BSP sets new rules on takeover, liquidation of quasi-banks

MANILA, Philippines -  The Bangko Sentral ng Pilipinas (BSP) has laid down the guidelines on the take over and liquidation of problematic non-banks with quasi banking functions and trust entities.

BSP Governor Amando M. Tetangco Jr. issued Circular 719 series of 2011 or the guidelines on receivership and liquidation proceedings of non-banks with quasi banking functions and trust entities as approved by the Monetary Board last April 14.

Under the new guidelines, non banks with quasi banking license such as investment houses and financing companies as well as trust entities that are unable to pay its liabilities as they become due in the ordinary course of business or have insufficient realizable assets, and could not continue in business without involving probable losses to its depositors and creditors would be placed under receivership.

Furthermore, non banks with quasi banking license and trust entities that willfully violated a cease and desist order that has become final involving acts or transactions which amount to fraud or a dissipation of assets would also serve as a legal basis for a take over.

The receiver to be appointed by the BSP would determine within 90 days from the date of the take over whetherthe non banks with quasi banking license and trust entities could still be rehabilitated and permitted to resume business or proceed with the liquidation process.

The new guidelines stated that the action of the Monetary Board would be final and executory and could not be restrained or set aside by the court except on petition for certiorari on the ground that the action was taken in excess of jurisdiction or with such grave abuse of discretion.

Furthermore, the BSP could summarily and without need for prior hearing close a banking institution and place it under receivership if it suspends the payment of its deposit liabilities for more than 30 days.

It warned that administrative sanctions would be slapped on quasi banks or trust entities that persist on conducting its business in an unsafe or unsound manner.

Penalties under Republic Act 8791 or the New Cental Bank Act include suspension or removal of officers and directors found to have willfully violated the provisions of the law.

The receiver to be appointed by the BSP must belong to the private sector and must have appropriate knowledge, training, and competence and must have minimum five years experience in the field of banking and finance, receivership, liquidation, rehabilitation, insolvency, and supervision of financial institutions.

A receiver must also pass the “fit and proper” rule of the BSP on bank directors or officers and must have no conflict of interest.

The number of non-banks with quasi banking license such as investment houses and financing companies supervised by the BSP increased 5.3 percent to 16,005 last year from 15,201. This comprised of 6,632 head offices and 9,373 branches.

Non-banks with quasi banking license posted a net income of P4.55 billion last year. The group’s operating income reached P12.54 billion while expenses amounted to P7.48 billion.