BSP to crack down on erring banks, employees

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) vowed to take appropriate enforcement actions against erring individual banks and their personnel that could affect the local banking system.

BSP Governor Amando Tetangco Jr. said in a statement the central bank is vested with the legal authority to run after violators of banking laws and regulations as well as those who fail to comply with minimum regulatory standards on governance, risk management and market conduct.

“The BSP’s track record demonstrates the will to decisively act by meting sanctions on erring bank directors and officers, restricting imprudent activities, prohibiting unsafe or unsound practices, and even shutting down banks,” he said.

Tetangco pointed out the strength and soundness of the banking system is underpinned by the efforts of the BSP and other government agencies to pursue financial stability as a prudential objective focusing specifically on the potential build up of systemic risks.

“The issues that we have been assessing covers quite a bit of ground, but they are inter-related by the common strand that they can create comingled risks that can be systemic in nature” he said.

The BSP has established a Financial Stability Committee made up of senior officials while the Financial Stability Coordination Council is made up of the Securities and Exchange Commission (SEC), the Insurance Commission, the Philippine Deposit Insurance Corp. (PDIC), the Department of Finance (DOF), the Bureau of Treasury, and the BSP.

All of the reform initiatives are ultimately meant to align the needs of a growing economy with a sound and responsive financial system.

“The BSP is very cognizant of the need to nurture financial stability but is also well aware that this must be aligned with the absolute objective of ensuring the integrity of the financial system,” Tetangco said.

Tetangco said the markets have become more attractive through financial stability and are targeted destinations for capital flows.

On this basis, the BSP said it has always recognized the urgency to maintain a strong prudential framework towards financial integrity as a necessary complement to financial stability.

Tetangco said the Philippine banks remain operationally and fundamentally strong as manifested by mainstream indicators on capitalization, asset quality, and the steady growth of assets as well as deposits and loans.

Latest data from the central bank showed the capital adequacy ratio (CAR) of universal and commercial banks remains high at 15.6 percent as of end-September last year.

“Bank balance sheets continued to expand amid the volatilities in the global financial system,” Tetangco said.

The BSP chief said the key foundation of the banking system’s strength has been the pursuit of proactive reforms on risk management practices, capital build-up, corporate governance, financial inclusion, financial literacy and consumer protection.

Under its legal authority to supervise the banking system, the BSP implements a comprehensive risk-based approach that is aligned with international best practices including the Basel Committee’s standards as articulated in the updated Core Principles for Effective Bank Supervision.