Memo No. M-2016-04 — Reminder on Sound Risk Management Practices when Dealing with Foreign Exchange Dealers, Money Changers, and Remittance Agents

7 April 2016

TO: All Rural Banks
RE: MEMORANDUM No. M-2016-04 – REMINDER ON SOUND RISK MANAGEMENT PRACTICES WHEN DEALING WITH FOREIGN EXCHANGE DEALERS, MONEY CHANGERS AND REMITTANCE AGENTS

Dear Rural Bankers,

Pursuant to Part 8 of the Manual of Regulations for Banks (MORB), banks dealing with foreign exchange dealers, money changers and remittance agents (FXDs, MCs and RAs) should take extra caution and vigilance and shall perform consistent with regulations and the bank’s procedures as provided under its Money Laundering and Terrorist Financing Prevention Program (MLPP). The bank’s MLPP should contain appropriate risk management practices to ensure that money laundering (ML) and terrorist financing (TF) risks arising from dealings with FXDs, MCs, and RAs are effectively identified, assessed, monitored, mitigated, and controlled. To this end, banks should ensure the soundness and adequacy of their risk management policies and practices in dealing with FXDs, MCs, and RAs, which include, among others, the following:

1. Banks shall only deal with FXDs, MCs and RAs registered with the BSP for the appropriate authority to engage in a specified business;

2. When dealing with RAs as remittance partners or tie up or if the accounts are being used to facilitate their business, the banks have the ultimate responsibility for conducting appropriate due diligence necessary to the relationship to ensure that it will not be used as channel for ML/TF activities. Bank’s tie-up relationship with such customers shall not be used to circumvent existing regulations;

3. Conduct risk assessment of the FXD, MC and RA customers, considering relevant factors such as business operations, types of customers, product/service availed, distribution channel, jurisdictions they are exposed to and expected account activity. By the nature of their business, they may inherently pose higher ML/TF risk which should be appropriately identified, monitored and mitigated;

4. Perform enhanced due diligence. Unsatisfactory result of the due diligence process shall be a ground for denying the business relationship.

5. Perform continuing account and transaction monitoring.

Banks are reminded that violation of the rules provided in Part 8 of the MORB shall be subject to applicable sanctions and penalties provided under Section X811 of the MORB.

For guidance and strict compliance.

You may also view/ download full copy of this memo through this link: http://rbap.org/wp-content/uploads/2016/04/m004.pdf

RBAP Secretariat

BSP Circular No. 2016-028: Authority of the Insurance Commissioner to Appoint a Conservator or Receiver of Insurance Companies

30 March 2016

TO: All Rural Banks
RE: AUTHORITY OF THE INSURANCE COMMISSIONER TO APPOINT A CONSERVATOR OR RECEIVER OF INSURANCE COMPANIES

Dear Rural Bankers:

The BSP, in a communication, advised all Banks of the authority of the Insurance Commissioner to appoint a conservator or receiver to take charge of, among others, the assets and liabilities of the insurance companies, pursuant to Sections 255 and 256 of the Insurance Code, which read as follows:

“Section 255. If at any time before, or after, the suspension or revocation of the certificate of authority of an insurance company as provided in the preceding title, the Commissioner finds that such company is in a state of continuing inability or unwillingness to maintain a condition of solvency or liquidity deemed adequate to protect the interest of policyholders and creditors, he may appoint a conservator to take charge of the assets, liabilities, and the management of such company, collect all moneys and debts due to said company and exercise all powers necessary to preserve the assets of said company, reorganize the management thereof, and restore its viability. The said conservator shall have the power to overrule or revoke the actions of the previous management and board of directors of the said company, any provision of law, or of the articles of incorporation or bylaws of the company, to the contrary notwithstanding, and such other powers as the Commissioner shall deem necessary.”

x x x

“Section 256. Whenever, or upon examination or other evidence, it shall be disclosed that the condition of any insurance company doing business in the Philippines is one of insolvency, or that its continuance in business would be hazardous to its policyholders and creditors, the Commissioner shall forthwith order the company to cease and desist from transacting business in the Philippines and shall designate a receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its policyholders and creditors, and exercise all the powers necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages in the name of the insurance company.

x x x

For information and guidance.

