BSP: Investor confidence in banks intact despite Wirecard scandal

The Bangko Sentral ng Pilipinas (BSP) said investor confidence in the banking system and its reputation remain intact despite allegations that two of the counbank try’s largest lenders were involved in the missing $2.1-billion funds of German financial technology leader Wirecard AG.

In a virtual press conference, BSP Governor Benjamin Diokno said the case of Wirecard mainly involves an internal financial reporting fraud within the German company.

He added there is no proof on allegations the funds of Wirecard were in two Philippine banks.

“Overall, the Wirecard issue does not pose significant reputational impact on the Philippines. I also do not see negative impact on investor optimism or shareholder confidence,” he said.

Diokno, who is also chair of the Anti-Money Laundering Council (AMLC), said the ongoing investigation does not lead to any trace of the alleged missing funds entering the Philippines.

The BSP chief said the value alone would trigger reporting to the AMLC and internal due diligence review by the banks involved, BDO Uniand Bank of the Philippine Islands (BPI).

“This is consistent with the earlier statement by both banks, BDO and BPI, that they do not have any relationship with and did not process the subject fund from Wirecard,” Diokno said. Nonetheless, Diokno said the

regulator would continue to push for reforms to foster resilience of banks and the banking system.

These include promoting good corporate governance and effective risk management system and reinforcing the importance of sound risk culture in the organization.

“Strong governance culture will instill discipline and reduce potential for undesirable behaviors that may jeopardize the banks’ well-being. It’s also an opportune time to strongly support the amendment of the Philippines deposit secrecy laws to enable supervisors and law enforcement agencies timely access to deposits,” he said.

Diokno reiterated the country’s banking industry is resilient amid the Wirecard as well as directors, officers, stockholders, and related interest (DOSRI) transaction issues.

“Robust governance and risk management systems, which serve as lines of defense, enable banks to promptly detect and address threats to the integrity of the financial system. Likewise, expectations set out on dealings with related parties ensure that these transactions are done at arm’s length terms,” he said.

According to the BSP, the adoption of the risk-based supervision allowed the regulator to effectively monitor compliance with the issued standards and regulations and focus on areas that pose the most significant risk to the safety and soundness of individual banks and the banking system.

“This is complemented by a robust enforcement framework that provides a range of tools and sanctions that may be imposed on noted non-compliance with regulations,” Diokno said.

He added the implementation of enforcement action aims to promote adherence with regulations, observance of prudent banking practices, and exercise of good governance over banking operations.

He said other measures in the BSP’s arsenal include the use of data analytics using information collected from varied sources.

“This helps the BSP have a clear picture of activities and developments on the ground,” the BSP chief said.