Regulators want 'Charter change' for BSP

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) and the Philippine Insurance Deposit Corp. (PDIC) has made solid proposals for amendments to Republic Act (RA) 7653, otherwise known as the New Central Bank Act.

The objectives of the proposed amendments are: to enhance its administration of the monetary, credit and banking system, strengthen BSP’s supervisory powers, and provide for a more responsive organization.

Last April 29, amendments to the PDIC Charter was signed into law, which in effect, expanded its regulatory powers as well as increased the minimum deposit insurance coverage to P500,000 from P250,000.

Likewise, the Basel Committee is introducing new international standards on banking practices and risk management. The standards are set to take effect next year. The Basel Committee is under the wings of the Bank for International Settlements (BIS), which is composed of the world’s central banks.

Basel Committee chairman Nout Wellink said that most central banks have responded well in strengthening its regulations, particularly adjusting to the Basel II framework.

“We are working toward the introduction of a macro-prudential overlay and comprehensive set of measures to strengthen the regulation, supervision and risk management of the banking sector,” Wellink said, adding that the measures will substantially reduce the probability and severity of economic and financial stress.

Meanwhile, some of the outstanding amendment proposals include allowing BSP examiners access to deposit accounts in the course of the examination while the receiver of a closed bank would have the authority to sell its assets for purposes of rehabilitation.

The BSP recommends that a restraining order or injunction against receivership can only be issued by the Court of Appeals.

It wants to be empowered to issue quick resolution actions, including directing the infusion of capital, merger, consolidation or on quasi-reorganization including credit card companies, moneychangers, e-money issuers, remittance agents.

The BSP wants the authority to obtain data from any person or entity versus the present limits of sourcing of data from government offices only, and it wants quasi-banks and Islamic banks access to BSP credit facilities.

“The requirement for BSP personnel to exercise extraordinary diligence will be substituted by the general rule on liability of public officers,” the BSP proposal stated.

The proposal includes an increase to five deputy governors from the present three, and the ability of the BSP to own shares in international and regional organizations.

Meanwhile, the PDIC presented its own eight-point proposal for amendments to RA 7653, although the proposals were limited to issues pertaining to receivership issues and bank deposits.

“There is need for 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,” PDIC president Jose C. Nograles said.

Among the proposals is the authority of the receiver to prescribe terms and conditions of rehabilitation, and qualifications of parties seeking to rehabilitate the bank, as well as the inclusion of banking franchise or license as a closed bank asset.

It wants the receivership period extended, and that bank dormancy is included as grounds for receivership.

One proposed amendment is the so-called bridge bank authority, which is an alternative means of bank failure resolution practiced in countries such as the US. It was proposed in the recently amended PDIC Charter but disapproved by Congress.

A bridge bank is a temporary bank established and operated to take over the operations of a failed bank and 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.