Relax deposits secrecy law when need arises — Medalla
‘We will advocate for such laws, but ultimately, it is the President’s decision to deem it as urgent’
Bangko Sentral ng Pilipinas Governor Felipe Medalla expressed his concerns regarding the existing bank deposit secrecy law and emphasized the need for relaxation in certain cases.
On the sidelines of the launch of the book “Banking Laws of the Philippines — Annotated” at the Central Bank’s main office in Manila, Medalla highlighted the importance of allowing examiners to access bank deposits when there are strong suspicions of dishonest activities or money laundering.
Medalla acknowledged that while banking supervisors are performing their duties, they should not be hindered by bank secrecy laws. He likewise emphasized that examiners should have the authority to investigate deposits if they believe that bank owners are attempting to conceal illicit funds within various accounts.
Simply doing their jobs
“It is crucial that banking supervisors are not covered by secrecy laws because they are simply doing their jobs,” Medalla told reporters.
He further explained that situations could arise where a bank extends loans to individuals who are also the owners of the bank. In such cases, if the examiner discovers that the funds somehow find their way back to the same bank, they should be allowed to scrutinize the related deposits.
Medalla also noted that in certain instances, examiners receive tips from dissatisfied employees of the bank, which further emphasizes the need for access to deposits from specific banks. These insights can be instrumental in uncovering potential fraudulent activities.
Request for deposits secrecy relaxation
Responding to questions about pending legislation, Governor Medalla confirmed that the BSP has requested a relaxation of the secrecy of deposits to the extent that it does not impede the work of banking examiners.
He emphasized the importance of allowing examiners to perform their duties effectively and efficiently to maintain the integrity of the banking sector.
When asked if the BSP will request the President to certify this measure as urgent, Governor Medalla stated, “We will advocate for such laws, but ultimately, it is the President’s decision to deem it as urgent.”
Reduction of banks’ RRR
Meanwhile, Medalla reiterated anew that BSP might reduce banks’ reserve requirement ratio as an alternative to loosening monetary policy.
To prevent tightened monetary conditions, Medalla said the BSP plans to reduce reserve requirements while making provisions for small banks until their loans mature, ensuring a smooth transition.
“We will compensate by cutting the reserve requirements at the same time and providing provisions for small banks until their loans have matured, so they are not caught off guard,” Medalla explained.
Responding to queries about the potential impact on banks, Governor Medalla clarified that the small banks constitute a relatively small portion of the total assets, minimizing the effects of the changes.
He also distinguished between policies and operations, noting that the BSP is considering cutting reserve requirements on operations and can balance the effects by adjusting borrowings.