Bank supervision

IN SEVERAL interviews over the past week, newly appointed Bangko Sentral ng Pilipinas governor Benjamin Diokno has shown that in his role he will have a broader range than his predecessors. We wish him well in his new job.

It is clear that there will be a continued emphasis on infrastructural developments. I hope there will also be a concerted effort to reduce poverty. In the past, the assumption has been made that government spending will, by some unspecified process, “trickled down” to those most in need. Since there are over 20 million Filipinos suffering from poverty, and this number is not declining markedly, it is important to determine which areas have potentially the most impact on poverty alleviation.

***

In the area of bank supervision, it would be helpful to the nation’s economy if BSP exerted more influence over the banks’ lending policies. For a long time, BSP has ‘instructed’ banks to lend more to the agriculture sector but banks have chronically failed to meet BSP requirements.

***

The margin between borrowing and lending rates is still too large and contributes significantly to what to many are excessive bank profits.

My bank has invited me to avail myself of a loan with a specified annual percentage rate of charge (APC) of over 20 percent but my deposits only attract 1-2 percent. Unfair! BSP needs to examine the low deposit rates, particularly when the problem of financial inclusion does not seem to be addressed effectively.

In principle, the relentless drive towards automation is to be commended. But there does not appear to be sufficient testing of systems.

One arena where systems fail is in the retail sector. When goods are paid for by the customer, money should be debited from his bank account and credited to the retail. We have found that sometimes the debit takes place but not the credit. The customer and the retailer have been let down by the bank’s inadequate systems.

From last October, banks have been “ordered” to report such glitches to BSP within two hours. I believe that banks often fail to report these problems. It is high time that BSP enforced discipline on the banks.

I am not happy with the use of the word “glitches” if it implies that somehow these problems are beyond the control of the banks. They are not. Banks need to develop systems which do not allow these imperfections.

***

After a long delay, Bangladesh Bank, the victim of the 2016 cyberheist, has filed a case against Rizal Commercial Banking Corporation (RCBC) in the United States District Court for the Southern District of New York. BSP has already fined RCBC P1 billion for allowing illicit funds to pass through its system.

It would be prudent if BSP ensures that it fully understands all the details and ramifications of the case since Bangladesh Bank is the equivalent of BSP in Bangladesh. It could be embarrassing if those giving evidence on behalf of Bangladesh Bank are privy to details of the heist in the Philippines which are not known to BSP.

Enrique Razon’s Bloomberg Resorts Corp. is also a defendant in the case but its response is that it had no idea that the funds used to purchase gaming chips at its Solaire casino were stolen.

The probity of the Philippine banking system is being challenged by Bangladesh Bank.

Is BSP fully prepared?/PN