Evardone lauds House approval of BSP capitalization hike
Published Aug 1, 2018 02:56 pm
By Charissa Luci-Atienza
The chairman of the House Committee on Banks and Financial Intermediaries expressed hope on Wednesday that the Lower Chamber’s approval of the bill increasing the capitalization of Bangko Sentral ng Pilipinas (BSP) from P50 billion to P200 billion would aid the BSP to pull all its levers to minimize the impact of rising inflation on the daily wage earners.
Rep. Ben Evardone (via Google Image| Manila Bulletin)
Eastern Samar Rep. Ben Evardone, one of the authors of the bill, cheered at the House’s approval of House Bill 7742 on third and final reading on Tuesday night.
“I hope that the increase will enhance the BSP’s viability to meet the needs of the growing economy, particularly in combating the rising inflation,” he said.
“The BSP should pull its levers to minimize the impact of rising inflation on the daily wage earners,” he said.
HB 7742, which seeks to amend Republic Act 7653 or the New Central Bank Act, also grants BSP tax exemptions from income of its governmental and regulatory functions, to enhance more its viability.
Tax-exempt incomes include those earned from fund management, international reserve management and treasury operations, those earned from sale of acquired assets and consequent income of BSP being a lender of last resort, as well as those earned from activities being the sole issuer of currency, such as income from demonetization of currency, sale of commemorative notes, service fees for handling notes and coins.
Also exempted are income from activities as operator of payment systems, and other income arising from necessary and incidental functions as a central monetary authority.
The bill provides the BSP full flexibility to conduct risk-based supervision of financial institutions.
“Oversight of the payments and settlement system and critical financial market infrastructure is necessary because their failure can result in the inefficient use of financial resources, inequitable risk-sharing among agents, financial losses for market participants and loss of confidence in the financial system and in the use of money,” Evardone said.
HB 7742 enhances the BSP’s supervisory authority by expanding the entities it supervises to include other categories of financial institutions.
“Specifically, these included financial institutions are the money service businesses, credit granting businesses, and payment system operators, as their transactions and operating platforms are deeply linked to the operations and operating platforms BSP-supervised institutions,“ Evardone said.
“Considering the volume and amount of transactions that move funds, and the number of customers catered to and the extent of their network, there are sufficient risks to the financial system justifying the regulation of these financial institutions,” he added.
Under the bill, the BSP is authorized to transfer substantial shares of banks and quasi-banks and impose sanctions on such transfers and acquisitions without BSP approval.
“Transferring substantial shares of stock provides the transferee the power to elect or appoint directors or officers, so that the BSP should be authorized to look into the fitness of particular individuals and entities before they become owners of a BSP-supervised institution, consistently with the authority of the Monetary Board under the General Banking Law to pass upon and review the qualifications of individuals elected and appointed as bank directors and officers,” Evardone said.
Evardone noted that the bill strengthens resolution mechanisms to deal with problems in regulating financial institutions, at the same time providing stiffer administrative and criminal sanctions over financial institutions, including forfeiture of profits on unauthorized financial transactions.
The proposed measure likewise provides the BSP with the flexibility to establish adequate loss allowances and creates reserve buffers against future risk and contingencies to better manage the risks it faces in its operation.
The bill also removes the thresholds in the growth of monetary aggregates and credit as guiding principles in monetary administration has been removed. It also provides legal protection for BSP officials and staff, unhampered by harassment suits when performing official duties, similar to that provided to officers and employees of the PDIC, excepting those done in willful violation of its Charter, evident bad faith or with gross negligence.
Rep. Ben Evardone (via Google Image| Manila Bulletin)
Eastern Samar Rep. Ben Evardone, one of the authors of the bill, cheered at the House’s approval of House Bill 7742 on third and final reading on Tuesday night.
“I hope that the increase will enhance the BSP’s viability to meet the needs of the growing economy, particularly in combating the rising inflation,” he said.
“The BSP should pull its levers to minimize the impact of rising inflation on the daily wage earners,” he said.
HB 7742, which seeks to amend Republic Act 7653 or the New Central Bank Act, also grants BSP tax exemptions from income of its governmental and regulatory functions, to enhance more its viability.
Tax-exempt incomes include those earned from fund management, international reserve management and treasury operations, those earned from sale of acquired assets and consequent income of BSP being a lender of last resort, as well as those earned from activities being the sole issuer of currency, such as income from demonetization of currency, sale of commemorative notes, service fees for handling notes and coins.
Also exempted are income from activities as operator of payment systems, and other income arising from necessary and incidental functions as a central monetary authority.
The bill provides the BSP full flexibility to conduct risk-based supervision of financial institutions.
“Oversight of the payments and settlement system and critical financial market infrastructure is necessary because their failure can result in the inefficient use of financial resources, inequitable risk-sharing among agents, financial losses for market participants and loss of confidence in the financial system and in the use of money,” Evardone said.
HB 7742 enhances the BSP’s supervisory authority by expanding the entities it supervises to include other categories of financial institutions.
“Specifically, these included financial institutions are the money service businesses, credit granting businesses, and payment system operators, as their transactions and operating platforms are deeply linked to the operations and operating platforms BSP-supervised institutions,“ Evardone said.
“Considering the volume and amount of transactions that move funds, and the number of customers catered to and the extent of their network, there are sufficient risks to the financial system justifying the regulation of these financial institutions,” he added.
Under the bill, the BSP is authorized to transfer substantial shares of banks and quasi-banks and impose sanctions on such transfers and acquisitions without BSP approval.
“Transferring substantial shares of stock provides the transferee the power to elect or appoint directors or officers, so that the BSP should be authorized to look into the fitness of particular individuals and entities before they become owners of a BSP-supervised institution, consistently with the authority of the Monetary Board under the General Banking Law to pass upon and review the qualifications of individuals elected and appointed as bank directors and officers,” Evardone said.
Evardone noted that the bill strengthens resolution mechanisms to deal with problems in regulating financial institutions, at the same time providing stiffer administrative and criminal sanctions over financial institutions, including forfeiture of profits on unauthorized financial transactions.
The proposed measure likewise provides the BSP with the flexibility to establish adequate loss allowances and creates reserve buffers against future risk and contingencies to better manage the risks it faces in its operation.
The bill also removes the thresholds in the growth of monetary aggregates and credit as guiding principles in monetary administration has been removed. It also provides legal protection for BSP officials and staff, unhampered by harassment suits when performing official duties, similar to that provided to officers and employees of the PDIC, excepting those done in willful violation of its Charter, evident bad faith or with gross negligence.