To download copy of the circular please click through this link: http://rbap.org/wp-content/uploads/2016/03/cl028.pdf

RBAP Secretariat

APPROVED APPLICATIONS FOR NEW BANKING OFFICES AND OPENED BANKING OFFICES OF 4Q 2015

30 March 2016

TO: ALL RURAL BANKS
RE: APPROVED APPLICATIONS FOR NEW BANKING OFFICES AND OPENED BANKING OFFICES DURING THE 4TH QUARTER OF 2015

Dear Rural Bankers:

For information, listed below are the (1) approved applications for new banking offices, and (2) opened banking offices during the last quarter of 2015.

I. Approved Applications for New Banking Offices
Rural and Cooperative Banks

1. Banco Dipolog Inc., (A Rural Bank) – Extension office
2. Card Bank, Inc. (A Microfinance Oriented RB) – MBO
3. Cooperative Bank of Cotabato – MBO
4. Rizal Bank, Inc. (A Microfinance Oriented RB) – MBO

II. Opened Banking Offices
Rural and Cooperative Banks

1. BOF Inc. (A Rural Bank) – Regular Branch
2. Camalig Bank, Inc. (A Rural Bank) – Regular Branch
3. Card Bank, Inc. (A Microfinance Oriented RB) – MF Branch, MBO
4. East West Rural Bank Inc – Regular Branch, Extension Office
5. New Rural Bank of San Leonardo (N.E.), Inc. – Regular Branch
6. Rural Bank of Capalonga (Cam. Norte), Inc. – Regular OBO
7. Rural Bank of Medina (Mis. Or), Inc – Regular OBO
8. Rural Bank of Mexico, Inc. – Regular Branch

To view and/ or download complete list of approved banking offices applications, please click through this link: http://rbap.org/wp-content/uploads/2016/03/cl026.pdf

Sincerely,

(SGD)
VICENTE R. MENDOZA
Executive Director

BSP Circular No. 2016-024: Credit Consciousness Week

28 March 2016

TO: ALL RURAL BANKS
RE: CREDIT CONSCIOUSNESS WEEK

Dear Rural Bankers:

Pursuant to Proclamation No. 568 dated April 25, 1995 designating April 24 to 30 as Credit Consciousness Week, all banking institutions and their branches are enjoined to undertake during the period such promotional and publicity-generating activities as advertising, window and counter displays, streamers, distribution of give-aways, raffles and similar incentives and devices.

We hope that through the observance of Credit Consciousness Week, we will be able to promote awareness and appreciation of the vital role of credit in national development.

To unify the campaign, banks are also requested to incorporate the theme,“Sa tamang gamit ng pautang, ekonomiya at bayan makikinabang.”, and the phrase “Credit Consciousness Week, April 24-30, 2016” in their promotional materials and print advertisements during the period.

Attached herewith is the BSP-prescribed tarpaulin layout for this campaign. For more information, banks may contact the BSP Corporate Affairs Office at 708-7142.

You may also download copy of this memo and the prescribed tarpaulin through these links:
(1) http://rbap.org/wp-content/uploads/2016/03/Credit-Consciousness-Week.pdf
(2) http://rbap.org/wp-content/uploads/2016/03/Credit-Consciousness-Tarp.jpg

Sincerely,

(SGD)
VICENTE R. MENDOZA
Executive Director

BSP Circular No. 900: Guidelines on Operational Risk Management

20 January 2016

TO: All Rural Banks
SUBJECT: CIRCULAR NO. 900 – GUIDELINES ON OPERATIONAL RISK MANAGEMENT

Dear Rural Bankers,

The Monetary Board in its Resolution No. 2115 dated 18 December 2015, approved the following guidelines on operational risk management for BSP supervised financial institutions and amendments in the Manual of Regulations for Banks (MORB) and Manual of Regulations for Non-Bank Financial Institutions (MORNBFI).

Section 1. Sections X179/4179Q/ 4198N/ 4179T are hereby added to the MORB/MORNBFI to read as follows:

Policy Statement. It is the thrust of the Bangko Sentral ng Pilipinas (BSP) to promote the adoption of effective risk management systems to sustain the safe and sound operations of its supervised financial institutions (BSFIs). Cognizant that operational risk is inherent in all activities, products and services, and is closely tied in with other types of risks (e.g., credit, liquidity and market risks), the BSP is issuing these guidelines to clearly set out its expectations and define the minimum prudential requirements on operational risk management. These guidelines align existing regulations to the extent possible, with international standards and best practices. BSP expects its BSFIs to adopt an operation risk management framework, as part of the enterprise-wide risk management system, that is suited to their size, complexity of operations, and risk profile.

