Worries grow over BSP ‘superpowers’

Conclusion

As far as the Bangko Sentral ng Pilipinas is concerned, it needs the additional powers to be better able to regulate the fast changing financial markets which have evolved significantly since the New Central Bank Act was enacted over two decades ago.

“The current charter is over 20 years old,” BSP Gov. Amando Tetangco Jr. said during a recent briefing. “[That law] was passed in 1993. Many things have happened since then. In terms of amendments, what we really want to do is make the BSP more attuned to modern central banking given changes in the financial landscape globally, regionally, locally.”

In particular, Tetangco said, he wants a better handle on the financial transactions between conglomerate-owned banks and other companies belonging to the same group to eliminate so-called “shadow banking” activities that occur under regulators’ radars.

“The focus is, what’s the potential impact of transactions between banks and affiliates, subsidiaries of conglomerates,” he said.

Tetangco assures the public that there is nothing sinister in the central bank’s bid to obtain more information about banks and companies related to them, and that their main goal is only to provide better supervision over the financial system.

“We’ve looked at a number of conglomerate maps and we’ve noticed there’s a great number of companies in conglomerates … There are interlinkages,” he said. “We want to get a more accurate picture.”

But worries about the potential abuse of such vast regulatory powers remain, including among lawmakers in Congress. This is especially so, since Philippine government instrumentalities have, in the past, been accused of allowing themselves to be used by the powers that be to persecute individuals or companies either for political purposes or financial gain.

“Massive powers will be provided to the BSP [under the proposed bill],” said Kabataan Partylist Rep. Terry Ridon. “They will be removing some aspects of accountability, and we’re worried about the culture of impunity.”

He said that, if abused for whatever reason by the BSP’s leadership or even by some unscrupulous central bank employees, the implications to the public would be massive.

“These are potential white collar crimes. [The BSP is] asking for very broad powers that are not germane,” said the lawmaker who is also a public interest and constitutional lawyer. “These may infringe on individuals’ right to privacy.”

It has been pointed out that the BSP has been successful in its role of safeguarding the Philippine financial system through various crises, and prosecuting banking malfeasance over the years, despite the perceived shortcomings of its existing charter.

Ultimately, longtime bankers like former Philippine Deposit Insurance Corp. president Ernest Leung and Chamber of Thrift Banks executive director Suzanne Felix said they have no issues against the current BSP leadership, citing the institution as one of the most professionally run agencies in the entire government bureaucracy.

“Tetangco and [BSP Deputy Gov. Nestor] Espenilla [Jr.] are an excellent regulators,” said Leung. “They’ve done a terrific job.”

CTB’s Felix, meanwhile, expressed her admiration to both central bankers for their management of the Philippine banking system, which was able to withstand both the 1997 East Asian financial crisis and the 2008-2009 global financial crisis.

“Definitely, hats off to the BSP as a regulator,” she said, explaining that banks’ opposition to certain provisions of the bill should not be taken as a personal issue against central bank officials like Tetangco or Espenilla.

“But we’re talking about a law that will be there for a long time,” she said. “What happens when other people are in charge? What happens when they’re no longer there?”