BSP sets pawnshops’ reporting governance framework

Published August 7, 2022, 8:10 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) is amending the reporting system of pawnshops to improve the monitoring of the sector’s financial condition and for relevant policies to support the industry growth.

In the draft circular currently being circulated among pawnshops and non-banking sector, the BSP has set its Reporting Governance Framework that includes reporting standards, governance process and sanctions for non-compliance.

The new reporting system is expected to ensure the industry’s “safety and soundness” while “safeguarding the customers’ interest and the financial system in general.”

BSP building and logo/Reuters

The BSP said it is adopting the framework to generate “complete, accurate, consistent, reliable and timely submission of required information concerning a pawnshop’s operation and management, financial condition and results of operations” to facilitate BSP’s “exercise of effective supervision over pawnshops.”

“These high quality individual pawnshop reports support the Bangko Sentral’s determination and formulation of appropriate and responsive regulatory policies, supervisory tools, approaches and interventions, and the pawnshop operator/management’s business decision-making process,” said the BSP in the draft circular.

The BSP added that it is incumbent upon the pawnshop proprietor/partner/board of directors and senior management or key officers to implement an effective reporting system to generate complete, accurate, consistent, reliable and timely reports.

“Pawnshops are expected to capitalize on available information technology in establishing an effective reporting system that is appropriate for their size and complexity of operations,” said the BSP. It added that it will prescribe “reasonable reporting standards” which consider the cost of reporting relative to the expected benefits.

Pawnshops have until June 30, 2023 to make the necessary preparations to their

systems and processes to ensure full compliance with the establishment of an effective reporting system, said the BSP.

The proposed circular has a feedback deadline of Aug. 26 to receive pawnshop players’ comments and suggestions.

The pawnshop industry has total assets of P96.9 billion in 2021, up by 4.7 percent compared to P92.5 billion in 2020.

Pledge loans or “sangla” in Filipino, increased by 2.7 percent year-on-year to P54.5 billon in 2021 from P53.07 billion, as pawnshops have more reach and range of products and services for the public. Items being pawned have also evolved and includes — besides jewelry pieces — high value electronic gadgets, watches, musical instruments, designer bags and accessories.

Capital remains to be the primary funding source for the industry. Pawnshops’ capitalization grew by 2.6 percent year-on-year to P42.15 billion in 2021 from P42.10 billion, supported by the industry’s cumulative earnings of P3.9 billion last year.

As of end-2021, the BSP has registered 14,705 pawnshops that also have cash agency operations. Its network is broken down as 1,156 head offices and 14,350 branches nationwide. Pawnshops are present in 1,361 of 1,634 cities and municipalities, or 83.3 percent of all local government units across the country.

The BSP is currently implementing a network-based supervision approach for the industry to assess risks and other supervisory issues at the group level rather than on a per entity or pawnshop basis.