Only healthy banks allowed to voluntarily surrender licenses

Only banks that are in the pink of financial health will be allowed by regulators to voluntarily give up their licenses to ensure that no outstanding liabilities remain unmet once they cease banking operations or shift to other lines of business.

Thus said the Bangko Sentral ng Pilipinas on Monday as it announced that its policy-making Monetary Board recently tightened guidelines on the voluntary surrender of banking licenses either with a plan to proceed to voluntary dissolution and liquidation or to keep the entity’s corporate life and convert into a nonbank entity.

“The guidelines cover instances of voluntary surrender where no creditors will be affected during the resulting voluntary dissolution or the conversion into a nonbank entity,” the central bank said in a statement.

“At the minimum, the applicant bank will ensure immediately accessible funds equivalent to its outstanding deposit obligations to provide assurance on the repayment of depositors,” it added.

In the past, some banks have given up their coveted banking licenses when they merged or were acquired by other banks or shifted to other business activities. Henceforth, however, the regulator will first ensure that all existing obligations—especially to creditors and depositors—are covered before a financial institution is allowed to exit the business voluntarily.

The streamlining of the guidelines emphasizes the primary requirement that only a bank in sound financial condition and does not have any of the grounds to prohibit it from doing business under Section 30 of Republic Act No. 7653 or the New Central Bank Act, as amended, may be allowed to undergo voluntary surrender of its banking license.

The guidelines also stressed that even after the surrender of banking license, the BSP may impose sanctions on concerned bank directors, officers and employees who are found to have violated banking laws, rules and regulations.