BSP to set fit and proper parameters for stockholders

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is finalizing the parameters on fitness and propriety of stockholders, as well as the approval process for the transfer of voting shares to further strengthen governance in the banking sector.

Based on the draft guidelines, the BSP recognizes the importance of good corporate governance in ensuring that banks are subject to proper oversight and are soundly and prudently managed.

“In this regard, the Bangko Sentral is issuing regulations on the ownership of shares of stocks in banks and on the qualifications of stockholders to ensure that only individuals and corporations with beneficial owners who are fit and proper shall be allowed to own voting shares of stock in a bank,” the BSP said.

According to the draft circular, a stockholder must have integrity or probity, reputation, as well as financial capacity or financial soundness to be suitable to own the shares of stock of a bank.

In ascertaining a stockholder’s integrity/probity and reputation, the BSP said regard should be given to the stockholder’s observed conduct and behavior, as well as his or her ability to continuously comply with bank’s internal policies and applicable laws and regulations.

Such regulations include the relevant requirements and standards of any regulatory or professional body, or government and any of its instrumentalities or agencies.

Furthermore, the individual stockholder must also possess none of the disqualification criteria to become directors or officers.

In relation to this, an individual stockholder must not have been convicted of any crime or involved as a principal, accomplice, or accessory in any case.

Moreover, unless otherwise allowed under the provisions of existing laws, the BSP said a stockholder should not be an officer or employee of a government agency, instrumentality, department or office charged with the supervision of, or the granting of loans to banks within one year prior to their subscription, appointment, election or hiring.

Lastly, the central bank said the stockholder must have no adverse derogatory information of any kind, included in the watchlist file of any competent authority locally or internationally, or have pending administrative or criminal cases.

In assessing financial capacity or financial soundness, the BSP said the stockholder must be of good credit standing in the business community and has the financial strength to pay the proposed subscriptions in the bank and infuse additional capital when needed.

“The stockholder must be able to demonstrate that the amount committed to pay the proposed paid-up capitalization in the bank was not derived from borrowings, unlawful activity, or any money laundering activity,” the BSP said.

According to the regulator, banks should establish a mechanism to ensure the fitness and propriety of bank stockholders.

“Banks are expected to notify the BSP of any adverse information on the fitness and propriety of their stockholders that may have a significant impact on the bank’s business or reputation in accordance with notification/reporting requirements,” it added.

The BSP said prior approval of the BSP instead of Monetary Board would now be required on a transaction involving the voting shares of a bank if this would result in ownership of at least 10 percent of voting shares of stock.

The transactions that require prior BSP approval include the subscription or issuance, purchase or sale, transfer or acquisition of voting shares of stock; conversion of preferred shares or debt instruments into voting shares of stock of a bank; or such act, contract, agreement or arrangement whereby a person acquires voting shares of stock of a bank from one or more persons.

A request for prior BSP approval is required by the selling or conveying stockholder, through the bank, to appropriate supervising department of the central bank within 60 calendar days from the corporate secretary’s receipt of the request for registration of the transaction, whichever is earlier.

It warned that the transfers of voting shares of stock without the required approval of the BSP would have no legal effect; hence, would not be recognized in the books of both the transferor and the transferee and by any institution and government agency.