Deputation of Federations as Supervisors of the Financial Service Cooperatives (FSC) and Cooperatives with Savings and C

1. Deputation of Federations as Supervisors of the Financial Service Cooperatives (FSC) and Cooperatives with Savings and Credit Services • Cooperative Development Authority Dr. Emmanuel M. Santiaguel Chairman,

2. Legal Basis • Article 124, Chap 16 of RA 9520 (Designation of Existing Unit at CDA to Perform Regulatory & Supervisory Functions) • Rule 12 of IRR of RA 9520 (Financial Service Cooperatives)

3. Scope and Objective • covered… all registered federations of cooperatives, whose member-cooperatives undertake both savings and credit operations and Financial Service Cooperative Federations • aimed… to institutionalize the conduct of supervision and examination of cooperatives to ensure its safe and sound operation

4. Definition of Terms Financial Service Cooperative – refers to a duly registered cooperative for the primary purpose of engaging in saving and credit services and other financial services regulated by the Bangko Sentral ng Pilipinas (BSP) Cooperative with Savings and Credit Services - refers to a cooperative undertaking both savings and credit operations

5. Definition of Terms Deputized Federation – refers to the federation authorized to perform supervisory and examination functions to its member-cooperatives Supervision – refers to the review assessment of the entire cooperative operations including the quality of the cooperatives risk-management process, cooperative governance, internal risk-management process, cooperative governance, internal controls, accountabilities and responsibilities, and adherence to regulatory and prudential standards

6. Definition of Terms Examination – refers to the verification, review, and inspection of the cooperative’s books and records, business affairs, administration, governance and management and financial condition Net Worth – refers to reserve fund, paid-up capital, grants, donation less unbooked allowance

7. Qualifications • Registered and operating as a federation with direct access to the financial information and records of its member-cooperatives • With net worth of at least Ten (P10M) million • With active membership base of at least ten (10) primary coops undertaking savings and credit operation that are subject to supervision and examination

8. Qualifications • Positive net worth for the last 2 years at the time of application • With institutionalized Governance and Management Practices • Have at least three (3) qualified examiners • No adverse findings or derogatory record from other government agency or entity and creditors (CDA, BSP, GFIs and LGUs)

9. Qualifications • Not convicted of any legal, civil or administrative case involving moral turpitude with finality in any court of law or regulatory agency • Willing to undergo training on examination and supervision under CDA

10. Function of Delegated Supervisor and Examiner • Monitor strict compliance by the cooperatives / FSC on legal, regulatory and other requirements • Evaluate coops/FSC’s Governance, internal control, risk-management and other prudential practices • Evaluate the overall financial condition of the cooperative through on-site/off-site supervision and examination • Assessment of compliance with sound policies, procedures and practices.

11. Conditions • A Certificate of Authority will be issued to the federation and Terms of Referencesdetailing the responsibilities and accountabilities of the deputized federation • Within 1 month, the deputized federation shall submit the list and personal data of recommended personnel for the independent supervisory and examination unit

12. Conditions • Within 6 months, the deputized federation shall • Conduct supervision and examination of member cooperatives • Submit to the Authority the complete examination reports within 30 calendar days after each engagement • Use the Supervision and Examination Manual (SEM) prescribed by the Authority

13. Conditions • Within 6 months…Cont. • Keep SEM for official and exclusive use of the supervisors and examiners • Treat all reports and information during the examination with the strictest confidentiality

14. Validity and Grounds for Cancellation/Revocation • Accreditation as deputized federation will be valid for a period of 3 years and renewable • The Authority may cancel the Certificate of Authority based on the following: - Violation of any of the provision of the Terms of Reference, Cooperative Code and other laws, rules and regulations - Breach of Confidentiality (SEM and examination reports) - Misrepresentation or non-disclosure of material information to the authority

15. Validity and Grounds for Cancellation/Revocation The Authority may cancel the Certificate of Authority based on the following… cont. - Misrepresentation or non-disclosure of material information to the authority - Failure or delay in the submission of required reports - Negligence and/or inefficiency in the conduct of its supervisory functions - Failure to secure CGS on an annual basis - Other reasonable factors as may be determined by the Authority

16. Monitoring and Reports • The effectivity of the deputized federation will be monitored on a regular basis • The SEU within the deputized federation shall submit examination report within 30 days after completion of the examination • The deputized federation shall submit a quarterly report on delegated functions as a supervisor and examiner

17. Monitoring and Reports • Within 120 days after each calendar year, shall submit the following: - AFS - List of primary cooperatives - Notarized Certificate of Conflict of interest - List of officers, staff in the supervision and examination unit and their personal data - Staff Development Program

18. Statutory Provisions • Deputation of federation does not prohibit the Authority to conduct/perform supervision and examination to primary cooperatives • Primary cooperatives with multiple affiliations may choose the deputized federation who will conduct the supervision and examination. • Cooperatives with no affiliation shall be examined/supervised directly by the Authority

19. Advantages of Deputized Federation • Has the authority to demand/require the supervised primary cooperative to remit the CETF • Managed the stability/stabilization fund • May grasp and provide the best and necessary assistance, technical and financial, to the member primary coop • May gain the trust and loyalty of the supervised coop, that could spell mutual beneficial relationship

20. Advantage of being affiliated with deputized federation • Access to the Stability fund • Access to technical support, services, and capability/enhancement training • Access to information, technology (e-coop trade) and linkages (established market) • Enhanced cooperation among cooperatives

21. Conclusion… • Deputation of federation played a major role in the stability of cooperatives. It has been proven effective and successful in countries such as Korea, India, and Vietnam among others in Asia. • It has provided the backbone to the cooperative sector. • Deputation of federation is another way of ensuring SUCCESS of cooperatives.

22. “Each of us is here for a brief sojourn; for what purpose he knows not, though he senses it. But without deeper reflection one knows from daily life that one exists for other people.” • Albert Einstein

23. “Every kind of peaceful cooperation among men is primarily based on mutual trust and secondarily on institutions such as courts of justice and police… Albert Einstein

24. Thank you for listening!!!