The Senate Committee on Banks, Financial Institutions and Currencies on Monday endorsed key amendments to the existing Central Bank Act to further empower the Bangko
Sentral ng Pilipinas (BSP) in fulfilling its mandate to protect the banking system.
In sponsoring Senate Bill (SB) 1297, Sen. Francis G. Escudero, Banks Committee chairman, said the proposed legislation aims to “strengthen the tools which the BSP exercises in performing its mandates, supplement the mechanism in protecting savings of depositors and in ensuring the smooth flow of transactions in the financial system, as well as to enhance the corporate viability of the BSP.”
Escudero said the salient features of the remedial legislation, include provisions strengthening the BSP’s monetary-stability function, as follows: 1) Restoration of authority to obtain data for purposes of statistical and policy development, as well as ascertaining compliance with laws and banking regulations, and authority to issue negotiable certificates of indebtedness even during normal times, both of which were powers granted to the old Central Bank of the Philippines; and 2) Removal of thresholds in the growth of monetary aggregates, credit and prices as guiding principles in monetary administration, in view of current international trends in monetary-policy frameworks adopting inflation targeting.
The senator added that SB 1297 also aims to boost BSP’s financial- stability function by including a provision on “formal statutory recognition of the BSP’s mandate of promoting and maintaining financial stability in close coordination with other relevant agencies, as well as grant of statutory oversight of payment and settlement systems.”
Escudero added that central banks in Asia typically have a financial-stability mandate, including China, Malaysia and Singapore.
Moreover, he said the bill also enhances BSP’s prudential supervision function in enhancing BSP’s supervisory authority by:
■ expanding the entities it supervises to include other categories of financial institutions;
■ granting authority to impose sanctions on transfers and acquisitions of substantial shares of banks and quasibanks without BSP approval;
■ allowing full flexibility to conduct risk-based supervision of financial institutions; strengthening of administrative and criminal sanctions to include, among other things, forfeiture of profits from unauthorized financial transactions; and
■ improving resolution mechanisms to deal with problematic financial institution, and providing legal protection for BSP officials and staff when performing official duties similar to that provided to officers and employees of the Philippine Deposit Insurance Corp. (PDIC) under the latter’s charter (Republic Act [RA] 9576 as amended by RA 10846).
Escudero’s bill included provisions strengthening BSP’s corporate and financial viability through an additional BSP capitalization of P150 billion, payable immediately upon effectivity of the proposed remedial law amending the Central Bank Act.
It seeks the grant of flexibility to establish adequate loss allowances and create reserve buffers against future risks and contingencies, and restoration of tax exemption, similar to other central banks in the world; enhancement to credit operations by granting exemption from court processes relating to collateral obtained from banks; and the authority to deputize the BSP legal staff in extrajudicial foreclosure of mortgaged properties.
In addition, the bill includes a separate provision increasing the number of BSP deputy governors from three to five “to have a more responsive leadership in a complex institution” and a new section granting the central bank an “authority to approve transfer shares.”