Section 2. Subsections Xl79.t/4t79Q.t/4L9BN.L/4L79T.1 shall read as follows:

Definition of Operational Risk. Operational risk refers to the risk of loss resulting from inadequate or failed internal processes, people and systems; or from external events. This definition includes legal risk, but excludes strategic and reputational risk. Operational risk is inherent in all activities, products and services, and cuts across multiple activities and business lines within the financial institution and across the different entities in a banking group or conglomerate where the financial institution belongs.

Section 3. Subsections X179.2/4179Q.2/4198N.2/4179T.2 shall read as follows:

Duties and Responsibilities
a. Board of Directors. Consistent with the principles embodied under Subsection X141.3 of the MORB, the duties and responsibilities of the Board of Directors in relation to the effective management of risk include the establishment of comprehensive and effective operational risk management framework as part of the enterprise-wide risk management system. In this regard, the board of directors shall:

1. Ensure that it is aware of and understands the nature and complexity of the major operational risks in the BSFI’s business and operating environment, including risks arising from transactions or relationships with third parties, vendors, suppliers including outsourced service providers, and clients of services provided. This should include understanding of both the financial and nonfinancial impact of operational risk to which the BSFI is exposed to;

2. Approve the operational risk management framework which shall form part of the BSFI’s enterprise-wide risk management system and shall cover all business lines and functions of the BSFI, including outsourced services and services provided to external parties. The operational risk management framework should include an enterprise-wide definition of operational risk, which should be consistent with the definition under section 2 of this circular, governance, and reporting structures including the roles and responsibilities of all personnel, feedback mechanism, as well as standards and tools for operational risk management. In this respect, the board shall:

a. Define the operational risk management strategy and ensure that it is aligned with the BSFI’s overall business objectives. Relative to this, the board should set and provide clear guidance on the BSFl’s operational risk appetite (i.e. the level of operational risk the BSFI is willing to take and able to manage in pursuit of its business objectives as well as the type of risks that are not acceptable to the board and management), which should consider all material risk exposures as well as the BSFl’s financial condition and strategic direction;

b. Approve appropriate thresholds or limits to ensure that the level of operational risk is maintained within tolerance and at prudent levels and supported by adequate capital. Relative to this, the board shall approve policy on resolving limit breaches which should cover escalation procedures for approving or investigating breaches, approving authorities, and requirements in reporting to the appropriate level of management or the board;

c. Ensure that operational risk is appropriately considered in the capital adequacy assessment process;

d. Ensure that it receives adequate information on material developments in the operational risk profile of the BSFI, including pertinent information on the current and emerging operational risk exposures and vulnerabilities as well as information on the effectiveness of the operational risk management framework. The board must challenge the quality and comprehensiveness of the reliability of the said information and the monitoring system for operational risk;

e. Ensure that business objectives, risk appetite, the operational risk management framework, and the respective roles and responsibilities of personnel and officers at all levels in terms of implementing the operational risk management framework, are properly disseminated, clearly communicated/discussed, and understood by personnel concerned;

f. Provide senior management with clear guidance and direction regarding the principles underlying the operational risk management framework. The board shall ensure that senior management appropriately implements policies, processes and procedures, and provides feedback on the operational risk management process. In this regard, the board shall establish a feedback and reporting system that will allow employees to raise their concerns without fear of negative consequences; and

g. Ensure that the operational risk management framework is subject to effective and comprehensive independent review, on a periodic basis, by operationally independent, appropriately trained, and competent staff to ensure that it remains commensurate with the BSFl’s risk profile and continues to be adequate and effective in managing operational risk. The review should take into account the changes in business and operating environment, material changes in systems, business activity or volume of transactions, quality of control environment, effectiveness of risk management or mitigation strategies, loss experience, and the frequency, volume or nature of breaches in limits or any policy.

3. Provide adequate oversight on all outsourcing activities and ensure effective management of risks arising from these activities. In this regard, the board of directors shall approve a framework governing outsourcing activities, which includes a system to evaluate the risk and materiality of all existing and prospective outsourcing engagements and the policies that apply to such arrangements;

To view full copy of the guidelines, please refer to the attachment.
c900- Guidelines on Operational Risk Management

Thank you.

RBAP Secretariat

BSP Circular No. 899: Amendments to the Guidelines on Outsourcing

20 January 2016

TO: All Rural Banks
SUBJECT: CIRCULAR NO. 899 – AMENDMENTS TO THE GUIDELINES ON OUTSOURCING

Dear Rural Bankers,

The Monetary Board in its Resolution No. 2115 dated 18 December 2015, approved the following amendments in the Manual of Regulations for Banks (MORB) and Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) on the guidelines on outsourcing. These guidelines shall be read in conjunction with the guidelines on operational risk management.

