Congress urged to approve BSP charter amendments

MANILA, Philippines - The Philippine Deposit Insurance Corp. is urging Congress to approve its proposed charter amendments for the Bangko Sentral ng Pilipinas (BSP), saying that a stronger central bank would help improve the country’s financial system.

PDIC president Jose Nograles said the proposals laid down by PDIC are measures for strengthening co-regulations and bank receiverships.

Among the amendments proposed by PDIC to the New Central Bank Act is the creation of a Bridge Bank Authority, which is an alternative means of bank failure resolution practiced in countries such as the United States.

A bridge bank is a temporary bank established and operated to take over the operations of a failed bank and to maintain banking services for the customers.

As the term implies, a bridge bank is designed to “bridge” the gap between the failure of a bank and the time when a satisfactory resolution of the failed bank can be implemented. It enhances the receivership of closed banks by providing orderly liquidation without attendant disruptions present in ordinary closure and take over operations.

PDIC had earlier proposed for bridge bank authority under the PDIC Charter amendments. The Congress Bicameral Conference Committee welcomed the proposal but wanted more time to consider it.

Nograles added that among the co-regulatory acts that PDIC is recommending is the inclusion of an additional ground for the closure of a bank. This is the actual cessation of operation by a bank.

PDIC is also proposing the grant of an express authority to dispose of assets of banks under receivership even without consent of closed banks’ stockholders.

Nograles said this will enable rehabilitation especially with strategic third parties. Other proposals are: authority to prescribe the terms and conditions and qualifications of banks’ rehabilitators; extension of receivership period for another 90 days; and inclusion of franchise or license as asset of closed banks.

The PDIC chief said these proposed measures would contribute to overall enhancement of the regulatory framework and banking system stability.

“Side by side the recent amendments of PDIC’s Charter, there is need for corresponding measures to ensure that the regulatory oversight framework is reinforced. The financial crisis taught us that a strong and effective regulatory framework over banks is crucial to the stability of the financial system,” he said.