House leaders push amendments to banking laws

MANILA, Philippines - Leaders of the House of Representatives yesterday pushed for amendments to several banking laws and regulations to further distinguish non-stock savings and loan associations (NSSLAs) from the country’s regular banking institutions.

Speaker Feliciano Belmonte Jr. and Batangas Rep. Nelson Collantes, chairman of the House committee on banks and financial intermediaries, earlier filed House Bill 3112 or the proposed “Act Amending the New Central Bank Act” that they said will be acted upon swiftly by the chamber.

The panel is also studying proposed amendments to Republic Act No. 8367, known as the “Revised Non-Stock Savings and Loan Associations Act of 1953.”

Collantes told members of the Confederation of Non-Stock Savings and Loan Associations, Inc. (CONSLA) during their recent convention in Baguio City that the House “is aware of the distinguishing factors between regular banks and NSSLAs.”

“In terms of the purpose of regular banks, they are established mostly for profit, while NSSLAs support the pursuit of common economic and social goals of its members,” Collantes pointed out.

“While regular banks are allowed to make speculative and diverse investments, NSSLAs are limited to safe and non-speculative investments like government securities and deposits with banks,” he said.

Collantes stressed NSSLAs are different from regular banks and must not be treated similarly under the law.

The proposed amendments in the bill of Belmonte and Collantes contain provisions that would distinguish NSSLAs from regular banks such that regulations must not be applied equally to regular banks and NSSLAs.

“If we are to champion the welfare of the more than seven million members of NSSLAs, we must continue our efforts in distinguishing them from regular banks,” Collantes said.

In the same way that Islamic banks are given consideration taking into account their peculiar characteristics, Collantes said NSSLAs have characteristics that must warrant special consideration in terms of supervision by the Bangko Sentral ng Pilipinas (BSP).

Collantes added his committee will soon review BSP Memorandum Circular No. 789 that amended the Manual of Regulations for Non-Bank Financial Institutions Applicable to NSSLAs, particularly Section 5 which adds Section 4392S that enforces stricter rules and regulations for the provision of allowance for probable losses, and Section 10 that amends Section 3126S which limits the distribution of dividends to once a year.

Earlier, CONSLA’s board of trustees issued a resolution urging the BSP to either revise or totally repeal BSP Circular No. 789 or suspend the implementation of two of its sections that were reportedly issued in violation of their right to due process.

It said the recommendations of its technical working group were not considered during the formulation, finalization and issuance of the circular on Feb. 28, 2013 despite numerous position papers they submitted.

The failure of the BSP to consider its recommendations in coming up with the circular, according to CONSLA, also constitutes failure of due process.

It insisted that Section 5 of the circular “is not supported by any compelling reason” as no less than the BSP Status Report on the Philippine Financial System for the first semester of 2013 underscored the NSSLA industry’s sound and stable status, including the continuously improving quality of loan and other assets.

On the other hand, CONSLA said Section 10 violates Republic Act No. 8367, An Act Providing for the Regulation of the Organization and Operation of Non-Stock Savings and Loan Associations, for being unreasonable and violates the constitutional rights to due process and freedom to contract of the association and its members.

While the group understands the objective of BSP Circular No. 789 is to further strengthen the NSSLA industry, BSP’s implementation lacked proper consultation, they said.

The group said the strict implementation of the guidelines of the circular are stricter than those imposed on banks, which would cause higher loan loss provisioning for NSSLAs that will unduly erode the association’s profitability, thus, endangering the viability of the entire industry.

CONSLA president Ricardo Nolasco Jr. has requested the BSP to create a committee that would research and study the unique operation of the country’s NSSLAs compared to the regular banking institutions.

He said a thorough study would make the policies, circulars, and rules and regulations tailor fit for the unique operation of an industry such as the NSSLAs.

Nolasco, also chairman of the board of trustees of the Air Materiel Wing Savings and Loan Association, Inc. (AMSLAI), identified CONSLA’s regulatory concerns, including regulations that have been rendered obsolete due to the sweeping changes in the business and market conditions and in technology since 1997 when RA 8367 was enacted; and Regulations which may not be suited to the unique business nature and intrinsic mandate and missions of NSSLAs as self-help vehicles set up by individuals belonging to a well-defined group in pursuit of their common socio-economic goals and not for profit.

“We would like to emphasize that there are policies, rules and regulations that have been proven to work advantageously to the operations of the NSSLAs,” Nolasco said in citing BSP Circular 789.

“Why change something when there is nothing wrong with it. Why change a regulation that has been propelling the phenomenal growth of the industry?” he asked.

Nolasco also cited BSP’s 2013 report on the “exceptional financial and operational performance” of the country’s NSSLAs.

He said there are now 72 NSSLAs in the country that caters to the marginalized sectors like members of the military and the police, teachers, government employees and those in the private sector, market vendors, miners, and school employees.

“NSSLAs are an effective partner of the government in providing inclusive progress with the fruits felt and has transformed the lives of members and beneficiaries. In short, NSSLAs continuously serve and help build countless dreams into reality,” Nolasco said.