Archives for 2006

FMMRB Disclaims the White Paper Being Circulated

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FATF AML/CFT Evaluations and Assessments Handbook for Countries and Assessors

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Comments on BSP’s Reducing Restrictions on Bank Branching

Comments on BSP’s Reducing Restrictions on Bank Branching in Support to Microfinance Development

The rural banking system is ideally situated and structured to evolve into the most sustainable microfinance provider in the Phil countryside. While many NGOs have successfully grown their portfolios and outreach through the years, they remain hampered by the fact that as NGOs, they are not allowed to accept deposits per se, like the rural banks, and therefore are unable to mobilize savings from the public, to channel to the growing needs of the MF sector. External funding from donors is slowly dwindling and costs of borrowings,even from a dynamic govt. agency like the PCFC, is much higher (13% vs. deposit costs of 1.5 – 4%, if internally generated)

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35 RB Directors Completed Corporate Governance & Risk Management Course

Last 17-18 March 2005, RBRDFI held its 28th Seminar-Workshop on Corporate Governance and Risk Management for RB Directors at RBAP Conference Room, Intramuros, Manila. Thirty-five (35) incoming and incumbent directors completed the said seminar.
The 2-day seminar-workshop created an air of understanding among the participants on their huge role as rural bank directors and in discerning the risks that may be deterrent to the smoothness of the rural bank operation. Moreso, the same instilled the appropriate course of actions and decisions that may be done in the context of fairness, accountability and transparency.
Mr. Nestor Z. Flores, Vice President for Philippine Deposit Insurance Corporation Human Resource Management Group, lectured on the Corporate Governance with full enthusiasm. Ms. Irene D.L. Arroyo, East West Bank VP-Treasurer, gave her thorough insights on Risk Management. BSP Examiners Ms. Cheryl Lyn R. Hernandez and Mr. Christopher L. Malaluan, both Specialist II of the Supervision and Examination IV of the BSP, supervised the two-day seminar.
Mr. Ace Calang and Ms. Jackie Lou E. Echon, Research and Training Associates of RBRDFI, facilitated the course.
In view, below is the list of the participants:

PARTICIPANT’S NAME RURAL BANK POSITION
1 *Alcantara, Jose IV K. Rural Bank of Taysan (Batangas), Inc. Director
2 Pastor, Heidylyne M. Batangas Rural Bank for Cooperatives, Inc. Director
3 Almenar, Rizalina K. Biñan Rural Bank (Laguna), Inc. Director
4 Mercado, Corazon M. Biñan Rural Bank (Laguna), Inc. Director
5 Lozada, Maria Belen B. Cooperative Bank of Quezon Province Director
6 Gonzales, Rosalinda A. Mallig Plains Rural Bank (Isabela), Inc. Director
7 Sabado, Imelda V. Mallig Plains Rural Bank (Isabela), Inc. Director
8 Hernandez, Milagros O. Rodriguez Rural Bank (Metro Manila), Inc. Director
9 Aliguyon, Roscoe N. Rural Bank of Aritao (Nueva Vizcaya), Inc. Independent Director
10 Dumelod, Leonardo A. Rural Bank of Aritao (Nueva Vizcaya), Inc. Independent Director
11 Eucapor, Antonino S. Rural Bank of Buguias (Benguet), Inc. Director
12 Aguilar, Emerson H. Rural Bank of Calamba (Laguna), Inc. Director
13 Panganiban, Ervine A. Rural Bank of Calamba (Laguna), Inc. Director
14 Vergara, Ma. Teresa V. Rural Bank of Calamba (Laguna), Inc. Director
15 Cantor, Amado N. Rural Bank of Dasol (Pangasinan), Inc. Director/Legal Counsel
16 Quimson, Madelynn C. Rural Bank of Dasol (Pangasinan), Inc. Incoming Director
17 Miciano, Eduviges G. Rural Bank of Gloria (Oriental Mindoro), Inc. Director
18 Garcia, Crisanto Jr. L. Rural Bank of Lobo (Batangas), Inc. Director
19 De Guzman, Geraldine G. Rural Banko of Lupao (Nueva Ecija), Inc. Director
20 Balluga, Jenilyn D. Rural Bank of Magsaysay (Isabela), Inc. Corporate Secretary
21 Cuapiaco, Jeffry L. Rural Bank of Maragondon (Cavite), Inc. Director
22 Sabas, Filipina A. Rural Bank of Maragondon (Cavite), Inc. Director
23 Gonzales, Carolyn B. Rural Bank of Plaridel (Bulacan), Inc. Director
24 Madrid, Ma. Cecilia B. Rural Bank of Plaridel (Bulacan), Inc. Director
25 Santos, Joselito C. Rural Bank of Plaridel (Bulacan), Inc. Director
26 Quebral, Presentacion L. Rural Bank of San Antonio (Zambales), Inc. Director
27 Martinete, Alexander B. Rural Bank of San Luis (Batangas), Inc. Director
28 Asuncion, Jaclyn P. Rural Bank of Silang (Cavite), Inc. Director
29 Magpantay, Dionisio G. Rural Bank of Silang (Cavite), Inc. Director
30 Cruz, Ferdinand P. Saferbank (RB of San Fernando, Pampanga), Inc. Director
31 Quilantang, Jesse R. Southern Leyte Coop Bank, Inc. Director
32 Francisco, Maria Luisa K. Sto. Nino Rural Bank (Cavite), Inc. Director
33 Loveranes, Marielou P. Sto. Nino Rural Bank (Cavite), Inc. Director
34 Noriega, Nicetas R. Utility Bank (A Rural Bank), Inc. Independent Director
35 Reyes, Florante L. Utility Bank (A Rural Bank), Inc. Independent Director

