Security Bank openly violates BSP regulations and the Constitution

THE Bangko Sentral ng Pilipinas (BSP) “has supervision over the operations of banks and exercises such regulatory powers as provided in the New Central Bank Act and other pertinent laws over the operations of finance companies and non-bank financial institutions performing quasi-banking functions (www.bsp.gov.ph).” To implement these regulatory powers, the BSP formulated rules and regulations, which these BSP-supervised financial institutions (BSFI) are expected to follow and conform to.

However, as I discussed in this column last week, Security Bank Corp. (SBC) blatantly violated BSP regulations when it unilaterally withheld the hard-earned money of a depositor. What were these violations?

Memorandum M-2017-025

SBC violated the BSP Memorandum M-2017-025 when it placed a depositor’s bank account in a dormant status without properly informing the account holder.

BSP rendered the said memorandum to remind all banks and nonstock savings and loans associations (NSSLAs) on the compliance with the regulations governing dormant deposit accounts. Under the memorandum, banks and NSSLAs must comply with notice requirements set by the BSP by notifying depositors at least 60 days before their accounts become dormant and at least 60 days before their accounts are charged with dormancy fees. The notice must contain the effect of dormancy, which is to transfer the account from active to dormant status, and advice on how to reactivate the account. SBC failed to follow these requirements.

The memorandum is explicit that, “Failure to comply with foregoing regulation on dormancy fees will subject the responsible banks and quasi banks to applicable sanctions and penalties provided under Section X299 of the Manual of Regulations for Banks.”

The above Section X299 is the general provision on sanctions imposed on any violation of the provisions of the Manual of Regulations for Banks. Offenses are categorized as serious, less serious and minor.

I believe that SBC committed a serious offense. A bank’s act or omission is classified as a serious offense if “the act or omission has resulted or may result in material loss or damage or abnormal risk to the institution’s depositors” or it has “given unwarranted benefits, advantage or preference to the bank or any party in the discharge by the director or officer of his duties and responsibilities through manifest partiality, evident bad faith or gross inexcusable negligence.”

Indeed, SBC’s failure to properly serve the notice of dormancy resulted in the material loss and risk to the depositor and the same had given advantage to the SBC and its named officers, all of whom exhibited bad faith and gross inexcusable negligence.

Right to due process

Why is the correct service of a notice of dormancy very important? Proper service of any type of notices, summons and similar processes is part of “due process.” All citizens of this country enjoy a myriad of constitutional rights, including the right to due process.

Section 1, Article III (Bill of Rights) of the Constitution declares, “No person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of the laws.” The bank account of a depositor is the property of that depositor and hence, cannot be taken away from him without due process of law. The appropriate service of the notice of dormancy is the start of that constitutionally protected right to due process.

SBC not only defied Memorandum M-2017-025 but also openly transgressed the supreme law of the land, the Constitution.

Bible of banks

The Manual for Regulations of Banks (MRB) serves as the bible of banks in their day-to-day operations. Banks are supposed to adhere to the policies and procedures laid out in the same MRB. Yet, SBC chose not to follow, and continuously ignores, some of the precepts listed in the MRB.

Under Section X1002.3 of the MRB, financial consumers are expected to be treated fairly, honestly and professionally by the BSFIs. They must “[d]eal fairly, honestly and in good faith with customers and avoid making statements that are untrue or omitting information which are necessary to prevent the statement from being false or misleading.” BFSIs are mandated to “[h]ave a system or internal processes in place to detect and respond to customer mistreatment as well as serious infractions. In case of violation of Code of Conduct ... sanctions shall be enforced.” Yet, instead of imposing sanctions on its erring officers, SBC decided to cover up their glaring mistakes.

SBC dealt with the subject depositor in an unfair, dishonest, unprofessional and in sheer bad faith when it seemingly authorized Mharie Perez to fabricate evidence and manufacture data to supposedly satisfy the requirements of Memorandum M-2017-025.

Why do these SBC officers — executive vice president Leslie Y. Cham, senior vice president Ronald I. Austria, customer care unit head Mharie Perez and branch channel manager Erickson Basilio — think that they are above the law? Well, SBC had been protecting them, albeit illegally.