Section 1. Section X162 and all its subsections in the MORB shall now read as follows:

Section X162. Statement of Principle on Outsourcing. A bank may outsource to third parties or to related companies in the group, in accordance with existing BSP regulations, certain services or activities to have access to certain areas of expertise or to address resource constraints, Provided, That it has in place appropriate processes, procedures, and information system that can adequately identify, monitor, and mitigate operational risks arising from the outsourced activities. Provided further, that the bank’s board of directors and senior management shall remain responsible for ensuring that outsourced activities are conducted in a safe and sound manner and in compliance with applicable laws, rules and regulations.
Subsection XL62.T Definition. Outsourcing shall refer to any contractual arrangement between a bank and a qualified service provider for the latter to perform designated activities on a continuing basis on behalf of the bank.

Subsection XL62.2 Prohibition against outsourcing of inherent banking functions. No bank shall outsource inherent banking functions such as:

a. Services normally associated with placement of deposits and withdrawals including the recognition based on recording of movements in the deposit accounts;
b. Granting of loans and extension of other credit exposures;
c. Position-taking and market risk-taking activities;
d. Managing of risk exposures; and
e. Strategic decision-making.

Subsection X162.3 Authority to outsource. Only those banks with a CAMELS composite rating of at least 3 and a Management rating of not lower than 3 shall be allowed to outsource designated activities without prior Bangko Sentral approval. Otherwise, the bank must secure prior approval from the appropriate department of the SES whose evaluation will be based on the bank’s ability to manage risks attendant to outsourcing.

Subsection XL62.4 Governance and Managing of Outsourcing Risks. Key risk areas related to outsourcing such as strategic; reputation /legal; operational, compliance, country and concentration risks should be evaluated before entering into and while managing outsourcing contracts. In this regard, banks shall:

a. Perform risk assessment of a business activity and evaluate the implications of performing the activity in-house or having the activity outsourced.

The following factors shall be considered in the assessment:
(1) Level of importance to the bank of the activity to be outsourced and potential impact on bank’s operations, financial condition, reputation, and ability to achieve its objectives, strategies and plans, should the service provider fail to perform the services;
(2) Outsourcing costs in proportion to total operating expenses and compared with costs of developing own infrastructure and expertise;
(3) Aggregate exposure to a particular service provider, in cases when the bank outsources various functions to the same service provider;
(4) Ability to maintain appropriate controls and meet regulatory requirements, in cases of operational constraints of the service provider; and
(5) Exposure to risk of confidentiality, integrity and availability of customer and bank data.

In cases when the risk management system is deemed inadequate for purposes of managing outsourcing-related risks, the BSP may direct the bank to terminate, modify, make alternative arrangements or re-integrate the outsourced activity into its operations, as may be necessary.

b. Establish policies and criteria to select the “best” service provider for the outsourced activities and to get said services at reasonable price. The following factors should be considered in evaluating potential service providers:

(1) Reputation, ownership structure (to identify potential conflict of interest), technical expertise, and operational capability;

(2) Financial performance and condition (e.g., ongoing viability, outstanding commitments, capital/funding strength, liquidity and operating results; and reliance on subcontractors) of the service provider and its closely-related affiliates;

(3) Operations and internal control environment (e.g., internal controls, facilities management, training, security of system, privacy protection, maintenance and retention of records, business resumption and contingency plans, systems development and maintenance, and employee background checks);

(4) Fees and charges (e.g., outsourcing cost should be lower than developing the necessary infrastructure and expertise, comparable with market rates, and reasonable vis-à-vis scope and complexity of services);

(5) Actual performance vis-à-vis service level agreement;

(6) Performance of the service provider (past and present engagements) including the reasons/causes of disengagements, if any; and

(7) Compliance with provisions of service agreements, performance standards and adherence to applicable laws, regulations, and supervisory expectations.

In cases when the clients are prejudiced due to errors, omissions, and frauds by the service provider, the bank shall be liable in providing the appropriate remedies or remuneration as may be allowed under existing laws or regulations, without prejudice to the bank’s right of recourse to the service provider.

c. Establish, maintain, and regularly test business continuity and contingency plans for situations wherein the service provider cannot deliver the required services. The contingency plan must indicate whether another service provider will be tapped or the service/activity will be brought back in-house. This should in turn consider the costs, time, and resources that would be involved.

