BSP sets demerit system for bank report standards
THE CENTRAL BANK will impose a demerit system on banks starting next year for their failure to submit key industry data and reports sought by the regulator.
The Bangko Sentral ng Pilipinas (BSP) through Circular 963 introduced stiffer penalties on banks starting January 2018 under new reporting standards it will impose on all players.
The central bank requires lenders and financial entities to submit industry data which are “complete, accurate, consistent, reliable and timely,” but officials have observed poor compliance with these standards, especially in following the prescribed deadlines.
“In cases of non- compliance with the reporting standards, the circular has introduced a combination of enforcement actions that are intended to bring about an improvement in the bank’s behavior,” the BSP said in a statement.
“In addition to rationalizing the monetary penalties currently being imposed on banks, nonmonetary sanctions for habitual incurrence of reporting violations as determined through a demerit system were also introduced.”
For each incident, universal and commercial banks must pay a fine of P3,000 for those considered as primary reports; thrift banks at P1,500; and rural and cooperative banks at P450 per error or per day of delay of the submission. On the other hand,
mistakes or the late filing of “secondary” reports would merit a P600 fine for big banks, P300 for thrift banks; and P150 for rural and cooperative lenders per occurrence.
The fine is tripled for non-compliant or non-submission of reports.
Among the records sought from banks include approved loans, deposit base, capitalization, and corporate governance rules. In turn, these data are studied by the regulator to monitor latest developments and address potential gaps or bubbles which could put the banking system at risk.
In particular, trends in bank lending and money supply are among the key data which the BSP considers during its regular monetary policy review.
The circular also requires bank directors and senior management to set up an “effective governance process” that would streamline the reporting process to the BSP.
BSP Deputy Governor Nestor A. Espenilla, Jr. said last week that a lot of banks are unable to submit highquality reports to the central bank on time, noting that the central bank actually generates a lot of income from these penalties.
Sanctions can stretch as far as suspending or disqualifying a bank official found to cause the “persistent” and “intentional” late submission of reports to the BSP, Mr. Espenilla added.
The BSP would use a points system to monitor a bank’s compliance, with those hitting 100 points in a calendar year to be considered a “habitual” violator, and could face the restriction or suspension of branching privileges as well as the power to offer new financial products and services to its clients.
“For the remaining months of 2017, banks are expected to make the necessary changes to their systems and processes to comply with the requirements of the Circular,” the central bank said.
Demerit points will be calculated starting in August.
Specific expectations and submission formats will be rolled out by the central bank, with full compliance expected by next year.