The Bangko Sentral ng Pilipinas (BSP) plans to overhaul its reporting governance framework by imposing higher penalties on banks based on their asset size for lapses in regulatory compliance.

Instead of flagging reporting violations, the BSP is establishing clear criteria that banks should adhere to.

“The framework shifts focus from defining specific reporting violations—such as erroneous, delayed, or unsubmitted reports—to providing clear criteria for what constitutes an acceptable report which include completeness, accuracy, timeliness, and adaptability,” the BSP said in a draft circular released this week.

“This change promotes a more proactive and quality-focused approach to regulatory compliance,” the draft circular read.

As it stands, banks that fail to meet the reporting criteria will face sanctions for non-compliance. This time, however, the central bank will base penalties on banks’ asset sizes instead of their categories.

For the BSP, the alignment of penalties with banks’ asset sizes is meant to account for their systemic importance and risk proportionality.

Under Section 171 and the relevant provisions of the Manual of Regulations for Banks (MORB), universal and commercial banks face a daily fine of ₱3,000 for reporting violations, while digital banks are fined ₱2,000, thrift banks ₱1,500, and rural or cooperative banks ₱450 for primary report lapses. Fines for secondary reports are lower.

Meanwhile, the BSP’s proposed asset-based fines for each day of non-compliance could go as high as ₱10,000 for banks with assets above ₱400 billion.

Banks with ₱50 billion to ₱400 billion in assets could be fined ₱5,000; those with ₱10 billion to ₱50 billion face ₱3,000; those with more than ₱1 billion but up to ₱10 billion are charged ₱2,000; while banks with ₱1 billion and below in assets face ₱1,000.

Asset size will be based on the balance at the end of the preceding year—2024 if the circular takes effect this year. For newly opened, merged, or consolidated banks without prior year data, the assessment will be based on their balance at the start of operations.

To streamline compliance, the BSP is planning to drop the categorization of reports and notarization requirements unless legally mandated. The BSP is also eliminating the old habituality and demerit point system, which will be replaced by dashboard tracking of repeat violations.

“To ensure efficiency in data preparation and timely validation and processing of information” by the BSP, the central bank is setting new deadlines for select reports filed in extensible mark-up language (XML) format through its Prudential Reporting Innovation and Monitoring Engine (PRIME).

Banks must also revise authorized signatories for submissions and are encouraged to use BSP’s sandbox facilities to test their systems.

Banks have until Sept. 30 to submit their feedback. If the new rules take effect, financial institutions will have six months to comply, after which sanctions for reporting lapses will be enforced.