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Manila Bulletin devider Business devider Banking & Finance devider BSP tweaks rules on banks' equity divestment

BSP tweaks rules on banks' equity divestment

Published Aug 18, 2024 09:16 pm

The Bangko Sentral ng Pilipinas (BSP) has approved amendments for the divestment of disallowed equity investments held by banks.

These are banks’ equity investment transactions which were disapproved by the BSP or are not allowed under existing regulations, or were unlawful or made in violation of existing laws and should be divested.

Based on BSP Circular No. 1199, signed by BSP Governor Eli M. Remolona Jr. last Aug. 8, the BSP instructed banks to divest disallowed equity investments immediately and “without the need of notice” from the BSP. Divestment in this case means the selling or disposing of a bank’s investment in another company’s equity.

The circular also said that for transactions that do not comply with regulations, these will be divested within six months from receipt of notice from the BSP. Divestment is for the whole transaction or in cases where there are divisible transactions, portions which are non-compliant will be divested.

The BSP will slap sanctions for the non-divestment depending on the degree, such as first offense, subsequent offense, reprimand and a fine of P20,000 for each investment made.

Meanwhile, the BSP said a bank which has been directed to divest specific equity investments which do not comply with applicable regulations will be required to submit the following: a divestment plan within 15 calendar days from receipt of notice from the BSP; and a progress or status report within five calendar days from end of quarter.

The circular specifically mentioned investments in venture capital corporations or VCCs.

The BSP has amended the guidelines in “determining compliance with ceilings on equity investments in a VCC.”

VCCs may involve shares of stock acquired in settlement of loans. As explained by the BSP, “shares of stock of another corporation acquired in settlement of loans will be excluded from total equity investments for purposes of determining compliance with the prescribed ceilings on equity investments” under BSP rules.

The BSP said banks directed to divest equity investment prior to the effectivity of the amended circular but have not fully complied with such will have to “divest said investment within 90 calendar days following the effectivity of this circular.”

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