Contingency arrangements in respect of daily operational and systems problems should be covered in the service provider’s own contingency plan. The contingency plan must be reviewed regularly to ensure that it remains relevant and ready for implementation.
d. Ensure that it has adequate resources to manage and monitor outsourcing relationships on a continuing basis. Banks are expected to develop acceptable performance metrics to assess outsourcing contracts. They shall also maintain records of all outsourcing activities which should be updated and reviewed regularly.

e. Ensure that personnel with oversight and management responsibilities for service providers have the appropriate level of expertise and stature to manage the outsourcing arrangement. The oversight process, including the level and frequency of management reporting, should be risk-focused. Banks should design and implement risk mitigation plans for higher risk service providers. These may include certain requirements or processes such as additional reporting by the service provider or heightened monitoring. Further, more frequent and stringent monitoring is necessary for service providers that exhibit performance, financial, compliance, or control concerns.

Subsection X162.5 Documentations. The bank should maintain necessary documentation to show that outsourcing arrangements are properly reviewed and the appropriate due diligence has been undertaken prior to implementation. The bank shall keep in its file the documents shown in Appendix 100 and the same shall be made available to authorized representatives of the Bangko Sentral for inspection.

Subsection X162.6 Intra-group outsourcing. The guidelines and requirements of outsourcing to third-party service providers shall be observed when outsourcing within a business group including its head office, another branch or related company. When the bank is the service provider, the bank may only render services it performs in the ordinary course of its banking business: Provided, That (i) the service is rendered to subsidiaries, affiliates and companies related to it by at least five percent (5%) common ownership; or (ii) the service is rendered to its own depositors on account of the bank being a depository. The bank, acting as a service provider within its group, shall uphold the following:

a. Confidentiality of deposits and investments in government bonds as defined under R.A. No. L4O5, as amended;

b. Prohibition on cross-selling except as allowed under applicable regulations.

Subsection X162.7 Offshore outsourcing. Offshore outsourcing exists when the service provider is located outside the country. Subsec. X162.7 on intra-group outsourcing likewise applies in cases of offshore outsourcing. ln addition, offshore outsourcing of bank’s domestic operations is permitted only when the service provider operates in jurisdictions which uphold confidentiality. When the service provider is located in other countries, the bank should take into account and closely monitor, on continuing basis, government policies and other conditions in countries where the service provider is based during risk assessment process. The bank shall also develop appropriate contingency and exit strategies.

The Bangko Sentral examiners shall be given access to the service provider and those relating to the outsourced domestic operations of the bank. Such access may be fulfilled by on-site examination through coordination with host authorities, if necessary. The domestic branch of foreign bank shall be principally liable in cases where the clients are prejudiced due to errors, omissions and frauds of the service provider located offshore.

The Bangko sentral may require the bank to terminate, modify, make alternative outsourcing arrangement or re-integrate the outsourced activity into the bank, as may be necessary, if confidentiality of customer information, effective customer redress mechanisms or the ability of the Bangko sentral to carry out its supervision functions cannot be assured.

Subsection X162.8. Transitory provision. All outsourcing agreements must be aligned with the provisions of sec. xL62. Existing outsourcing agreements which are not in accordance with this section will not be unwound. However, it must comply with the requirements provided herein upon renewal of the agreements.

Subsection X162.9. Supervisory Enforcement Actions. Consistent with Circular No’ 875 dated 15 April 2015, the BSP may deploy enforcement actions to promote adherence with the requirements set forth in this Circular and bring about timely corrective actions’ The BSP may issue directives to improve the management of outsourcing arrangements, or impose sanctions to limit the level of or suspend any business activity that has adverse effects on the safety or soundness of the BSFI, among others. Sanctions may likewise be imposed on a BSFI and/or its directors, officers and / or employees.

Section 2. Section 4162e and 4190N shall now read as follows:

Section 4162Q Guidelines on Outsourcing. The rules on outsourcing of banking functions as shown under section X162 of the MORB and Appendix e_37 of the MORNBFT shall likewise apply to eBs.

Section 4190N Guidelines on Outsourcing. The rules on outsourcing of banking functions as shown under section X162 of the MoRB and Appendix e-37 of the MORNBFI shall likewise apply to NBFIs.

Section 3. Effectivity. This Circular shall take effect fifteen (15) calendar days after its publication either in the official Gazette or in a newspaper of general circulation.

To download full copy of the guidelines, please refer to this link: c899 – Amendments to the Guidelines on Outsourcing

Thank you.

