BSP eases ‘watch list’ time on erring bankers

Published February 23, 2020, 12:00 AM

by manilabulletin_admin


Erring officials who have been banned from working as directors and officers of a financial institution – both banks and non-banks – have a chance to be delisted from the Bangko Sentral ng Pilipinas’ (BSP) “blackbook” after five years “serving” as a watch listed disqualified person.

Based on BSP Circlar No. 1076 (“Amendments to the Regulations on the Disqualifications and Watchlisting of Directors/Officers”) – signed by BSP Governor Benjamin E. Diokno last Tuesday – a delisting and reclassification is possible after five years when previously, the specific period of disqualification is not set or defined, and could exceed beyond five years.

According to the circular, a disqualified bank director or officer “may request delisting only after the lapse of five years from the date of his/her receipt of notice of disqualification.”

There are exceptions that could lead to an early delisting and reclassification if a case against a director or officer came out in his/her favor or “upon clearance by the appropriate body” such as judiciary, quasi-judicial bodies and domestic financial regulatory authorities, or similar agencies in foreign countries where the disqualified person has a derogatory record.

“The Monetary Board may consider the time already served under watchlisting by the person concerned,” said Diokno in the circular memo.

All delistings will be approved by the Monetary Board upon the recommendation of appropriate departments, such as the Financial Supervision Sector.

The BSP is reviewing and updating its watch list and derogatory information file (DIF) on a weekly basis. Basically, the DIF is the BSP’s “blackbook” of erring bankers.

The BSP has been enhancing the clean up procedures by establishing new criteria for placement in the DIF. The BSP also reviewed how it acquires information for the DIF, which are usually sourced from disclosures or official reports from banks, as well as BSP onsite examination findings.

The DIF, as implemented by the BSP, is a permanent reference file that is internal to the BSP. As the name implies, it contains the list of individuals cited with adverse derogatory information but not yet disqualified from holding a director or officer position in any financial institution supervised by the BSP.

The BSP has two watch list files, Disqualification File “A” for permanent disqualifications and File “B” for temporary watch listed. The amended circular said that a reclassification from “B” to “A” may be approved by the Monetary Board when the case that landed the erring banker in “B” has become final and executory.

Before 2019 ended, the Monetary Board released new rules revising the disqualification of directors and officers of banks and quasi-banks, effectively expanding the grounds for disqualification. This is part of of the BSP’s “fit and proper” rules for directors/trustees and officers of all BSP-supervised financial institutions.

Based on the revised policy, directors and officers found to have caused “undue injury, material loss or damage to the bank or those who exposed the bank to higher risk or danger” will be disqualified from becoming a director or officer in other banks or non-banks.

The revised policy updated the due process that an erring director or officer would have to be subjected to and the procedures now have a window for the concerned person to present evidence when giving his or her side.

The watchlist files, according to BSP Circular No. 421 and updated by its amended version, is for internal use only of the BSP and not accessible or “queried upon” by outsiders such as banks and trust entities, except with the authority of the person concerned.

In effect, a bank can request the BSP for background information on a person, and if this person is on the watch list files.

Persons permanently disqualified from holding director or officer positions in banks are not only those who have been convicted by final judgment for offense involving dishonesty or breach of trust (such as embezzlement, extortion etc.) but also those convicted by final judgment for bribery, falsification as well as violations of the Anti-Graft and Corrupt Practices Act.

Temporary disqualifications are those that refuse to submit or disclose material information to the BSP when required pursuant to a provision of law or regulation or directors who have been absent for more than half of all meetings of the board.