The Bangko Sentral ng Pilipinas (BSP) is tightening its monetary penalty system on erring banks by imposing a maximum P1 million for each transactional violation or P100,000 per business day for continuing offense.

The previous monetary penalty for banks and/or their directors and officers was P30,000 per calendar day for each violation or offense.

Setting a higher penalty system was one of the provisions in the amended BSP Charter (Republic Act No. 11211) which was approved in 2019. But the pandemic delayed its imposition since extending relief measures to all BSP supervised financial institutions (BSFIs) amid COVID-19 was more crucial.

“We had some back and forth in the entire review process, both for internal and external stakeholders,” said BSP Deputy Governor Chuchi G. Fonacier, in explaining the delay in approving the circular on new penalties. “And, also because of the pandemic,” she added.

Last Friday (August 20) however, BSP Circular No. 1125 which will implement the fines and charges for banks in violation of BSP rules was signed by BSP Governor Benjamin E. Diokno, following an August 12 Monetary Board resolution to revise the guidelines on the imposition of monetary penalties on directors/trustees, officers and/or employees for violations of banking and other applicable laws.

There are separate penalties imposed on other BSP rules including reporting violations and for breaking or the non-compliance of anti-money laundering regulations.

In the circular memo, Diokno said that the BSP “recognizes the need to impose monetary penalties as one of the possible administrative sanctions to hold BSFIs and/or their directors/trustees, officers and/or employees accountable for their conduct, deter future commission of violations, and achieve the overarching supervisory objective of changed behavior and mitigated risks.”

With the P1 million maximum penalty per transaction violation or P100,000 per business day, Diokno said that “in case profit is gained or loss is avoided as a result of the violation, the BSP may also impose a fine of no more than three times the profit gained or loss avoided.”

“To ensure fairness, consistency and reasonableness in the imposition of monetary penalties, the BSP takes into consideration the attendant circumstances of each case, such as the nature and gravity of the violation or irregularity and the size of the financial institution,” he also said. He added that the BSP “may impose monetary penalties, singly or in combination with non-monetary sanctions, if appropriate.”

These “attendant circumstances” include “aggravating and mitigating factors” which are not only based on the nature, gravity and seriousness of the violation or

irregularity, but also on these additional factors: financial and/or non-financial impact of the violation or irregularity to the bank, its industry and/or the financial system; intentionality, frequency and duration of the violation or irregularity; and measures undertaken to stop or correct the violation or irregularity.

Penalized BSFIs can make an appeal or a motion for reconsideration with the Monetary Board, whose decisions are “final and executory after fifteen calendar days” unless a motion for reconsideration is filed on a “timely” condition.

“The appeal or the motion for reconsideration shall be in writing and shall specify

the findings or conclusions in the decision which are not supported by the

evidence or which are contrary to law, making express reference to the evidence

or to the provisions of law alleged to be contrary to such findings or conclusions,” according to the circular. But, a pro forma appeal or motion for reconsideration will be rejected outright.

The BSP defines transactional violations as “an act or omission constituting a violation of any applicable law or any order, instruction/directive or regulation issued by the Monetary Board.” As for licensing-related violations, these are transactional violation pertaning to the failure to “obtain approval prior to engaging in an activity which the institution is qualified to undertake at the onset, based on eligibility test and assessment of compliance with the prudential criteria” of the BSP.

A continuing violation is where the violation “persists or lingers over time from the instant the particular act was committed or omitted until the violation is stopped,” said the BSP. The BSP has been finetuning all of its monetary fines for the revised BSP Charter, finally implemented in 2019. It has been imposing the meager P30,000 per day for erring banks for decades.

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