* Undertook Remedial Session

27th Corporate Governance & Risk Management Seminar-Workshop Commends 29 RB Directors

Twenty-nine (29) incoming and current directors from major rural banks graced and completed the 27th Seminar-Workshop on Corporate Governance and Risk Management held at the RBAP Conference Room in Intramuros last February 17-18, 2005.
The seminar-workshop simply aims to build a healthy and a competitive banking system. To achieve this, the rural bankers must learn to understand the presence of risks in every step of the decision-making process, and as such, they should not take these risks loosely. This further entails the provision of a sound judgment by the rural bankers through the principles of fairness, accountability and transparency.
The informative and lively Mr. Nestor Z. Flores, Vice President for Philippine Deposit Insurance Corporation’s (PDIC) Human Resource Management Group, lectured on Corporate Governance. Ms. Irene D.L. Arroyo, East West Bank VP-Treasurer, delivered direct-to-the-point insights on Risk Management. BSP Examiners Mr. Rholyn R. Dayrit and Ms. Michelle J. Fernando, both Acting Bank Officers I of the Supervision and Examination Department IV of BSP, supervised the two-day seminar-workshop.

In view, the list of the participants are:

# PARTICIPANT’S NAME RURAL BANK POSITION
1 Ulibarri, Robert G. Cooperative Bank of Cagayan, Inc. Director
2 Alburo, Milagros G. Cooperative Bank of Quezon Province Director
3 Bobadilla, Paz L. Cooperative Bank of Quezon Province Director
4 Encanto, Julito D. Cooperative Bank of Quezon Province Director
5 Yap, Isabel A. Countryside Rural Bank of Palauig (Zambales), Inc. Director
6 Yap, May D. Countryside Rural Bank of Palauig (Zambales), Inc. Incoming Director
7 Alas, Ramon P. Jr. Entrepreneur Rural Bank (Laguna), Inc. Director
8 Cataquiz, Aaron Calixto S. Entrepreneur Rural Bank (Laguna), Inc. Incoming Director
9 Cataquiz, Abraham S. Entrepreneur Rural Bank (Laguna), Inc. Incoming Director
10 Godinez, Felisa N. Rural Bank of Apalit (Pampanga), Inc. Director
11 Panaligan, Peter Ronald G. Rural Bank of Baco (Oriental Mindoro), Inc. Director
12 Gonzales, Jose C. Rural Bank of Calauan (Laguna), Inc. Director
13 Ambito, Corazon L. Rural Bank of Cavite City (Cavite), Inc. Director
14 Acenas, Hector C. Rural Bank of Lubang (Occidental Mindoro), Inc. Director
15 Gomez, Josefina S.P. Rural Bank of Lubang (Occidental Mindoro), Inc. Director
16 Larin, Emilia S. Rural Bank of Lubang (Occidental Mindoro), Inc. Director
17 Manahan, Renato P. Rural Bank of Lubang (Occidental Mindoro), Inc. Director
18 Villarosa, Voltaire Anthony C. Rural Bank of Lubang (Occidental Mindoro), Inc. Director
19 Vergara, Clarita C. Rural Bank of Mexico (Pampanga), Inc. Director
20 Vergara, Ma. Concepcion M. Rural Bank of Mexico (Pampanga), Inc. Director
21 Magsalin, Mary Ann C. Rural Bank of San Narciso (Zambales), Inc. Independent Director
22 Pambuan, Francisco C. Rural Bank of Silang (Cavite), Inc. Independent Director
23 Landicho, Dominador M. Rural Bank of Talisay (Batangas), Inc. Director
24 Manalo, Gerardo R. Rural Bank of Talisay (Batangas), Inc. Director
25 Liwanag, Ernesto E. The Country Bank (RB of Bongabong, Oriental Mindoro), Inc. Director
26 Liwanag, Randell L. The Country Bank (RB of Bongabong, Oriental Mindoro), Inc. Director
27 *Catmunan, Emerita F. Rural Bank of Saint Joseph (Rizal), Inc. Director
28 *Catmunan, Solomon L. Sr. Rural Bank of Saint Joseph (Rizal), Inc. Director
29 *Sta. Maria, Cheryl Jane C. Rural Bank of Saint Joseph (Rizal), Inc. Director