RBAP Secretariat

BSP Circular No. 836: Amending Mircofinance Reports, and Redefining “Microfinance Loans” and “Small and Medium Enterprises Loans” accounts in the Financial Reporting Package (FRP)

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To download a PDF copy, please click on this link: BSP Circular No. 836

BSP in talks with Malaysia counterpart to craft Islamic banking framework for PHL

Malaysia, home to the one of the world’s largest Muslim populations, has expressed interest in helping develop the Islamic banking industry in the Philippines, the Department of Finance said Sunday.

Finance Undersecretary Jose Emmanuel Reverente said the Bangko Sentral ng Pilipinas has been holding talks with Bank Negara, Malaysia’s central bank, regarding the creation of a framework for Islamic banking in the country.

“There has been strong interest from Malaysia in terms of assisting us develop a strong Islamic banking framework… We are working closely with them,” he said.

In a forum held last March, BSP Governor Amando Tetangco Jr. lamented the scarcity of Islamic banks in the Philippines, particularly in the Autonomous Region in Muslim Mindanao (ARMM), despite the vast business opportunities available in the region.

At present, only 20 banks operate across five provinces in ARMM, with Al-Amanah bank being the only Islamic financial institution. The bank is a subsidiary of the Development Bank of the Philippines.

Malaysia, meanwhile, has 16 Islamic banks.

Reverente said the growth of Islamic banking industry in the Philippines has been stunted by the absence of a framework to guide the creation of laws that recognize the particular manner by which Muslims transact and do business.

Under traditional Islamic banking, loans to clients or customers must not carry interests. Because of this condition, Islamic banks in the Philippines serve more as an equity partner than a deposit-taking and lending institution, Reverente said.

This, in turn, puts the banks at a disadvantage when it comes to fulfilling tax obligations, he said.

The government earlier said it hopes to develop a market for the Islamic banking industry in preparation for the ASEAN economic integration in 2015.

Source: http://www.gmanetwork.com/news/story/357638/economy/moneyandbanking/bsp-in-talks-with-malaysia-counterpart-to-craft-islamic-banking-framework-for-phl

BSP issues warning on ‘Bitcoins’

THE Bangko Sentral ng Pilipinas (BSP) warned the public of “Bitcoins,” or virtual currencies currently being exchanged in the country, saying monetary authorities were still studying the “appropriate regulatory measure” on the new technological innovation.

The central bank said Bitcoins were a form of unregulated digital money that allows purchase of both virtual goods, such as those in online gaming environments and social network, as well as real goods and services, such as retailers, restaurants and other establishments. This type of currency is not issued by a central bank. Also, unlike electronic money that is backed by cash for the entirety of its value, Bitcoins are not backed by any commodity but by the mere ability of its holder to exchange them for goods.

“It has recently come to the attention of the BSP that virtual currencies like Bitcoins are now being exchanged in the Philippines. This is the reason we put out an advisory just this week to warn the public that in the Philippines these [and other virtual currencies] are still unregulated,” BSP Governor Amando M. Tetangco Jr. said in his e-mailed response to reporters.

In the public advisory issued by the central bank, the central monetary institution in the country said it will be “closely monitoring developments” on these virtual currencies and urged the people to “familiarize themselves” with information on the subject. “As we understand it, there still isn’t global agreement on how to handle this new technological innovation,” Tetangco said.

He also told reporters that those who engage in virtual currency exchange could “lose their money” through a number of ways.

“Some of these include outright fraud, system failure as trading would be exchange platform-dependent. There have been a number of cases reported where the trading platforms have gone out of business or failed or through the users’ own mistakes when the virtual currencies are ‘stolen’ from the users’ ‘digital wallet,’” Tetangco said.

Although the innovation still has its loopholes for fraud, Tetangco also said it could be used for future low-cost remittance solution.

“We are trying to better understand the intricacies of its use and implications on consumer protection. This innovation could possibly offer a low-cost remittance solution, but we would need to have some level of confidence that the weaknesses could be addressed,” Tetangco said.

