By Beting Laygo Dolor, Contributing Editor

After a spate of scandals involving the banking industry, the Bangko Sentral ng Pilipinas (BSP, the Philippines’ central banking authority) approved new rules that make it easier to partially or perpetually disqualify persons from serving as bank directors or officers, depending on the gravity of the offenses they commit.

Specifically, the punishments are aimed at those found to have committed detrimental acts against the banks or its stakeholders.

The tighter rules cover not only banks but also quasi-banks such as lending companies, savings and loan associations and pawnshops.

According to the BSP, “the new rules expanded the grounds for disqualification aimed at further strengthening the quality of governance in the financial services industry.”

Persons who cause  undue injury, material loss or damage to a financial institution, or those who expose the bank to higher risk or danger will be disqualified from becoming a director or officer in other BSP-supervised institution.

The Monetary Board (MB) — the country’s highest policy making body which is headed by the BSP governor — greenlit the revised rules on disqualification for directors and officers of financial institutions.

The MB included in its grounds for disqualification dismissal from any government institution, conviction for offenses under the amended charter of the Philippine Deposit Insurance Corp. (PDIC) and delinquency or unwillingness to settle obligations.

The new rules, however, still  provide for protection for persons suspected of malfeasance by providing a window “for the person concerned to explain his side and present evidence to support his position.”

But once a person is disqualified, his name will be included in a watchlist database and he can no longer be connected in any BSP-supervised financial institution unless and until his name is removed from the watchlist.

Towards the end of 2019, the Philippines was found to be involved in the largest banking scandal to hit Australia.

At least 10 local banks led by the Bank of the Philippine Islands — considered one of the so-called Big 3 in local banking which includes Banco de Oro and Metropolitan Bank and Trust Company — had ties to Westpac, one of the biggest banks in Australia, which was forced to suspend operations in November, last year.

BPI was a remittance partner of Westpac, whose LitePay service was aimed at Filipinos living and working abroad, particularly Australia, looking to send money back home.

In late 2017, the BSP also penalized Metrobank after it was discovered that PHP1.75 billion (about US$35 million) had been lost due to fraud.

Considered as the second largest bank in the country, Metrobank faced such sanctions as the suspension of directors and officers. The bank, founded by the late George Ty, was also ordered to allocate PHP4.45 billion of its capital to cover higher operational risk.

While the country’s universal banks were able to ride the financial storms of recent years, a number of small, mostly provincial, banks have not been as lucky, with the BSP ordering  the closure of several banks and forcing the PDIC — which insures all local bank deposits — to take over their assets to pay off depositors.

In 2016, the Rizal Commercial Banking Corp. (RCBC) was involved in a “dirty money” transaction involving the central bank of Bangladesh’s foreign reserves in the Federal Reserve Bank of New York.

A manager of RCBC was found to be involved in the successful heist of US$81 million.

In a related development, BSP Gov. Benjamin Diokno said he is optimistic that 2020 will be a better year for the economy.

This, following the government’s failure to hit its growth targets last year due mainly to the delayed implementation of the 2019 budget.