Metrobank slapped with 14.45-billion risk cover
BSP sanction on internal control breach
The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has required Metropolitan Bank and Trust Co. (Metrobank) to set aside a higher operational risk cover of R4.45 billion – for now – as part of sanctions for compromising the bank’s sound and safe banking business due to internal control neglect.
A statement from the BSP yesterday said that after investigating the Ty-controlled Metrobank’s internal control cracks which allowed a R1.75-billion fraud by one of its officers to be perpetrated for some time, it deemed it appropriate to slap it with higher operational risk cover.
“In determining the appropriateness of the sanctions, the Monetary Board took into consideration Metrobank’s strong financial condition and immediate corrective actions to contain further financial damage,” said the BSP.
The central bank also reprimanded and suspended bank directors and officers for failing to “perform adequate oversight and/or have been complacent/remiss of their duties and responsibilities.”
A major sanction was that Metrobank has to allocate R4.45 billion of its capital on a consolidated basis for higher operational risk cover. However the BSP can ease this requirement subject to periodic reviews. “(This) would be lifted when the bank is determined to have put in place adequate risk control measures to address the weaknesses noted,” said the BSP.
The bank will have to execute and submit a Letter of Commitment to the BSP, which will be “implemented and completed” within one year. According to the central bank, this is to “enhance corporate governance, credit administration, internal controls and audit, risk management, and customer on-boarding and monitoring processes.”
“Together with medium to long-term initiatives that will serve to improve governance, controls, and compliance, the Monetary Board re-affirms the safety and soundness of Metrobank,” the BSP reiterated.
The BSP have strict banking rules and require all banks to be well-capitalized and risk-based approaches implemented. Banks are also expected to adopt internal control frameworks that are suited to their size, risk profile and complexity of operations.
Metrobank, the country’s second largest bank, was dealt with an operational and reputational blow in July this year when police arrested one of its officers for fraudulent transactions. However the bank was quick to assure its clients and banking public that they will not be affected by the incident.
The bank defended its position by emphasizing that its almost R2 trillion financial resources will be more than enough to contain any issues brought by the fraudulent act.
The charges filed on one of its vice president, Maria Victoria Lopez, were qualified theft, falsification and violations of the General Banking Law.
Lopez allegedly involved one of the accounts of the Gokongwei Group’s Universal Robina Corp. in the bank as recipient of these fraudulent accounts.
The BSP took four months to investigate the incident and decide on Metrobank’s sanctions. It remains confident that Metrobank’s case was an isolated one and that it had handled the situation aptly.
In cases of bank fraud, the central bank can file its own prosecution suit of an erring bank employee for violating BSP regulations such as falsification of documents and for reporting false statements to the BSP.
Fraudulent loans which are still reported as part of a bank’s total loan portfolio are submitted under the consolidated statements of condition, and the falsification of these documents when reporting to the BSP is a criminal offense. Sanctions will be imposed on a bank, or its directors and officers, if proven that they committed an error or went against BSP regulations.