BSP sees more stable savings, loan associations under tighter rules

MANILA, Philippines—The Philippine central bank’s strengthened rules governing the country’s savings and loan associations were expected to improve the soundness and stability of these financial institutions, several of which ran into risks associated with weak corporate governance.

At an online press briefing, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said these enhanced regulations promote the value of a strong board of trustees and board-level committees coupled with effective control functions, with the board expected to oversee the implementation of effective risk governance and management systems.

“Effective corporate governance is the foundation of safe and sound business operations, and it embodies the principles of fairness, accountability and transparency,” Diokno said. “It also provides a crucial anchor for sound risk governance practices that enables [savings and loan associations] to be responsive in identifying, understanding, measuring, and managing risks,” he said.

“Since corporate powers are exercised through a [savings and loan association’s] board of trustees, the enhanced guidelines aim to ensure that trustees shall hold their office for the best interest of the association,” he said.

He said trustees and officers must be fit and qualified for their positions to carry out with “utmost integrity” their business affairs.

To promote independence and instill accountability, a percentage of independent trustees are required for these firms, and that the chairperson of the board of a complex savings and loan associations must not have any management position.

There are also mandatory board-level committees depending on a savings and loan association’s complexity and size to increase efficiency and allow deeper focus on specific areas.

The revised corporate governance guidelines were also seen to promote public trust in the savings and loan industry, which continues to have sound and stable operations and financial condition amid the COVID-19 pandemic.

As of March 31, 2021, the industry’s total assets reached P271.2 billion, a 4.3 percent growth from the end-December 2019 level. Savings and loan associations’ total loan portfolio, meanwhile, stood at P238.9 billion at end-March this year, a 5.7 percent increase from the figure recorded at end-December 2019.

TSB