Reputational damage

A “short” 40 years and the Philippines’ monetary authority is again facing reputational damage due to the selfish action of two members of the policy- making Monetary Board of the Bangko Sentral ng Pilipinas.

The current circumstance is different from the damage caused about 40 years ago  when the old Central Bank of the Philippines was caught window dressing its accounts as the government tried to extricate itself from a corruption induced economic tailspin and  a banking crisis that was exacerbated by a global financial crisis.

While the then Central Bank governor Jaime “Jimmy” Laya was not able to serve his full term, no administrative action was taken against him.

It took the courage and fortitude of former Central Bank governors Jose “Jobo” Fernandez Jr. and Jose “Joey” Cuisia Jr.,  former BSP governors Gabriel “Gabby” Singson, Rafael “Paeng” Buenaventura, Amando “Say” Tetangco Jr. and Nestor “Nesting” Espenilla to face the country’s foreign creditors to restructure the country’s debts, bear the “humbling” experience of being made to wait and listen to admonition from junior foreign bankers, and then work on rebuilding the credibility of and professionalizing the BSP to regain the respect of the international banking community.

The unexpected death of governor Espenilla during the term of former president Rodrigo Duterte, ended the institutionalization of professional bankers heading the BSP.  While the post of the BSP Governor and the Monetary Board are appointive and, thus, subject to some form of politicization, the appointees go through a vetting process to ensure their qualification and probity.

From the first Central Bank governor Miguel Cuaderno Sr. to former BSP governor Felipe Medalla, the MB members have had their quirks and disagreements, but have generally been free from any open accusations of wrongdoing.

Unfortunately, this time around, the two MB members face a serious charge of malversation of public funds stemming from the  employment of ghost employees, and if charges are filed against them, could result in their removal from the Monetary Board upon the discretion of President Marcos.

A stated in Section 10 of the BSP Charter which sets the condition for the possible removal of an appointed MB member. “ The President may remove any member of the Monetary Board for any of the following reasons:

(a) If the member is subsequently disqualified under the provisions of Section 8 of this Act; or

(b) If he is physically or mentally incapacitated that he cannot properly discharge his duties and responsibilities and such incapacity has lasted for more than six months; or

(c) If the member is guilty of acts or operations which are of fraudulent or illegal character or which are manifestly opposed to the aims and interests of the Bangko Sentral; or

(d) If the member no longer possesses the qualifications specified in Section 8 of this Act.

It is unfortunate that the current crisis of the BSP is happening during the term of Governor Eli Remolona, who prior to his appointment, had a sterling reputation. It must also be made clear that while the BSP Governor is on top of the monetary regulator, he is not privy to the internal staff hiring of MB members.

The current crisis involving the ghost employees hired by the two MB members appointed by former president Rodrigo Duterte, started during the term of former BSP governor Benjamin Diokno, but the anomaly came to light only early this year.

Hiring ghost employees is a case of malversation of public funds and is punishable under Philippine laws.

While the rumor first came out in social media, followed by a story on online media platform Bilyonaryo, the BSP communications department basically chose to remain silent on the matter while the institution undertook an investigation to verify the matter, thus allowing the problem to fester.

With the ghost employee fraud finally hitting mainstream media, and more public exposure, even the slightest lapse from BSP officials is likely to be magnified.

Thus, while Gov. Eli cannot be blamed for what the two MB members have committed, his own reputation is now subject to more scrutiny and criticism has also been raised against the incumbent governor stemming from a case of “delicadeza” that former CB and BSP Governors had been careful to avoid – allowing or agreeing to the appointment of a legal or jural relationship to a government financial entity directly under the purview of the BSP.

The ghost employee crisis , of course, also affects current MBM Benjamin Diokno who had already taken exception to an article published in The STAR over a comment that the politicization of the BSP started under his term as BSP governor following the untimely and unexpected death of governor Espenilla.