Passage of BSP charter amendments pushed

MANILA, Philippines -  The House of Representatives is pushing for the immediate enactment of the proposed changes to the charter of the Bangko Sentral ng Pilipinas (BSP) to give the central bank more power in regulating banks in light of the closure of Aguirre-owned Banco Filipino Savings and Mortgage Bank.

Leyte Rep. Sergio Apostol told reporters on the sidelines of the 58th annual national convention of the Rural Bankers Association of the Philippines (RBAP) passage of the consolidated House Bills pertaining to the proposed amendments to the New Central Bank Act or Republic Act 7653 would further strengthen the regulatory powers of the central bank.

“It has a very good chance in passing. We have to make its powers stronger,” Apostol stressed referring to the bills on the proposed changes to the BSP charter.

Apostol, who chairs the Committee on Banks and Finance Intermediaries of the Lower House, said the consolidated bill calls for the establishment of a body within the BSP wherein bank closures could be appealed.

The proposed changes to the BSP charter would lift the remaining constraints of the bank secrecy laws on examiners and at the same time enhance the scope for risk-based supervision including risk based approach to capital requirements.

It would also authorize the BSP to issue its own debt securities to strengthen the effectiveness of monetary management.

However, Apostol pointed out that the proposed bills in the Lower House is silent on the provisions allowing the BSP to issue its own debt papers and exempting the central bank from court cases arising from the implementation of the provisions of the General Banking Law.

Multilateral lenders led by the International Monetary Fund (IMF) have been urging legislators to enact proposed amendments to the BSP charter without further delay to strengthen the supervisory powers of the BSP.

“As in other countries, supervisory authorities should be provided with sufficient legal powers and protection to meet their core mandate,” IMF said.

Furthermore, the state-run Philippine Deposit Insurance Corp. (PDIC) has also been supporting the proposed changes to the BSP charter to increase the central bank’s capability to regulate and supervise banks and allow it “greater flexibility to deal with distressed institutions.”

PDIC has put in eight proposals in support of the BSP charter amendment which will strengthen co-regulations, especially in dealing with bank closures and receiverships.

Among the amendments proposed by PDIC to the BSP charter is the so-called bridge bank authority, which is an alternative means of bank failure resolution practiced in countries such as the US.

According to the PDIC, bridge bank is a temporary bank established and operated to take over the operations of a failed bank and maintain banking services for the customers. As the term implies, a bridge bank is designed to “bridge” the gap between the failure of a bank and the time when a satisfactory resolution of the failed bank can be implemented. It enhances the receivership of closed banks by providing orderly liquidation without attendant disruptions present in ordinary closure and take over operations.

PDIC had earlier proposed for bridge bank authority under the PDIC charter amendments.

The further strengthening of the regulatory powers of the BSP is very timely with the decision of the central bank’s Monetary Board last March 17 to close and place Banco Filipino under PDIC receivership due to unsafe and unsound bank practices.