* Completed Remedial

Ms. Cristine Charisse V. Fernando and Mr. Ace Calang, RBAP Research Associates, facilitated the two-day event.

Central Banker: FAQs on Lending Investors, Financing Companies and Pawnshops

OF LIs, FCs and PAWNSHOPS

Source: Central Banker, A Publication of the Bangko Sentral ng Pilipinas Sept.-October 2004 Vol. II Nos. 9 and 10

Following are some of the basic questions often asked of lending investors (LIs), financing companies (FCs) and pawnshops.
Lending investors (LIs) are in the business of granting direct loans to the public. Does BSP then supervise operations of LIs?
No. BSP does not supervise the operations of LIs as there is no specific law granting BSP supervisory powers over LIs.

Does BSP grant LIs their license or permit to operate?
No. An LI should get a license from the city or municipality where it intends to operate or do business. Moreover, if an LI is organized as a single proprietorship, it has to register its business with the Dept. of Trade and Industry (DTI). If it is a partnership or a corporation, its Articles and By-laws must be registered with the Securities and Exchange Commission (SEC).
How does LI differ from a financing company?

While LIs grant direct loans to the public, they do not engage in financing operations like discounting, factoring and leasing activities, primary functions allowed only of financing companies under Republic Act 5980. LIs cannot undertake these FC activities without proper authority from the SEC.
How does an LI differ from a pawnshop?

LIs are not allowed to accept personal items, e.g., jewelry, precious stones as pledge or securityto the loan since these are pawnbroking activities. An LI is not allowed to engage in operations of a pawnshop and vice versa.

Does BSP supervise financing companies (FCs)?

FCs are generally supervised by the SEC.

In what way is BSP involved with FC operations

Under existing law, BSP has supervision over FCs that are granted BSP authority to engage in quasi-banking function or borrow from the public. These are known as “NBQBs” or “quasi-banks.” The BSP also has supervision over FCs that are subsidiaries or affiliates of banks or NBQBs that are engaged in allied activities.
What law governs the organization and operation of FCs?
Republic Act 5980, otherwise known as The Financing Companu Act, and its Implementing Rulesgovern the operations of financing companies

What then is the concern of BSP regarding non-bank financial intermediaries (NBFIs), e.g. LIs and FCs, that are not affiliates of banks or NBQBs?
– BSP requires NBFIs to submit certain documentary requirements for listing in the BSP directory of NBFIs as well as financial statements for statistical purposes.
– Its main concerns are the NBFIs’ compliance with the 19-lender limit and Truth in Lending Act.
Which is the BSP department in charge of these NBFIs?The Supervision and Examination Department III (SED III) in the Supervision and Examination Sector.
What about pawnshops? Can these commence operations without registering with the BSP?
No. A licensed pawnshop cannot legally commence business operations unless it is registered with, and has obtained a certificate of registration from BSP, through SED III.

Where will the pawshop secure a license?
The pawnbroker’s license or permit shall be secured from the local government of the city or municipality where the pawnshop is to be located. The business name of the pawnshop to be established should be registered with the DTI, if it is a single proprietorship, or with the SEC if it is a corporation or a partnership.
What is the law that governs the operations of pawnshops?
Pawnbroking activities are governed by Presidential Decree No. 114, otherwise knowm as the Pawnshop Regulation Act.

RBAP STRATEGIC PLAN

2010 VISION

“By 2010, RBAP shall be recognized as an institution known for its strong organization, full service, and as an advocacy and information and communication center for community banking in Asia.”

