BSP eases rules on dividend declaration

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has further eased the regulations on dividend declaration of banks and quasi-banks on shares of stock and similar capital instruments.

The BSP’s Monetary Board has approved the policy liberalization to align the dividend declaration standards of banks and quasi-banks in the Philippines with international standards on the rights of shareholders.

BSP deputy governor Nestor Espenilla Jr. said the revised policy holds more accountable the board of directors and management of the bank and quasi-banks on the declaration of dividends and makes more transparent to the public the dividend declaration in view of the required disclosures.

“Basically, no more prior BSP evaluation/clearance before a bank can declare dividend unless a bank has been specifically directed by the Monetary Board otherwise. It will be the bank’s responsibility to determine and certify its compliance with BSP requirements,” Espenilla added.

The BSP explained the policy would bring publicly listed banks or quasi-banks in a position to comply with the 30 calendar day’s timeline prescribed under the Association of Southeast Asian Nations Corporate Governance Scorecard (ACGS) for the payment of dividends to shareholders of record.

Further, the policy also requires that the dividend declaration be immediately recognized as a liability in accordance with Philippine Accounting Standards, and that it be disclosed in the statement of equity changes and in the notes to the financial statements.

Banks and quasi-banks that meet the pre-qualification criteria including capital adequacy requirements shall be qualified to declare and pay dividends without prior BSP verification.

The central bank added any bank or quasi-banks that misrepresents or does not comply with the amended regulations on dividend declaration shall be reverted back to the “prior Bangko Sentral verification” requirement. 

Espenilla said violators would also be subject to other enforcement actions provided by law or regulations, including possible declaration of unsafe or unsound banking practice.

“Sanctions apply if a bank is later found to violate conditions, including loss of privilege,” he added.

The number of banks in the Philippines declined amid the consolidation of smaller players, but the physical network of banking industry increased in the first half of the year.