BSP issues new rules to protect banks, financial system from rogues | Inquirer Business

BSP issues new rules to protect banks, financial system from rogues

By: - Reporter / @daxinq
/ 05:19 PM May 06, 2021

MANILA, Philippines—Tighter checks on hiring by banks and regular monitoring of current employees for behavioral “red flags” would help weed out “unprincipled personnel” with the potential of damaging the financial system through rogue activities.

The chief of the Bangko Sentral ng Pilipinas (BSP) gave emphasis to these measures, saying on Thursday (May 6) that financial institutions would be ordered to enforce more stringent screening processes for new hires and “know-your-employee (KYE)” rules that would include lifestyle checks on key staffers.


“Adequate understanding of an employee’s personal background, character, conflict of interest and propensity to commit fraud or irregularity shall be considered,” BSP Governor Benjamin Diokno said at an online briefing.

He added that the new rules also aim to address the situation when potential rogues are already employed in the financial institution, highlighting the importance of continuing assessment of employees’ fitness and propriety to perform their tasks.


“The new policy identified certain behaviors that serve as red flags warranting further scrutiny as part of personnel’s performance evaluation.,” Diokno said.

The move was given the green light by the regulator’s policy making Monetary Board recently in a bid to prevent potential rogue employees from defrauding the institutions’ clients, which does not happen often locally but involves hundreds of millions of pesos that go missing when it does.

The Philippines’ chief financial regulator said the new KYE procedures foster a stable banking system by weeding out unprincipled personnel who may bring ill repute to a bank and the financial system.

“People are the very heart of every institution, especially in banking which is built on trust,” Diokno said. The new rules, he said, “are key to managing people risk by ensuring that the supervised financial institution hires persons with the right competency, experience and integrity to fulfill their duties and responsibilities.”

The BSP recently issued KYE rules aligned with global best practices as part of broader supervisory reforms to continue raising the bar on corporate governance and risk management in the domestic banking system.

Under the rules, BSP-supervised financial institutions are required to adopt a risk-focused screening process which considers sensitivities of certain positions that may require more stringent screening. These rules also emphasize the use of BSP records as part of the screening process of banks.

The new policy also requires head offices of financial institutions to act on requests for confirmation of accounts from their clients or depositors.

Separating the confirmation process from the branch or officer handling the account is a control measure aligned with the principles set by the BSP’s operational risk management guidelines.

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TAGS: Bangko Sentral ng Pilipinas, Benjamin Diokno, know-your-employee, lifestyle checks, screening
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