House OKs bill amending BSP charter

MANILA, Philippines - The House of Representatives has approved on third and final reading a bill amending the charter of the Bangko Sentral ng Pilipinas (BSP) to give more powers to the central monetary authority.

Speaker Feliciano Belmonte Jr., principal author of Bill 5875, said yesterday the BSP law or Republic Act 7653 was enacted 23 years ago.

“Since then, the economic milieu in the country has changed, globalization has increased the integration of financial markets and the scope of operations of financial institutions has evolved,” he said.

“In light of these realities and developments, there is undoubtedly a need to respond to contemporary challenges by amending RA 7653 so the BSP remains effective in its conduct of monetary policy and supervision of entities within the financial system,” he said.

He said once the proposed changes in the BSP charter are enacted into law, these would empower the BSP to effectively respond to challenges and innovations of a globalized economy, and more significantly, in performing its constitutional mandates.

Among other changes, Bill 5875 increases the capital of the central bank from P50 billion to P200 billion. The national government will provide the additional P150 billion.

It also provides that BSP would make policy directions in the areas of money, banking and credit.

The BSP would have supervision and regulatory powers over banks, finance companies, non-bank financial institutions performing quasi-banking functions, credit card firms, money changing businesses, pawnshops, e-money issuers, money forwarding businesses, payment and settlement system operators, and other institutions doing similar business.

The central bank would be authorized to seek necessary information from covered companies in the performance of its regulatory functions. These firms would face sanctions if they withhold such information.

The bill allows the BSP to establish a reserve fund to mitigate future risks and contingencies inherent in carrying out its functions.

The measure also permits the BSP to acquire shares of any kind or accept them as collateral and prohibits it to participate in the ownership or management of any enterprise either directly or indirectly.

BSP deputy governor Vicente Aquino has told a House hearing that the central bank needed a large capitalization “to enable it to meet the needs and demands of a rapidly expanding economy and the growing complexity of our financial system.”

The House committee on banks and financial intermediaries has also agreed to endorse a bill amending the charter of Al Amanah Bank to expand Islamic banking in the country.

Batangas Rep. Nelson Collantes, committee chairman, has created a technical working group to draft the final version of Bill 5989 for submission to the House proper for plenary consideration.

The bill, authored by Rep. Sitti Djalia Turabin-Hataman of party-list Anak Mindanao, seeks to make the country’s lone Islamic bank, Al-Amanah Islamic Investment Bank, independent from the Development Bank of the Philippines by converting it into a universal bank with a P10-billion capitalization and authorizing it to issue Islamic bonds.

Hataman said the measure would help provide a responsive regulatory framework for Islamic banking that encourages a level playing field for a wider success in financial transactions by amending the Al Amanah Bank charter.

It would open Islamic banking to local and foreign investors, she said.

“Islamic banking and finance is a growing industry worldwide, gaining a market not just exclusive for Muslims, as it is seen as an alternative to existing conventional banking. This is particularly significant for the country, as we position our self as a major player in the Asean (Association of Southeast Asian Nations) integration,” she said.

She added that an expanded Amanah Bank would offer financial services not only to Muslims but other sectors of society as well.

The BSP has endorsed Hataman’s bill, saying it could be the answer to growing challenges and opportunities in Islamic banking.