IMF cites need for quick approval of amended BSP charter

MANILA, Philippines - Multilateral lender International Monetary Fund (IMF) has stressed the importance of quickly amending the charter of the Bangko Sentral ng Pilipinas (BSP) to further strengthen the country’s banking supervision and re-gulatory framework.

IMF assistant director in the Asia & Pacific Department Vivek Arora said in an interview with reporters that the reforms would give monetary authorities more protection from litigation.

“In order to strengthen the banking supervision and regulation framework it remains critical that supervisors receive stronger protection from litigation and, consequently, that the BSP charter amendments be quickly approved,” Arora said.

The BSP has been pushing the proposed amendments to its charter for more than five years starting from the term of Governor Rafael Buenaventura.

The BSP is seeking to strengthen its powers to enhance the administration of the monetary, credit and banking system under the pending bills and would help seek to track the owners of banks and determine their fitness and integrity.

Pending bills also aim to empower BSP examiners to access deposit accounts in gathering evidence against the perpetrators of bank fraud. The BSP also wants to compel a more timely rehabilitation, reorganization or restructuring of distressed banks.

The central bank is also pushing to increase administrative fines and expedite forfeiture proceedings. It also seeks to obtain data from any person or entity in the formulation of monetary policy and in crafting remedial measures in case of abnormal movements in monetary aggregates, credit or price level.

Arora pointed out that the proposed reforms would give supervisors more legal protection and allow the BSP to issue its own securities.

“These amendments would also provide the BSP with additional tools for liquidity management,” he added.

Sen. Edgardo Angara, who chairs the Senate Finance Committee, vowed to pursue the proposed amendments to the BSP charter that would help the central bank better protect the interest of depositors and at the same time avoid losses of public funds.

“To better protect the interest of the depositors and to avoid losses of public funds, the BSP should adapt various international best practices in banking supervision and other measures that will strengthen the regulatory and supervisory powers of the BSP over banks and other financial institutions,” Angara said earlier.

He added that the proposed changes would enable the BSP to adapt various international best practices in banking supervision.

“The authority of the BSP over troubled banks, in general, is limited to the grant of emergency advances in case of illiquidity, or closure in case of insolvency. Prompt corrective actions cannot be implemented due to the absence of clear and strong legal basis. Such inability of the BSP often causes losses of hard-earned money of the depositors and also losses of public funds,” he said.

Furthermore, the legislator said the amendments would empower the BSP to use transparency mechanisms that can give more teeth in the supervision of formal and informal remittance firms in order protect overseas Filipino workers (OFWs) from usurious practices in money transfer.

Angara said the proposed measure would allow the BSP to adopt the following international best practices in banking supervision and other measures that would strengthen its regulatory and supervisory powers of the BSP over banks and other financial institutions.

These include the principle of consolidated supervision; the BSP’s authority to approve transfers or acquisitions of shares in a supervised institution; the authority of the Monetary Board to prescribe guidelines for the examination of supervised authorities; and the authority of the board to direct existing stockholders to infuse additional  capital or in case of their inability or refusal, to direct them to accept new investors or merge or consolidate with a qualified financial institution.

The proposed amendment also prescribes additional and transparent grounds for bank closure announcement of unilateral closure, suspension of payment of deposit substitutes, or inability to pay liabilities as they become due; increase in penalties for violation of applicable laws and regulation and; indemnify BSP personnel for cost and expenses incurred by them in connection with any civil, administrative or criminal action, suit or proceedings.