The Bangko Sentral ng Pilipinas (BSP) reiterated over the weekend that it continues to strictly monitor banks' compliance with the country’s existing laws as part of financial stability and a strong banking system.

“The BSP continues to promote compliance with existing laws through good governance among its supervised institutions to ensure soundness of the financial system and to protect the transacting public,” the BSP said Saturday, May 4.

In the same statement, it announced the most recent court conviction of a former loan officer of Rural Bank of Buguias (Benguet) Inc. which the Monetary Board, BSP’s policy-making body, has closed.

The BSP said the Regional Trial Court of La Trinidad, Benguet has convicted the former loan officer for violating the central bank’s Manual of Regulations for Banks, the General Banking Law of 2000, and the New Central Bank Act.

“The court sentenced former RB Buguias loan officer Gavino John B. Bay-an III to pay a fine after he was found guilty of participating in the release of irregular and questionable loans to the bank’s Directors, Officers, Stockholders, and their Related Interests (DOSRI),” the BSP noted.

The BSP filed the criminal case after it discovered the DOSRI loans during its investigation of the rural bank’s loan transactions after it was shut down by the central bank.

“In October 2023, the courts also convicted former officers of RB Buguias for violations of the rules on DOSRI loans,” said the BSP.

Last year’s criminal cases were filed against the bank’s two former managers together with a cashier and teller that were involved in irregular and questionable DOSRI loans.

Under Section 36 of the General Banking Law of 2000, the BSP is authorized to implement restrictive DOSRI rules.

The DOSRI individual limit or ceiling is 10 percent and five percent for unsecured limits, and aggregate 20 percent limit on loans, other credit accommodations and guarantees granted by banks to their subsidiaries and/or affiliates.  

In 2023, the BSP said the court found merit to its complaint that the former officers violated the provisions of the law pertaining to loans granted to DOSRI and participation in fraudulent transactions.

The BSP releases these court orders and criminal charges in a show of its commitment to “fostering financial stability and protecting public interest.”