BSP simplifies rules on confirmation of directors, officers

Published February 15, 2022, 2:08 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) has relaxed and streamlined the rules on the confirmation of the election and appointment of banks and non-banks’ directors, trustees and officers.

BSP Circular No. 1136, signed by BSP Governor Benjamin E. Diokno on Feb. 11, also amended the confirmation of directors and officers’ biodata submission and rules on the interlocking directorships and officerships.

BSP Governor Benjamin E. Diokno

The amendments will also apply to the BSP procedures on administrative cases involving directors and officers of BSP supervised financial institutions (BSFIs).

“The amendments aim to limit the coverage of Bangko Sentral confirmation of appointment of officers of supervised financial institutions and to streamline the documentary requirements in the confirmation of election/appointment of directors/trustees/officers of (a BSFI),” said Diokno in the circular memo.

The confirming authority for BSFIs is the Monetary Board, BSP’s policy-making body, and the Financial Supervision Sector or FSS Committee.

Based on the new circular, the confirmation from the Monetary Board or the FSS will no longer be required if the directors and officers of a BSFI has already been confirmed in a previous position, and in the same bank or non-bank.

Last year, the BSP adopted a stricter policy on banks’ screening of its new hires and other human resource-related practices in a bid to reduce the number of blacklisted and watchlisted bankers and employees.

The BSP maintains a watchlist and derogatory information file (DIF) which is reviewed on a weekly basis. Basically, the DIF is the BSP’s “blackbook” of erring bankers, from the rank and file to directors and senior officials. There are more than 8,000 names in the BSP’s DIF. The list is not limited to disqualified bank personnel.

In 2021, the BSP issued its Know Your Employee (KYE) rules to weed out “unprincipled personnel” that could cause a BSFI reputational risks.

The KYE rules instructs all BSFIs to adopt a risk-focused screening process based on the “sensitivities of certain positions” that requires “more stringent screening.”

BSP wants BSFIs to have adequate understanding of an employee’s personal background, character, conflict of interest and propensity to commit fraud or irregularity, and to be able to identify “certain behaviors” that are red flags.

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.