BSP hikes penalties, expands accountability for banking violations

MANILA, Philippines—The central bank is implementing a revised monetary penalty framework with expanded coverage and higher fines for financial institutions that violate the country’s banking rules and regulations, the regulator said on Thursday (Sept. 9).

From only banks, quasi-banks and their directors and officers, the guidelines now covers all BSP-supervised financial institutions and their directors or trustees, officers and employees, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said at an online briefing.

The adoption of a more stringent penalty system for financial institutions aims to further promote effective regulation of banks and the financial system.

“These guidelines provide more teeth to hold financial institutions and their directors, trustees, officers and employees accountable for their conduct, deter the future commission of violations, and sustain discipline in engaging in safe and sound banking practices,” Diokno said.

“The BSP remains steadfast in its commitment to ensure the stability of the financial system through strong and effective regulations for financial institutions,” he added.

The revised guidelines impose a maximum penalty of P1 million for each transactional violation or P100,000 per calendar day for a continuing violation committed by financial institutions and their directors, trustees, officers and employees.

The guidelines also provide that the BSP may impose a fine of no more than three times the profit gained or loss avoided due to the violation. These are aligned with provisions of Republic Act No. 11211 or The New Central Bank Act.

Monetary penalty is a type of sanction and is one of the enforcement actions that the BSP may deploy singly or in combination with other non-monetary sanctions on financial institutions and their key personnel for violations of banking laws, rules and regulations.

Consistent with the principles of proportionality, fairness, consistency and reasonableness, the BSP considers the circumstances of each case in determining the appropriate amount of monetary penalty to be imposed on erring institutions or individuals.

These factors include:

• Nature, gravity, and seriousness of the violation or irregularity
• Financial and non-financial impact of the violation or irregularity on financial institutions
• Intention, frequency and duration of the violation
• Measures taken to stop or correct the violation

Due process shall be observed in the imposition of monetary penalties to afford the financial institution and their personnel a fair and reasonable opportunity to explain their side and submit supporting evidence.

TSB