BSP issues new rules to protect depositors
Published Sep 22, 2019 12:00 am
By Lee C. Chipongian
To protect the depositor or creditor of a bank who has made its decision to cease operation, the Bangko Sentral ng Pilipinas (BSP) updated previous guidelines that will cover not only the termination of a banking license, but also its dissolution and liquidation.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno. (Bloomberg)
BSP Governor Benjamin E. Diokno has signed the new guidelines as Circular No. 1050 or the “Guidelines on Voluntary Surrender of a Banking License” as this is one of the circulars that the BSP needs to make current its amended charter.
“Cognizant that the business of banking is imbued with public interest, it is the thrust of the BSP to ensure that no depositor or creditor interest is prejudiced when a bank voluntarily surrenders its banking license,” said Diokno in the circular-memo which he signed last week.
The up-to-date circular and guidelines covers the voluntary dissolution and/or liquidation of a bank after it has surrendered its banking license, or the conversion of a former bank into a non-bank entity.
Diokno said however that the circular will not apply to the termination of a banking license because of a merger, consolidation and due to the “purchase of assets and assumption of liabilities transaction.”
The guidelines also stressed that even after the surrender of banking license, the BSP may impose sanctions to concerned bank’s directors, officers and employees who are found to have violated banking laws, rules and regulations, said the BSP.
The circular detailed the criteria and conditions for accepting the voluntary surrender of a banking license, such as:
*The voluntary surrender of a banking license is based on the plan either to proceed to voluntary dissolution and liquidation, or to convert into a non-bank entity;
*The plan has been approved by the required number of the board of directors and stockholders of the bank or members of the cooperative bank as provided under applicable law;
*There are no grounds to prohibit the bank from doing business under Section 30 of Republic Act No.7553 or the New Central Bank Act, as amended by RA No. 11211;
*The bank is solvent and has sufficient liquid assets to fully repay all its depositors and creditors in a timely manner;
*The bank has appropriated or set aside immediately accessible funds (escrow, etc.) equivalent to its outstanding deposit obligations for the purpose of the payment/settlement of such obligations to its depositors in a timely manner;
*The bank submits an acceptable board-approved liquidation plan in the case of a plan to proceed to voluntary dissolution or a plan of action for the cessation of its banking business (plan of settlement of liabilities) in the case of a plan to convert into a non-bank entity; and
*Other conditions which the BSP deems necessary or as may be warranted by the attendant circumstances in order to protect the public interest.
In cases where voluntary dissolution is included, the bank must complete the process within six months after the BSP approved its voluntary surrender of banking license.
“As for voluntary liquidation, the bank only needs to notify the Monetary Board within five days after informing the Securities and Exchange Commission or the Cooperative Development Authority. “In case of voluntary liquidation, the Monetary Board shall have the right to intervene and take steps, as may be necessary, to protect the interest of depositors and creditors,” according to the circular memo.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno. (Bloomberg)
BSP Governor Benjamin E. Diokno has signed the new guidelines as Circular No. 1050 or the “Guidelines on Voluntary Surrender of a Banking License” as this is one of the circulars that the BSP needs to make current its amended charter.
“Cognizant that the business of banking is imbued with public interest, it is the thrust of the BSP to ensure that no depositor or creditor interest is prejudiced when a bank voluntarily surrenders its banking license,” said Diokno in the circular-memo which he signed last week.
The up-to-date circular and guidelines covers the voluntary dissolution and/or liquidation of a bank after it has surrendered its banking license, or the conversion of a former bank into a non-bank entity.
Diokno said however that the circular will not apply to the termination of a banking license because of a merger, consolidation and due to the “purchase of assets and assumption of liabilities transaction.”
The guidelines also stressed that even after the surrender of banking license, the BSP may impose sanctions to concerned bank’s directors, officers and employees who are found to have violated banking laws, rules and regulations, said the BSP.
The circular detailed the criteria and conditions for accepting the voluntary surrender of a banking license, such as:
*The voluntary surrender of a banking license is based on the plan either to proceed to voluntary dissolution and liquidation, or to convert into a non-bank entity;
*The plan has been approved by the required number of the board of directors and stockholders of the bank or members of the cooperative bank as provided under applicable law;
*There are no grounds to prohibit the bank from doing business under Section 30 of Republic Act No.7553 or the New Central Bank Act, as amended by RA No. 11211;
*The bank is solvent and has sufficient liquid assets to fully repay all its depositors and creditors in a timely manner;
*The bank has appropriated or set aside immediately accessible funds (escrow, etc.) equivalent to its outstanding deposit obligations for the purpose of the payment/settlement of such obligations to its depositors in a timely manner;
*The bank submits an acceptable board-approved liquidation plan in the case of a plan to proceed to voluntary dissolution or a plan of action for the cessation of its banking business (plan of settlement of liabilities) in the case of a plan to convert into a non-bank entity; and
*Other conditions which the BSP deems necessary or as may be warranted by the attendant circumstances in order to protect the public interest.
In cases where voluntary dissolution is included, the bank must complete the process within six months after the BSP approved its voluntary surrender of banking license.
“As for voluntary liquidation, the bank only needs to notify the Monetary Board within five days after informing the Securities and Exchange Commission or the Cooperative Development Authority. “In case of voluntary liquidation, the Monetary Board shall have the right to intervene and take steps, as may be necessary, to protect the interest of depositors and creditors,” according to the circular memo.