Source: http://www.businessmirror.com.ph/index.php/en/news/top-news/28869-bsp-issues-warning-on-bitcoins

BSP Circular No. 827: Amendments to the Risk-Based Capital Adequacy Framework for Stand-alone Thrift Banks, Rural Banks, and Cooperative Banks

Dear rural bankers,
The Monetary Board, in its Resolution No. 232 dated February 7, 2014, approved the amendments to Appendix 63c and other related provisions of the Manual of Regulations for Banks (MORB) on the revised risk-based capital adequacy framework for stand-alone thrift banks, rural banks, and cooperative banks
Attached is a copy of the BSP Circular, as posted on their official website.
To download a copy, please click on this link: BSP Circular 827
For your reference.
RBAP Secretariat

BSP, PDIC Approve the Extension of SPRB Plus

The Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corporation (PDIC) have approved the extension of the Strengthening Program for Rural Banks (SPRB) Plus from 31 December 2013 to 31 December 2014 with certain amendments and enhancements, to encourage more mergers, consolidations and acquisition of eligible rural banks (RBs) and thrift banks (TBs) by strategic third party investors (STPIs).

Among the approved amendments and enhancements include the relaxation of the required ownership control in an eligible bank by an eligible STPI to at least 60% (from at least 67%) of the outstanding capital stock of the eligible bank to align with the provisions of BSP Circular No. 809 dated 23 August 2013 on the rules and regulations implementing R.A. No. 10574 (An Act Allowing the Infusion of Foreign Equity in the Capital of Rural Banks, Amending R.A. No. 7353, Otherwise known as “The Rural Banks Act of 1992”).

The financial assistance (FA) from PDIC may now also be in the form of either a combination of Preferred Shares (PS) and Direct Loan, or Direct Loan (DL) only. Furthermore, as support to banks affected by typhoon Yolanda, the amount of the PS component of the PDIC FA is increased from 50 percent to 100 percent of the required additional capital to restore the eligible bank’s capital adequacy ratio to a minimum 10 percent.

The SPRB Plus, which is a joint project of the BSP and the PDIC, is an enhanced version of the original SPRB which was launched in 2010 exclusively for rural banks (RBs). In furtherance of the objectives of SPRB Module I and to promote participation under the Program, its scope was broadened and enhancements were made under the SPRB Plus such as inclusion of TBs, in addition to RBs, as among the eligible banks as well as the inclusion of TBs, universal and commercial banks (UKBs), non-bank corporations and group of companies as eligible STPIs.

With the exception of STPI UKBs and banking groups which can only avail of incentives from the BSP without the financial assistance component, all other eligible STPIs, including non-bank corporations which are not subsidiaries of UKBs, may avail of both the FA and the incentives consisting of regulatory reliefs and branching/other incentives.

The SPRB Plus aims to strengthen the banking system and to minimize bank closures.

As of 31 December 2013, five (5) merger/consolidation applications involving ten (10) banks have been approved by the PDIC and are being processed by the BSP. Moreover, there are two (2) other applications for consolidation/acquisition that are in the pipeline.

Source: http://www.bsp.gov.ph/publications/media.asp?id=3349

BSP Issues 10-Piso Bonifacio Commemorative Coin

The Bangko Sentral ng Pilipinas (BSP) today announced the circulation of a ten-piso legal tender coin to highlight the nationwide celebration of the 150th birth anniversary of Filipino patriot Gat. Andres Bonifacio. The BSP has previously issued P1-piso legal tender commemorative coins for the 150th birth anniversary of Dr. Jose Rizal.

Widely regarded as one of the Philippines’ greatest heroes, Andres Bonifacio was a dynamic leader who founded the Katipunan, the nationalistic society that ignited the flames of the revolution which led to the declaration of Philippine independence in 1898.

 The portrait of the Father of the Philippine revolution is etched on the obverse of the coin, along with the markings, “150 years,” “Republika ng Pilipinas” and “2013.” The reverse side, meanwhile, features the BSP seal, the signature of the hero, the Bonifacio monument and the markings, “150 years,” “1863-2013” and “Dangal at Kabayanihan.”

The BSP will produce 10 million pieces of the Bonifacio commemorative coin which has the same size (26.5-millimeters in diameter) and weight (8.70 grams) as the ten-piso coin currently in circulation.

The issuance of the coin was recommended by the BSP’s Monetary Board and approved by the Office of the President.

 

Summary of Regulatory Relief Granted by BSP to Rural Banks

As a response to RBAP’s proposal for the rehabilitation of rural banks affected by Super Typhoon Yolanda, the Bangko Sentral ng Pilipinas (BSP) granted the following:

For the rehabilitation of the bank’s manpower:

1. Direct financial assistance beyond the limits of each affected rural banks BSP-approved Financial Assistance Program for bank staff as per BSP Memorandum M-2013-050;

2. Extraordinary safeguarding by banks of the existing accounts of each affected bank staff:
a. For deposit accounts – exemption from dormancy for 5 years as per Section X263 of the MORB;
b. For loan accounts – suspension of interest and all charges for 5 years;

3. One-time write off of one existing loan per staff as per BSP Memorandum M-2013-050

For the rehabilitation of rural banks:
1. Banks must apply for immediate application of BSP’s regulatory relief measures;

2. Exemption from all fees due to the regulators for 5 years is allowed to include non-imposition of penalties as per BSP Memorandum M-2013-050;

3. Extraordinary safeguarding by banks of the existing accounts of each affected rural bank
a. For deposit accounts – exemption from dormancy for 5 years
b. For loan accounts – suspension of interest and all charges for 5 years.

