authority of the
Philippines, responsible for overseeing the stability and regulation of the country's
financial system.

● Key Roles:
○ Monetary Policy: Formulates and implements the country’s monetary policy to
maintain price stability and foster sustainable economic growth.
○ Bank Regulation and Supervision: Supervises and regulates banks and non-
bank financial institutions to ensure a sound and efficient banking system.
○ Financial Consumer Protection: Enforces rules to protect depositors and other
financial consumers, such as guidelines on fair lending practices.
○ Currency Management: Issues and manages the Philippine peso and works to
stabilize its value.

2. Securities and Exchange Commission (SEC)

The Securities and Exchange Commission (SEC) is the regulatory authority that
oversees the securities markets in the Philippines.

● Key Roles:
○ Securities Regulation: Regulates and supervises the issuance, sale, and trading of
securities in the capital markets.
 ○ Corporate Governance: Ensures that corporations and financial institutions
follow proper governance and transparency practices.
○ Public Company Disclosure: Requires public companies to disclose accurate and
timely financial information.
○ Enforcement of Securities Laws: Monitors for violations of securities laws and
regulations, such as fraud, insider trading, and market manipulation.

3. Insurance Commission (IC)

The Insurance Commission (IC) is the government agency tasked with regulating and
supervising the Philippine insurance industry.

● Key Roles:
○ Insurance Company Oversight: Ensures that insurance companies, mutual
benefit associations, and health maintenance organizations (HMOs) maintain
sound financial conditions.
○ Consumer Protection: Safeguards the interests of insurance policyholders,
ensuring fair practices and appropriate claims settlements.
○ Market Conduct and Licensing: Licenses insurance companies and agents, and
monitors market behavior to ensure compliance with insurance laws.

4. Philippine Deposit Insurance Corporation (PDIC)

The Philippine Deposit Insurance Corporation (PDIC) is a government-owned

corporation responsible for insuring deposits in member banks and helping resolve
troubled financial institutions.

● Key Roles:
○ Deposit Insurance: Provides insurance coverage to protect depositors in case a
bank fails, ensuring up to PHP 500,000 per depositor per bank.
○ Resolution of Failed Banks: Takes over and manages the assets of banks that are
unable to meet their financial obligations or are closed by the BSP.
○ Financial Literacy and Consumer Protection: Promotes financial literacy
programs to help the public understand deposit insurance and their rights as
depositors.

5. Anti-Money Laundering Council (AMLC)

The Anti-Money Laundering Council (AMLC) is a government body responsible for

safeguarding the financial system from being used for money laundering, terrorism
financing, and other illegal financial activities.

● Key Roles:
 ○ Money Laundering Prevention: Develops and implements policies and
programs to detect and prevent money laundering activities.
○ Suspicious Transaction Reporting: Monitors financial transactions and ensures
that financial institutions report suspicious activities to the AMLC.
○ Investigation and Enforcement: Investigates money laundering activities and
imposes penalties, including freezing assets related to illegal transactions.

6. National Privacy Commission (NPC)

The National Privacy Commission (NPC) is responsible for implementing and

monitoring the Data Privacy Act of 2012 to protect personal information and ensure that
data processing by private and public entities complies with privacy laws.

● Key Roles:
○ Data Protection Oversight: Enforces compliance with the Data Privacy Act
(R.A. 10173) to protect personal data and privacy rights.
○ Guidelines and Policies: Issues guidelines for the proper handling, storage, and
transfer of personal data in both the private and public sectors.
○ Investigation of Breaches: Investigates complaints or breaches related to data
privacy and imposes penalties for non-compliance.

7. Bureau of Internal Revenue (BIR)

The Bureau of Internal Revenue (BIR) is responsible for collecting taxes in the
Philippines, including taxes related to the operations of banks and financial institutions.

● Key Roles:
○ Tax Collection: Collects corporate income taxes, value-added taxes, and other
applicable taxes from financial institutions.
○ Tax Compliance: Ensures financial institutions comply with tax laws, including
the correct payment of taxes and submission of tax returns.

8. Securities Exchange Commission (SEC) – Corporate Governance

The Securities Exchange Commission (SEC) also oversees the corporate governance of
companies listed on the Philippine Stock Exchange (PSE) and enforces rules to protect
investors and ensure transparency.

