The Bangko Sentral ng Pilipinas (BSP) is implementing new reporting guidelines for banks’ foreign exchange (FX) transactions and imposing penalties of up to P1 million for each violation to protect the peso and to ensure price stability.
In a statement Wednesday, July 17, the BSP said its policy-making arm, the Monetary Board, has approved Circular No. 1197, which amended the FX regulations on reporting and penalties to require the central bank to collect more accurate and relevant information on all banks’ FX transactions.
The BSP said the amended guidelines will encourage banks to submit reports in a timely manner and “instill accountability among BSP-Supervised Financial Institutions (BSFIs) and/or their Directors/Trustees, Officers and/or Employees (DTOEs).”
“These regulations will likewise enable the BSP to efficiently generate reports being used for policy studies and monitoring of the economy and financial system, among others,” said the BSP.
The implementing circular will take effect 15 banking days after its official publication. A transitory period is set until Dec. 31, 2024, to “make the necessary preparations and adjustments to (banks’) systems and processes.”
Based on the circular, signed by BSP Governor Eli M. Remolona Jr. last July 12, the major amendments were: defined reports that are non-compliant with the BSP reporting standards such as erroneous, delayed, unsubmitted; revised monetary penalties for reporting violations based on reporting entities and classification of report (primary and secondary); and to set a maximum monetary penalty of P1 million for each transactional violation or P100,000 per calendar day for violations of a continuing nature based on Section 37 of Republic Act No. 7653, as amended by Section 19 of RA No. 11211 or the BSP Charter.
The circular also “explicitly provided the process for notifying the concerned BSP BSFI and/or its DTOE of the FX policy violation and the corresponding amount of monetary penalty, and appeal or request for reconsideration.
“Moreover, to ensure fairness, consistency, and reasonableness in monetary or non-monetary penalty imposition, the BSP takes into consideration its general principles, categories of enforcement actions, observance of due process, and attendant circumstances of each case,” said the BSP.
Since 2022, the BSP has been proposing to increase fines of up to P1 million on banks with incorrect FX reporting. This is to protect the local currency and maintain price stability.
Under the BSP law, violators of the FX rules may be imposed a maximum monetary penalty of P1 million for each transactional violation or P100,000 per calendar day for continuing violations.
To ensure fairness, consistency, and reasonableness in the imposition of monetary penalties, the BSP said it will consider the “attendant circumstances of each case” or the nature and gravity of the violation “or irregularity and the size of the financial institution, including other aggravating and mitigating factors.”
The BSP first issued Circular No. 1197 in draft form in mid-2022.
For the compliance of FX laws, rules, regulations, orders or instructions, the BSP said that it “recognizes that there is a need to impose monetary penalties as one of the possible administrative sanctions to hold (banks) and/or their DTOEs accountable for their conduct, deter future commission of violations, achieve the overarching supervisory objectives of changed behavior and mitigated risk, and promote and maintain price stability, external sustainability and the integrity and value of the Philippine peso.”
The rules cover big banks, authorized agent FX corporations, digital banks, thrift banks, offshore banking units, rural/cooperative banks, and representative offices.
Penalties range from the highest at P3,000 for the big banks or the universal/commercial banks’ primary reports to P300 for representative offices.
In determining penalties, the BSP will also adopt a demerit points system wherein the total number of demerit points for a calendar year will be computed based on the total amount of penalties divided by the prescribed fine for the applicable reporting category.
Amending the FX rules from time to time ensure that it remains appropriate to the needs of a dynamic and expanding local economy. Updating FX rules will also support regional integration with regional and global markets, and enhance data capture on FX transactions.
The BSP, since 2007, has approved and completed 13 rounds of FX policy liberalization.