BSP wants stricter policies vs erring bank personnel

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is looking to require its supervised financial institutions to have a policy in determining the process and criteria on when to file legal cases against erring personnel, including dismissed directors, officers and employees.

In a draft circular posted on the central bank website, the BSP said the proposed changes would amend relevant sections of the Manual of Regulations for Banks and of the Manual of Regulations for Non-Bank Financial Institutions.

“This aims to reinforce measures, including filing of legal cases, to deter misconduct and promote discipline in BSP-supervised financial institutions (BSFIs) for the protection of the depositors and other financial consumers,” the central bank said.

According to the BSP, the board should set up a tailored policy consisting of the process, procedures, guidelines and criteria on filing of legal cases against erring and dismissed personnel.

This should also be aligned with the overall framework for managing human resource-related risks. The guidelines should list all the factors to be considered in the decision-making process, such as the severity of the offense, amount involved, possibility of recovery or loss and presence of aggravating and mitigating situations.

BSFIs should also consider the administrative, civil or criminal liabilities arising from the incident, costs of litigation, availability and strength of evidence as well as the potential risks that the BSFI, including its stockholders, directors and officers, may be exposed to.

“Also, the policy must clearly indicate the decision-making process and approving authorities for the filing of administrative, civil and/or criminal cases,” the BSP said.

“This can be defined based on thresholds, aligned with the BSFI’s legal risk appetite, in graduated scale in terms of the amount and position of personnel involved, with a stricter application for those personnel holding fiduciary functions,” it said.

The central bank also pointed out that banks should put in place an appropriate operational risk management framework that would identify, assess, monitor and control operational risks effectively and efficiently.

It noted that one of the major sources of operational risk is “people risk.”

“In this regard, banks shall embed in their enterprise-wide risk management framework measures to identify, measure, monitor and control human resource related risks. Banks shall ensure that there are adequate policies and risk management and control measures,” the BSP added.

Once the draft circular is approved, BSFIs have six months to comply with the requirements.