● Key Roles:
○ Corporate Governance Standards: Promotes best practices in corporate
governance for publicly-listed companies, including financial institutions.
○ Investor Protection: Enforces rules for the protection of investors, including
those related to financial disclosures and shareholder rights.
Key Regulatory Requirements for Banks and Financial Institutions

1. Licensing and Registration Requirements

All banks and financial institutions in the Philippines must secure a license from the
Bangko Sentral ng Pilipinas (BSP) before they can begin operations. This includes
submitting detailed information about their financial status, business plans, and
management structure.

Regulatory Basis: Under Republic Act No. 7653 (The New Central Bank Act),
financial institutions are required to undergo a thorough evaluation process before being
granted a license to operate in the country.

2. Capital Adequacy and Solvency

Financial institutions are required to maintain a minimum Capital Adequacy Ratio

(CAR) to ensure they have sufficient capital to cover operational risks and liabilities.

Regulatory Basis: BSP Circular No. 969 (on risk-based capital adequacy standards)
outlines the minimum CAR that banks must maintain.

3. Anti-Money Laundering (AML) and Know Your Customer (KYC) Compliance

Banks and other financial institutions are mandated to implement Know Your Customer
(KYC) protocols to prevent money laundering and other financial crimes. They must also
report suspicious transactions to the Anti-Money Laundering Council (AMLC).

Regulatory Basis: Republic Act No. 9160 (The Anti-Money Laundering Act of 2001)
mandates these procedures.

4. Financial Reporting and Disclosure

Banks are required to submit regular financial statements and undergo independent
audits. These reports must be submitted to both the BSP and the Securities and
Exchange Commission (SEC).

Regulatory Basis: Republic Act No. 8791 (The General Banking Law of 2000) and
Securities Regulation Code (R.A. No. 8799) outline the disclosure requirements for
financial institutions.

5. Data Privacy and Security Compliance

 Financial institutions are obligated to protect the privacy of their customers' personal
information. This includes implementing strong data protection protocols and ensuring
that customer data is not exposed to unauthorized parties.

Regulatory Basis: Republic Act No. 10173 (Data Privacy Act of 2012) governs data
protection for financial institutions.

6. Consumer Protection

Banks and financial institutions must adhere to consumer protection regulations,

particularly in relation to lending practices and transparency in fee structures.

Regulatory Basis: Republic Act No. 3765 (Truth in Lending Act) and Republic Act
No. 7394 (Consumer Act of the Philippines) regulate lending terms and ensure that
consumers are fully informed about interest rates and loan conditions.

Penalties for Non-Compliance

Non-compliance with regulatory requirements can lead to severe penalties, which may include
financial fines, operational sanctions, and legal consequences. The penalties aim to enforce
accountability and ensure that financial institutions operate in a manner that upholds public trust
and legal standards.

1. Monetary Fines

One of the most common penalties for non-compliance is the imposition of monetary
fines. The amount of the fine depends on the nature and severity of the violation.

Examples: Failure to meet the Capital Adequacy Ratio or non-submission of required

financial reports can lead to substantial fines.

2. Suspension or Revocation of License

In cases of repeated or serious violations, the BSP or other regulatory bodies may
suspend or revoke the license of the offending institution.

Examples: A bank found guilty of money laundering or fraudulent reporting may face
license suspension or cancellation.

3. Criminal Liability

For severe violations such as fraud, money laundering, and other financial crimes, the
responsible officers or directors of the financial institution may be held criminally liable.
 Examples: Executives who fail to implement proper KYC procedures or who knowingly
assist in money laundering can face imprisonment.

4. Civil Liability

: A financial institution may be held civilly liable for damages caused by its non-
compliance, especially if it affects customers or stakeholders.

Examples: A financial institution failing to secure customer data could be liable for the
damages caused by a data breach.

5. Reputational Damage

Non-compliance can lead to reputational damage, which can have long-term effects on
a financial institution’s customer base and market position.

Examples: High-profile violations, such as a data breach or money laundering

scandal, can lead to loss of consumer trust and market share.

F. Latest News and Updates

1. Philippine Central Bank (BSP) Initiatives on Digital Transformation

● BSP Digitization Efforts: The Bangko Sentral ng Pilipinas (BSP) has been pushing for
digital banking reforms and has launched a Digital Payments Transformation
Roadmap (2020-2023). This roadmap aims to achieve a target of 50% digital payments
by 2023, with a focus on fostering inclusive financial services, improving accessibility,
and enhancing financial inclusion through digital platforms.

2. New Anti-Money Laundering (AML) and Financial Fraud Measures

● Amendments to the Anti-Money Laundering Act: The Philippine government passed

Republic Act No. 11521 in 2021, amending the Anti-Money Laundering Act (AMLA).
The amendments aim to enhance the country's compliance with global standards,
particularly the Financial Action Task Force (FATF) recommendations.

