The Monetary Board (MB) approved the adoption of the Financial Consumer Protection Framework of the Bangko Sentral ng Pilipinas (BSP) to institutionalize consumer protection as an integral component of banking supervision in the country.
The new framework has been crafted based on the fundamental tenets of consumer empowerment, market conduct and collective responsibility. The Framework reflects the BSP’s own commitment to ensure that BSP-supervised financial institutions (BSFIs) develop a culture of fair and responsible dealings while continually protecting the welfare of financial consumers.
Moving beyond core principles, the BSP Framework identifies five consumer protection standards which BSFIs must observe at all times.
Under the standard of “Disclosure and Transparency,” it shall be the responsibility of BSFIs to ensure that financial consumers are provided all material details of an instrument or service before a transaction is consummated.
“Fair Treatment” requires that BSFIs must not only fully disclose product details but should also determine whether the products and services it is offering are suitable to the risk and financial profile of the financial consumer. This goes beyond the current practice of “suitability tests” because this standard likewise covers, among others, the selling practices of the staff of BSFIs and a specific consideration for possible over-indebtedness of the financial consumer.
BSFIs are likewise expected to respect the privacy of a client’s personal information. Information on a client could not generally be shared absent the client’s authorization. BSFIs are not at liberty to share the client’s information even with their subsidiaries and affiliates for purposes of marketing and referrals. At this digital age, this standard is even more critical and is aligned with other IT-related security measures it has recently required of the banking industry.
To further assist in nurturing the financial well-being of consumers, a standard on “Financial Education and Awareness” is likewise introduced. Since BSFIs deal directly with financial consumers, BSFIs are expected to take active roles in promoting financial education and awareness, and ensuring that this becomes a component of good governance by the BSFIs.
A standard for remedial action completes the five standards. An “Effective Recourse” mechanism is expected of BSFIs so that an objective process and venue is in place to handle consumer complaints.
These standards are to be observed by BSFIs and evaluated by the BSP. The evaluation process will include a periodic on-site assessment, a continuing off-site evaluation of the BSFIs and their environment, a rating system, and the corresponding enforcement actions.
BSFIs will be rated on a scale of 1 (poor) to 4 (strong) based on the adherence of each BSFI to the standards set by the Framework. The commitment of the Board of Directors and the Senior Management of the BSFI to embed a culture of consumer protection is likewise considered by the rating process.
Overall, the Framework addresses the need to protect and empower the financial consumers. With increased transparency, fair treatment and assurance that their rights will be fully protected, financial consumers will have greater confidence in the formal financial system. Empowered financial consumers drive competition, promote efficiency and productivity, thereby encouraging a dynamic and robust financial system.
Finally, the Framework underscores that financial consumer protection is a collective responsibility and shared accountability among BSFIs, the BSP and the financial consumers.