BSP tackles impact of de-risking strategy

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is putting in place measures to cushion the adverse impact of the de-risking activities being undertaken by foreign banks and the money laundering scandal that hit the local financial system on remittances.

BSP Governor Amando Tetangco Jr. said in a his keynote address during the Financial Inclusion Summit 2016 organized by the Bank of the Philippine Islands (BPI) Foundation there are concerns needed to be addressed by monetary authorities.

 “Foremost is the adverse impact on remittance costs and flows of the closure of accounts of several money transfer operators by correspondent banks who are limiting their exposure to possible channels for money laundering and other financial crimes,” Tetangco said.

This, he added, is a de-risking strategy largely driven by business decisions of foreign banks, weighing the risks and benefits of dealing with remittance companies.

“This has been going on in recent years and has not been helped by the present money laundering case here,” Tetangco said..

Tetangco was referring to the $81 million funds of the Bangladesh Bank stolen from its account at the Federal Reserve Bank of New York that found its way to the Philippines via the Rizal Commercial Banking Corp. (RCBC).

“With this recent development, unfortunately is not helping them because of the perception that money transfer operators and money service businesses are possible channels for money laundering. So we need to address that and we need to strengthen the money laundering terrorist financing regime in the Philippines,” Tetangco said.

Furthermore, the BSP chief warned the de-risking could also result in movement by overseas Filipinos toward informal remittance channels and subsequent financial exclusion.

“In the end, this may exact an even larger toll on the overseas Filipinos and their families in terms of deprivation of access to safe and reliable financial services,” he said.

A recent study by the World Bank ranked the Philippines third in terms of remittances after India and China. The study cited the cost of sending remittances through commercial banks is 11 percent while those coursed through money transfer operators is pegged at six percent.

The BSP has raised concerns on the adverse impact of de-risking with relevant international institutions including the Financial Action Task Force, Alliance for Financial Inclusion, the Global Partnership for Financial Inclusion of the G20, the US Department of Treasury, the Financial Stability Board, and the World Bank as early as 2014. 

“I think they have been listening. In fact there has been advisories that have been issued clarifying certain standards because sometimes it is just as matter of interpretation. If the interpretation is on the strict side then it becomes a little bit more difficult to comply,” he said.