Bangko Sentral ng Pilipinas tightens rules on pawnshops

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has tightened its rules governing pawnshops, increasing the minimum capital requirement and subjecting owners and officers to its “fit and proper” rule to uncover “fly by night” operators.

The BSP announced that it has issued a new set of rules that would govern all pawnshops operating throughout the country.

The BSP said the new rules would replace the existing implementing rules and regulations of Presidential Decree 114 also known as the Pawnshop Regulation Act issued in 1973.

Under the new rules, the BSP said pawnshop proprietors, partners, incorporators, directors, stockholders and officers of pawnshops must meet certain “fit and proper” standards.

Similar standards are now being applied to bank officers and the BSP said pawnshops would be subjected to the same standards to ensure that pawnshops are owned and run by people without any derogatory record.

According to the BSP, applying the “fit and proper” rule would also promote good governance. 

“Pawnshops have increased in number over the years and they have provided an alternative source of credit to a large segment of our population, particularly those who do not like to go to banks,” said BSP Governor Amando M.Tetangco Jr.

“The new rules are designed to enhance consumer protection and foster confidence in the pawnshop industry by the pawning public,” he said. 

Tetangco said the new rules also required pawnshops to maintain a minimum level of capital or net worth in relation to their loan portfolio. 

“The existing statutory capital of P100,000 has become too small and it is susceptible to the proliferation of “fly-by-night” operators,” Tetangco explained.

Adjusting the minimum required capital, according to Tetangco, would be more relevant since it would be based on the actual scope of operations of respective pawnshops.

Basing the minimum required capital on the size of their loan portfolio, the BSP said, would ensure that pawnshops would have adequate cover based on the actual size and risks of their operations.

The BSP also revised the rules governing actual pawning operations. Under the law, pawners have 90 days after maturity to redeem their pawned articles and pawnshops must notify their clients within the 90 day period before they can sell the pawned items in an auction.