By IGNACIO R. BUNYE
IF there is one good thing that came out of the Legacy mess, it is the heightened awareness among Filipinos that they should be more prudent in dealing with unscrupulous syndicates posing as respectable institutions.
There is also a stronger sense of urgency to prevent Legacy-type operations from victimizing more innocent depositors and investors in the future.
In previous dialogues with legislators, even prior to the Legacy scam, the Bangko Sentral ng Pilipinas (BSP), as regulator of all banks in the country, has repeatedly stressed the utmost importance of amending its charter to enable the BSP it to more effectively perform its mandate.
The proposed amendments to the BSP charter seek to strengthen the BSP’s supervisory powers; empower the BSP in improving the quality of bank ownership, governance and capitalization; enhance the BSP’s administration of the monetary, credit and banking system; and provide for a more responsive BSP organization.
One of the more salient proposed amendments has to do with the transfer of ownership of banks.
Under an amended Section 25 of Republic Act 7653 or the New Central Bank Act, transfers of substantial shares in banks shall require the prior approval of the BSP.
The BSP will also take into consideration the “fitness” of the incoming stockholders as may be indicated by their financial capacity and integrity.
The BSP’s role in bank ownership transfers will ensure integrity among bank owners. A stronger BSP, with the power to approve or disapprove the transfer of ownership of banks, could have prevented Legacy group owners from buying ailing rural banks that were eventually used to victimize depositors.
In the case of Legacy, not only did the (Celso) De Los Angeles group not seek BSP approval of the acquisition of such banks. The acquisitions were even keep secret!
The BSP also proposes that, as an exception to the Bank Deposit’s Secrecy Law, its examiners be given authority to verify suspicious bank accounts generated through deceitful schemes.
The proposed amendments also seek to indemnify bank examiners for legal expenses incurred in work-related cases unless examiners are adjudged to be have acted in bad faith, with malice, gross negligence, or gross misconduct.
The present charter exposes bank examiners to harassment law suits.
One proposed amendment seeks to limit the authority to issue temporary restraining orders (TROs) to the Court of Appeals.
Experience has shown the relative ease by which TROs are applied for and granted. The banks under investigation easily obtain the TROs by simply alleging to the court that the BSP’s investigations have begun to trouble depositors and that continued investigation could trigger panic withdrawals and possible bank failure.
Under the proposed charter amendments, only the Court of Appeals can issue restraining orders to halt the investigation of suspiciously fraudulent banks. Even then, the BSP will have the right to go ahead with its examination after posting a bond.
The BSP also proposes that it be given authority to direct a distressed bank to accept investors for rehabilitation.
If the adjusted capital accounts of a bank or quasi-bank are lower than the minimum capital required, the BSP proposes that the Monetary Board be authorized to direct the stockholders of ailing banks to infuse capital within 90 days.
In case of inability or unwillingness of the distressed institution to infuse the needed capital, the Monetary Board may direct the distressed bank to accept investments from qualified investors, to merge with a qualified financial institution, or to effect a quasi-reorganization.
The Monetary Board may likewise prescribe a higher capital adequacy ratio for banks exposed to more than normal risks.
Finally, the BSP proposes steeper fines for violations of banking laws. The BSP proposes that the original maximum penalty be increased from P200,000 to P2 million, while the fines which could be imposed by the BSP Governor should now be raised from P10,000 to P100,000.
Cavite Representative Crispin Remulla and Senate President Juan Ponce Enrile have filed separate bills in the House of Representatives and in the Senate incorporating most, if not all, of the proposed amendments. We hope that Congress gives these bills top priority.