House eyes appeals unit in BSP on banks’ closure
MANILA, Philippines—In the wake of tensions arising from the closure of Banco Filipino, the House of Representatives has drafted a bill seeking, among others, to create an appeals department within the central bank where banks that have been shut down may contest closure orders.
Congressman Sergio Apostol, chairman of the House committee on banks and financial intermediaries, said the bill would be due for plenary debate next week.
Currently, banks ordered closed by the Monetary Board, the decision-making body of the Bangko Sentral ng Pilipinas (BSP), may file an appeal straight to the Court of Appeals.
Should the proposed bill be enacted into law, Apostol said, banks would have an option to first seek administrative means to contest closure orders by going to the appeals department of the BSP. If the case is solved administratively, then banks and the BSP avoid the usually lengthy and tedious court process of hearing appeals against closure orders.
“Banks should have the right to appeal before the BSP, and to lodge the appeal in a department [that is tasked with reviewing appeals],” Apostol told reporters at the sidelines of a banking forum organized by the Rural Bankers Association of the Philippines (RBAP) and held in Pasay City.
The bill came following the move of the Monetary Board of the BSP to close down Banco Filipino and sue the thrift bank’s officials amid allegations of insolvency and unsound banking practices. Banco Filipino is strongly opposing the closure order and, in turn, has sued BSP officials for alleged irregularity in the closure order and graft.
Nestor Espenilla Jr., deputy governor of the BSP who is in charge of bank regulation, said the central bank has not received a copy of the House bill and has not been informed about the proposal.
He said the BSP should study the bill carefully before making any official comment, but said that the current appeals process has shown to be efficient.
“The current process is that banks ordered closed go directly to the CA [Court of Appeals] to make an appeal. It [existing process] has worked so far,” Espenilla said.
The House bill is generally aimed at amending the existing charter of the BSP.
The BSP is actually pushing to have its charter amended, but some of its key amendment proposals have not been incorporated in the House bill.
One is the BSP’s proposal to make its examiners immune from court cases related to bank-closure orders. BSP examiners who do their job of thoroughly assessing financial conditions of a bank and recommending closure orders if they deem appropriate are always threatened by chances of getting sued by bank owners, according to officials.
In order that concerned BSP personnel are able to do their job efficiently and without fear, they should be protected against court cases, they said.
Apostol said legislators from the Lower House did not find the BSP proposal prudent, and so did not incorporate it in the bill.
“They [BSP officials and examiners] are expected to be responsible for their decisions,” Apostol said, adding that they should be able to defend their decisions in court if these were questioned.
Another BSP proposal thumbed down by the House was that giving the central bank the authority to issue its own bonds.
Apostol said allowing the BSP to issue its own bonds would not be prudent. He said that given the public sector’s huge debts, borrowings by public entities must be monitored.
Unlike regular line agencies that are under the national government and borrowing of which are approved by Congress, the BSP operates independently. This means that if the BSP’s proposal is approved, then it will be able to borrow without approval by the national government or Congress.