3. Financial Inclusion Initiatives

● P2P Payment Systems: With a push towards improving financial inclusion, the BSP has
been actively promoting Peer-to-Peer (P2P) payment systems, such as QR Code-based
payments and mobile wallets like GCash and PayMaya (now Maya). These systems are
 designed to encourage cashless transactions, which can help businesses and individuals
participate in the formal economy.
● National ID System: The implementation of the Philippine Identification System
(PhilSys) is an important step toward achieving better financial inclusion. The Philippine
Statistics Authority (PSA) has been rolling out the national ID cards that are expected to
be crucial for improving access to financial services, especially for unbanked individuals
in rural areas.

4. BSP’s Enhanced Regulatory Guidelines for Cryptocurrencies

● Cryptocurrency Regulations: The Bangko Sentral ng Pilipinas (BSP) has issued BSP
Circular No. 1108 (2021) which updated the regulatory framework for virtual asset
service providers (VASPs) in the Philippines. This regulation requires VASPs to register
with the BSP, maintain anti-money laundering (AML) safeguards, and implement strict
KYC procedures for their customers.
● Digital Assets and FinTech Growth: The rise of digital assets, including
cryptocurrencies like Bitcoin and Ethereum, and the increasing popularity of DeFi
(Decentralized Finance) platforms has led the BSP to adopt a more comprehensive
approach to cryptocurrency regulation. BSP Governor Benjamin Diokno has emphasized
that the Philippines must strike a balance between encouraging innovation and ensuring
consumer protection in the cryptocurrency space.

5. Philippine Insurance Industry – Regulation Updates

● Insurance Commission’s Digitalization Drive: The Insurance Commission (IC) has

been promoting the digital transformation of the Philippine insurance industry. The
commission has rolled out initiatives aimed at improving the efficiency of insurance
companies and ensuring more accessible and transparent processes for consumers.

6. Philippine Deposit Insurance Corporation (PDIC) Updates

● Increase in Deposit Insurance Coverage: In 2023, the Philippine Deposit Insurance

Corporation (PDIC) raised the maximum deposit insurance coverage for depositors
from PHP 500,000 to PHP 1 million. This increase is part of the PDIC’s efforts to
ensure that depositors feel secure in placing their funds in the banking system,
particularly during times of financial instability.
● Online Claim Filing: The PDIC has expanded its online services, allowing depositors to
file claims electronically, improving accessibility and efficiency in the processing of
claims during bank closures.

7. Enhanced Consumer Protection Laws

 ● Republic Act No. 11765 (Financial Products and Services Consumer Protection
Act): This law, signed into effect in 2022, aims to provide stronger consumer protection
for users of financial products and services, including banks, insurance firms, and loan
companies. The law seeks to promote transparency, fairness, and accountability among
financial institutions offering products and services to the public.

8. Updates in Foreign Investment and Capital Market Laws

● Ease of Doing Business: The Philippines has been actively revising its laws to attract
foreign investment, especially in financial and tech industries. The Foreign Investment
Act (FIA) was amended in 2020 to allow foreign ownership in more sectors, including
banking and finance, provided the foreign investors meet certain requirements.

9. Tax Reforms and Financial Institutions

● Tax Reforms for Financial Institutions: The Philippine government passed the
Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act in 2021,
which reduced the corporate income tax rate for most businesses, including banks and
other financial entities. The new tax structure aims to stimulate investment and support
the growth of the financial sector.

10. Ongoing Challenges: Inflation and Monetary Tightening

● Monetary Tightening: As of 2023, inflationary pressures in the Philippines, largely

due to global factors like rising fuel prices and supply chain disruptions, have led the
Bangko Sentral ng Pilipinas (BSP) to tighten its monetary policy. The BSP raised
interest rates to control inflation, which has had implications for borrowing costs for both
individuals and businesses.
● Economic Growth and Stability: Despite global uncertainties, the Philippine economy
is showing resilience, but regulators like the BSP are closely monitoring risks related to
inflation, external debt, and financial market volatility.

References:
https://www.insurance.gov.ph/news/
https://cda.gov.ph/board-of-directors/asec-pendatun-b-disimban/
https://lawphil.net/
https://lawphil.net/administ/bsp/bsp.html
https://www.bsp.gov.ph/Pages/AboutTheBank/WhoWeAre/OrganizationAndGovernance/Gover
nanceOfTheBank.aspx