BSP eases rules on interlocking positions

THE CENTRAL BANK has provided some leeway for government officials sitting as directors or officers of more than one financial entity, clarifying that the stringent requirements set by the regulator only applies to those with voting powers in banks and similar firms.

The Bangko Sentral ng Pilipinas ( BSP) through Circular 953 seeks to limit the coverage of rules on interlocking directorships or officerships for government executives, saying that the restrictions only cover those “holding voting shares of stock” in banks, quasi-banks, non-banks, and trust firms.

Interlocking positions refer to a business strategy where a member of one firm’s board of directors also sits as part of the board of another, usually under the same group of companies.

Under the manual of regulations for banks, a person cannot sit as concurrent director between two banks or among quasi-banks and non- bank firms. This is to “safeguard against the excessive concentration of economic power” and prevent conflicts of interest, according to the BSP’s rules.

“Multiple positions may result in poor governance and unfair competitive advantage,” the regulations also read, referring to concurrent officerships.

As a rule, any concurrent positions in banks and financial firms must be approved by the Monetary Board. Secondments or the temporary transfer of an official from one company to another is also prohibited, but is given some leeway in cases of banks and as much as two of its subsidiary banks, quasibanks, or non-bank affiliates.

The new circular, however, relaxes the rules covering government officials, saying that such limits only cover those who hold voting shares among BSP-supervised financial institutions.

A number of government officials and executives are often given ex-officio seats in various state- run corporations. For example, members of the Cabinet sit as board members at the Land Bank of the Philippines. Its board of directors includes Finance secretary Carlos G. Dominguez III, Agriculture secretary Emmanuel F. Piñol, Agrarian Reform secretary Rafael V. Mariano, and Labor secretary Silvestre H. Bello III. •