Together, the Rural Bankers Association of the Philippines Officers and Staffs crafted the above vision statement during the 2-Day Planning Workshop
last January 21-22, 2005 at the Lotus Garden Hotel in Malate. With the fast changing political and economic environment, technological advancements and dynamic nature of the rural banking sector, RBAP commits to rally and stimulate its members to pursue credit and development goals in the communities they serve.

With this essential role that RBAP plays in the rural bank sector, together, the Officers and Staffs crafted the organization’s Strategic 2010 Vision.

Four strategic directions were identified: 1) RBAP as a full-service organization; 2) RBAP as a strong organization with high level of professionalism and sustainability of programs; 3) RBAP as an advocacy center in community banking in Asia and 4) RBAP as an Information and Communication Center for rural banks.

To achieve these directions, the Five-Year Work Plan laid down the specific activities and milestones. The Work Plan was divided into five years and plotting the activities was based on exigency, resources, and time frame. Years 1 to 3 are the busiest years for the organization because the activities are mainly to nurture the grounds to where a strong, full-service organization, advocacy and information and communication center for community banking will be lodged.

The following are the RBAP Officers and Staffs who contributed to the success of the planning session:

RBAP OFFICERS AND DIRECTORS:

1. Mr. Senen D. Glorioso – President
2. Gen. William K. Hotchkiss III – VP for Mindanao
3. Mr. Mark Ernest D. Rosario – Corporate Secretary
4. Mr. Jobel G. Chua – Treasurer
5. Mr. Felino S.M. Angeles – Director

RBAP STAFFS:

1. Ms. Felecitas P. Javier
2. Ms. Shallie Y. Recaido
3. Ms. Selfa D. Distor
4. Ms. Lalaine Coroneza
5. Ms. Cristine Charisse Fernando
6. Ms. Ruth Marie Ian Caldito
7. Ms. Jackie Lou Echon

BSP releases regulations on liquidity, market risk weighting

The Philippine STAR 09/19/2006

The Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) has approved two new circulars on how financial institutions (FIs) should manage market and liquidity risks, including interest rate risk. The guidelines are formulated to ensure that FIs have sufficient knowledge and skills to understand and effectively manage market and liquidity risks. These emphasize that the level of risk exposures undertaken by FIs and the proper management of these risks are primarily the responsibility of the FIs.

“The principles set forth in these guidelines shall be used (by the BSP) in determining the adequacy and effectiveness of an FI’s (market and liquidity) risk management process, the level and trend of (these) risk exposure(s) and adequacy of capital relative to exposure(s),” the circulars said.

The statement of policy states that “the level of (market and liquidity) risks assumed by an FI is not necessarily a concern, so long as the FI has the ability to effectively manage the risk(s). The BSP will not restrict the level of risk assumed by an FI, or the scope of its financial market activities so long as the FI is authorized to engage in such activities and that the institution (a) understands, measures, monitors and controls the risk assumed, (b) adopts risk management practices whose sophistication and effectiveness are commensurate to the risk being monitored and controlled, and, (c) maintains capital commensurate with the risk exposure assumed. It may be noted that the issuances take the form of principles-based guidelines on market and liquidity risk management.

The order is consistent with the guidelines on supervision by risk set forth under BSP Circular 510 issued February 2006. The adoption of the guidelines communicates the BSP’s implementation of the risk-based approach to supervision (RBS), which promotes the adoption of a principles-based regulatory framework, rather than a prescriptive approach to supervision.

The principles-based guidelines allow more flexibility since markets rapidly develop, often ahead of changes to the regulatory framework.

For example, the circulars provide that the BSP is aware of the increasing diversity of financial products and that industry techniques for measuring and managing (market and liquidity risks) are continuously evolving. As such, the guidelines are intended for general application; specific application will depend to some extent on the size, complexity, and range of activities undertaken by individual financial institutions. The RBS is a continuous and dynamic process that focuses on assessing risk exposures and quality of risk management practices and allocating supervisory resources on areas that are identified as high risk.

In particular, the market and liquidity risk guidelines provide that if the BSP determines that an FI’s risk exposures are excessive relative to the FI’s capital, or that the risk assumed is not well managed, the BSP will direct the FI to reduce its exposure to an appropriate level and/or strengthen its risk management systems.

“Although the guidelines are not strictly Basel 2 to conform with institutional arrangements and operating realities in the Philippines, the principles outlined are consistent with Basel 2 principles and international best practices,” the BSP said.

