BSP puts PhilEXIM under tight watch

The Bangko Sentral ng Pilipinas (BSP) is putting the state-owned Philippine Export-Import Credit Agency (PhilEXIM) under a tight watch after recent examinations turned up “negative findings” that could put the institution at risk.

Sources revealed over the weekend that the BSP had conducted routine examination on PhilEXIM and found weaknesses in the institution’s internal audit system.

Sources said the results of the BSP examination was presented to the Monetary Board (MB) which directed the BSP’s Supervision and Examination Sector (SES) to forward the result to the PhilEXIM for “prompt corrective action.”

Formerly the Trade and Investment Development Corp. of the Philippines (TIDCORP), PhilEXIM is a government financial institution attached to the Department of Finance, with Finance Secretary Margarito Teves as chairman of the board.

The company also guarantees foreign loans for developmental purposes, with special focus on export-oriented industries, Board of Investment-registered industries, public utilities and industries.

PhilEXIM’s main function is to provide loans, guarantees, credit insurance and technical assistance services to the export sector as well as the priority industries of the government.

According to sources, however, PhilEXIM’s internal audit system was “faulty” and the board needs to address these weaknesses immediately or face sanctions, just like any financial institutions under the supervision of the BSP.

BSP Deputy Governor Nestor Espenilla Jr., who also heads the BSP’s SES, sits in the PhilEXIM board of directors as BSP representative but declined to comment when asked about the BSP’s findings.

“Our policy is not to comment on individual institutions,” Espenilla said.

According to a PhilExim source, however, the findings of the BSP were already “well-known” to the board and newly-appointed president and veteran banker Francisco Magsajo was hand-picked to implement reforms.

The source said that Magsajo already got board approval for a “package of reforms” that addressed weaknesses in the company’s internal audit system, checks and balances as well as its portfolio.

“The problem with PhilExim is that it was operating just like any other government bureaucracy,” the source said. “It is our Eximbank, it shouldn’t operate like that, it has to be held up to a higher standard.”

According to the source, the board had already given Magsajo a free hand to implement his reforms as well as to review the company’s portfolio.

The source said that PhilExim could no longer take back guarantees or loans it has already approved but the board could still tighten the monitoring of the projects to make sure they complied with all the requirements.

The source said however that there would be changes in the criteria for selecting projects that the institutions would be involved with in the future to address the concerned raised by the BSP.