4. Restructuring of affected loans rediscounted with other banks including BSP and LBP

For the rehabilitation of the affected rural bank clients
1. Extraordinary safeguarding by banks of the existing accounts of each affected bank client:
a. For deposit accounts – exemption from dormancy for 5 years
b. For loan accounts – suspension of interest and all charges for 5 years.
2. One-time write off of one existing loan per client.

Meanwhile, BSP also extended their temporary regulatory and rediscounting relief to banks with head offices and/or branches affected by Super Typhoon Yolanda in the following form:

For thrift, rural and cooperative banks
a. During a temporary grace period for payment or upon their restructuring and subject to reporting to BSP, exclusion of the loans of borrowers in affected areas, which should have been reclassified as past due loans under Section X306 of the MORB on 8 November 2013 (date Typhoon “Yolanda” hit the country) and those becoming past due up to 31 December 2014, from computation of past due loan ratio; provided that BSP documentary requirements for restructuring of loans for this purpose are waived; provided further that the bank will adopt appropriate and prudent operational controls;

b. Reduction of the 5 percent general loan loss provision to 1 percent for restructured loans to borrowers in affected areas from 8 November 2013 to 31 December 2014;

c. Non-imposition of penalties on legal reserve deficiencies or TBs/RBs/Coop Banks with head office and/or branches in the affected areas incurred starting from reserve weeks ended 14 November 2013 to 15 May 2014 provided these reserve deficiencies can be shown to be calamity related as certified by the bank rather than due to pre-existing conditions;

d. Moratorium without penalty on monthly payments due to the BSP until 30 June 2014 for banks with ongoing rehabilitation programs upon filing of application for extension/rescheduling;

e. For all types of credits extended to individuals and businesses directly affected by the calamity, allowing, subject to BSP prior approval, the booking of allowances for probable losses on a staggered basis over a maximum period of five years on loans outstanding as of 8 November 2013; and

f. Non-imposition of monetary penalties for delays in the submission of all supervisory reports due to be submitted from 8 November 2013 to 30 June 2014.

For all banks
a. Allowing banks to provide financial assistance to their officers and employees who were affected by the calamity even if not within the scope of the existing BSP-approved Fringe Benefit Program (FBP) subject to subsequent submission of request for approval of the amendment to FBP to the appropriate supervision and examination department for regularization.

BSP MEMORANDUM NO. M-2013-055: Standard Coding for PhilPass Transactions

The Bangko Sentral ng Pilipinas (BSP), with its mandate to ensure a safe and efficient payments system, will be implementing a standard transaction coding system in order to properly identify the nature of banks’ funds transfer and payment instructions that are coursed through PhilPass for settlement.

To get a copy of the BSP Memo, please click on this link: BSP Memorandum No. M-2013-055

BSP Circular Letter No. CL-2013-064: National Banking Week 2014

To: ALL BANKING INSTITUTION
Subject: National Banking Week 2014

Pursuant to Proclamation No. 2250 dated 10 December 1982 (copy attached) designating 1 to 7 January as National Banking Week, all banking institutions and their branches are enjoined to undertake during the period such promotional and publicity-generating activities as advertising, window and counter displays, streamers, distribution of give-aways, raffles and seminar incentives and devices.

The BSP also enjoin the banking industry to promote more vigorously the benefits derived by our communities from banks. They believe it is imperative to convey the important role that banks play in the lives of our people, economy and our country as a whole.

To unify the campaign for our celebration of the National Banking Week 2014, banks are requested to incorporate the theme, “Sa Wasting Pagbabangko, Aasenso Tayo” and the phrase “National Banking Week, 1 to 7 January 2014” in their promotional materials and print advertisements during the period.

A prescribed tarpaulin layout for this campaign may be downloaded here:
National Banking Week 2014_FINAL 3x10

National Banking Week 2014_FINAL 3x10

To download a copy of the BSP Circular Letter, please click on this link: cl064