IMF backs lifting of financial institution secrecy


THE Lender Secrecy Regulation is constraining the Bangko Sentral ng Pilipinas’ (BSP) capability to successfully supervise the banking business, the Intercontinental Financial Fund (IMF) claimed.

In a money sector assessment report unveiled on Nov. 10, the IMF claimed the Financial institution Secrecy Regulation should be amended to allow for the BSP comprehensive accessibility to banks’ deposit and other data.

“BSP ought to be granted unimpaired accessibility to data on all purchaser accounts, and the capability, without having constraints, to hire and share depositor data for any prudential reason (e.g., funding concentrations from similar parties, intra-group dependencies, money circulation evaluation, related-occasion transactions (RPT) and off-internet site anti-dollars laundering (AML) info and analysis) in order to satisfy its supervisory mandate to deal with basic safety and soundness issues,” it reported.

There are expenditures submitted in Congress proposing to reinstate Presidential Decree 1792 which gave the BSP the mandate to look at lender deposits, offered it located sensible grounds this kind of as fraud, severe irregularity or illegal activities.

The Wirecard AG scandal in June sparked renewed phone calls from the BSP and the Division of Finance to move amendments to the Financial institution Secrecy Regulation. The German payments company to begin with claimed it kept $2.1 billion in two community banks, but later on admitted the resources did not exist.

In the report, the IMF said there is a need to have to reinforce the BSP’s capability to gauge the effect of combined conglomerate constructions on domestic systemically important banks (D-SIB) or those people deemed as “too significant to fail.”

“The BSP has to depend to a big extent on general public data for evaluating hazards in the wider conglomerates as it does not have the power to supervise a bank’s guardian or the wider group, or to evaluate their things to do to figure out their impression on the protection and soundness of the financial institution and the financial institution teams in just the conglomerates,” it stated.

The BSP has identified various D-SIBs, most which belong to large Philippine conglomerates and some are foreign financial institution branches, the IMF explained.

Based mostly on the IMF’s assessment, Republic Act. No. 11211 or the New Central Bank Act only gave the BSP the supplemental electricity to get hold of information and information relating to parent and affiliate providers of D-SIBs only for “statistical and policy improvement reasons.”

“Limited scope of this new authority does not deliver the BSP with sufficient powers to evaluate any potential negative impact the actions of those providers may perhaps have on the basic safety and soundness of the banking group. Restrictions on BSP’s enforcement powers also impair its capacity to totally secure the bank from the actions of guardian businesses and affiliates,” the IMF claimed.

The IMF mentioned the BSP should also fortify its oversight on the assessment of best advantageous ownership (UBO) of banks in the Philippines.

“BSP’s means to assess the resolvability of financial institutions, specially D-SIBs, and aid the orderly resolution of a challenge lender, such as the preparedness for efficiently working with a major lender failure requirements to be designed,” it included.

Also, the IMF elevated concern around the inclusion of a Cabinet member in the Financial Board (MB). Under the New Ce​ntral Financial institution Act, one of the MB’s govt sector associates should really also be a member of the Cupboard design​ated by the President.

“Although the Cabinet member has only one particular vote and there is no proof of any earlier political interference in the supervisory choices taken by the MB, the existence of a senior political appointee to the MB, by definition, gives rise to a concern that the operational independence of the BSP is compromised,” it claimed.

The present MB contains Finance Secretary Carlos G. Dominguez III.

The IMF also stated the central financial institution really should keep on to function on improving upon its prompt corrective action (PCA) framework to be certain bank failures are fixed instantly. It suggested that the framework should include the transition methods of difficulty banking institutions with the Philippine Deposit Insurance policies Corp. to prevent losses to the deposit insurance plan fund and lessen ethical hazard challenges.

The report detailed the IMF and World Bank’s findings on the Philippines in relation to the observance of the Basel main ideas for effective banking supervision, primarily based on details obtainable as of July 2019. — L.W.T.Noble