The Bangko Sentral ng Pilipinas (BSP) said over the weekend that it has received an affirmative assessment from its adoption of Basel Core Principles (BCP).

           The positive assessment was published in the “Detailed Assessment Report on the Observance of the Basel Core Principles for Effective Banking Supervision”. The assessment, however, cites some “some legislative gaps.”

“This is an encouraging news amid the pandemic,” said BSP Governor Benjamin E. Diokno in a statement.

The BCP assessment is a core component of the joint International Monetary Fund (IMF) and World Bank Financial Sector Assessment Program (FSAP) mission to the Philippines conducted from June 2019 to October 2020.

                The BSP said the IMF and World Bank mission team “lauded the BSP for the reasonably good compliance with the BCPs.”

            “As a result, the BSP is rated either “Compliant” or “Largely Compliant” in 27 core principles (CPs), and “Materially Non-Compliant (MNC)” in two CPs,” said the BSP.

           The two MNCs stem from the identified legislative gaps. “This is a significant improvement in terms of enhancing the regulatory framework and supervisory approach of the BSP as compared to the 2002 full FSAP assessment where 11 MNCs and one non-compliant ratings were noted,” said the BSP.

                The report said the BSP’s regulatory framework is broadly effective for the size and complexity of the Philippine banking system, “but legislative gaps continue to hinder effective supervision of banks.”

                “The BSP has a well-resourced, experienced and highly committed staffing complement, but there is an ongoing need to develop and maintain adequate expertise in certain complex areas (risk modelling). Since the FSAP in 2002, and the assessment update in 2010, the BSP has made significant progress in enhancing the regulatory framework in a number of areas. But significant weaknesses in the legislative framework, arising notably from the bank secrecy laws and the lack of power for the BSP to supervise the parent companies and their affiliates of banking groups, present a material hindrance to effective supervision,” according to the report.

                On the legislative gaps, the BSP said it has been working closely with both Houses of Congress for important legislations such as the amendments to the Bank Deposit Secrecy Laws and “other critical legislative reforms necessary to reinforce the strengthened nexus of banking supervision and financial system resilience.”

                “Moreover, the BSP will continue to pursue proportionate and responsive regulatory reforms sensitive of the developments and challenges in the business environment,” said the BSP.

                The BCPs are the “globally recognized standards for sound prudential regulation and supervision of banks and banking systems” and these standards are utilized by the IMF and the World Bank. The BCPs have 29 core principles to assess a supervisory agency or central banks.

During his regular “GBED Talks” briefing last week, Diokno again emphasized the bills that BSP is actively pursuing to improve banking regulation in the country.

Diokno said the BSP is working closely with Congress on key financial sector reforms. “We also regularly conduct dialogues with technical experts and concerned stakeholders to ensure that all issues related to the legislative measures are adequately addressed.”

                He noted that BSP’s legislative agenda is all for the strengthening of the financial system and to “foster financial inclusion, enhance the delivery of financial services, address social issues related to access to financial products and services, and support economic growth amid the pandemic.”

            Among the legislative agenda of the BSP are the Financial Consumer Protection Bill, the Bank Secrecy Bill, and the Agri-Agra Bill.

            Diokno said the BSP is also the main proponent of the bills on Financial Institutions Strategic Transfer or FIST and Financial Consumer Protection. BSP so supports the passage of the GUIDE Bill.