WB favors EO 138

The Philippine STAR 09/19/2006

The World Bank (WB) has expressed grave concern on the repeal of Executive Order (EO) 138 which was replaced by EO 558.

EO 558, signed by President Arroyo last month, allows all government agencies to lend money regardless of its mandated functions. The repealed EO 138, signed by former President Estrada, designated only government financial institutions (GFIs) to extend loans.

During a press briefing on corruption and good governance held yesterday, WB country director for Philippines Joachim von Amsberg said that EO 138 restored public lending to only GFIs and it placed strict rules on pricing, subsidies and credit programs.

“What EO 135 did, was to restore fiscal stability and discipline on public lending,” Von Amsberg stressed.

The WB official also pointed out that EO 135 created a level playing field between private lending institutions and government, which in effect also helped develop the country’s flourishing financial sector.

The repealed executive order was developmental and favored good corporate governance, the lending agency official added.

Earlier, Finance Secretary Margarito Teves proposed that a clear and transparent implementing rules and regulations (IRR) should first be outlined and approved before EO 558 is enforced.

In his reaction letter sent to Malacañang, Teves said that EO 558 was all embracing or without limits and that it would directly compete with GFIs. Concerns over ballooning non-performing loans (NPLs) of the government sector would only derail government plans to eliminate its fiscal deficit by 2008.

Unnamed officials of the GFIs said that EO 558 “brings us back to the Masagana 99 era where government doled out public funds resulting in huge debts which we are paying to this day.”

Only GFI can directly tap funding from multilateral or bilateral arrangements thus able to get lower or favorable repayment interest rates. “The system allows for better control on the country’s debt levels,” they said.

Another official said that it could be subject to abuses by local or national government entities pointing out that the “elections was just around the corner.”

EO 558 was issued by Mrs. Arroyo last Aug. 8, repealing EO 138 which was issued in 1999.

EO 558 simply said that it repeals the Estrada order, and that any agency can start lending direct.

EO 138 designated GFI as the main government vehicle for the delivery of credit services by providing wholesale funds to government or private entities which will in turn practice direct lending. The practice would cushion government from huge and numerous exposures.

“It is also the reason why official development agency (ODA) funds are flowing in,” a GFI official added.

BSP gives banks more leeway in financial market activities

By Des Ferriols
The Philippine Star 09/05/2006

The Bangko Sentral ng Pilipinas (BSP) has issued two major guidelines giving banks full control and accountability of their market and liquidity risks as the industry gears up for full compliance with the Basel II Convention.

Under the new guidelines, the BSP said it is not particularly concerned with the level of risks that financial institutions assume but they should have the ability and resources to manage these risks.

“Therefore, the BSP will not restrict the level of risks assumed by financial institution (FI) or the scope of its financial market activities so long as it is authorized to engage in such activities,” the BSP said in the statement of policy. [Read more…]

PDIC issues rules on reporting for bank deposits

The Philippine STAR 08/22/2006

The Philippine Deposit Insurance Corp. (PDIC) published a regulatory issuance and operations manual recently prescribing standards of record keeping of bank deposits for all member banks.
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ONB, DBP form remittance alliance

The Philippine STAR 08/08/2006

One Network Bank (ONB) has teamed up with the Development Bank of the Philippines (DBP) recently to expand the overseas remittance payout services available in its 63 branches through DBP’s Electronic Cash Remittance (EC REMIT) Program.

ONB is the first rural bank to tie-up with DBP’s foreign remittance arm. [Read more…]

Letter-Introduction of Schuykill/Acres to Rural Banks

August 7, 2006

TO: ALL RURAL BANKS / COOP BANKS

FROM: ATTY. FRANCIS S. GANZON, PRESIDENT

SUBJECT: LETTER-INTRODUCTION OF SCHUYKILL/ACRES TO RURAL BANKS
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Letter-Introduction of Peragram to Rural Banks

August 7, 2006

TO: ALL RURAL BANKS / COOP BANKS

FROM: ATTY. FRANCIS S. GANZON, PRESIDENT

SUBJECT: LETTER-INTRODUCTION OF PERAGRAM TO RURAL BANKS

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BSP to release new rules on banks‘ reporting system

By Donnabelle L. Gatdula
The Philippine Star 08/03/2006

The Bangko Sentral ng Pilipinas (BSP) will release end of this week new rules that would overhaul banks’ reporting system, BSP Deputy Governor Nestor Espenilla said yesterday.

“We are tidying up some of the templates and we will be ready to release it. It was already approved by the Monetary Board for release,” Espenilla said. [Read more…]