BSP to strengthen survey on banks' corporate governance

The Bangko Sentral ng Pilipinas is strengthening its yearly survey of banks' corporate governance to ensure that participants respond honestly and are not involved in overly risky deals. The mechanism is being tightened as part of broad efforts to “keep the economy well functioning and growing," according to BSP Gov. Amando M. Tetangco Jr., who started the survey last year. “One of the main reasons our economy has weathered the (global) crisis, relatively better than most in our region, is that our financial system has continued to function normally even at the height of the crisis in the last quarter of 2008," Tetangco said in a text message. Survey questions would be changed to achieve greater clarity and with governance scorecard enhanced, Tetangco said of the significance of the changes. “Many have concluded that this crisis was to an important extent the result of poor adherence to the core tenets of good governance," Tetangco said. “Decisions overstepped the principles of good governance either due to excessive risk-taking, conflicts of interest and or opacity of transactions." Good governance standards being observed by supervised banks include the rule governing the choice of board directors, making sure they “learn the ethos of good governance" in compulsory seminars. Boards that have at least two independent directors also helped the industry to come out of the global downturn relatively unscathed, Tetangco said, noting the practice is on top of the required risk management, corporate governance and audit committees, The corporate governance scorecard or CGS for banks is the first of its kind in the world, broadly patterned after the scorecard for publicly listed companies, covering expanded license or universal banks as well as the regular commercial banks and their subsidiaries and affiliates. Some of the standards were based on those set for corporations governed by the Organization for Economic Cooperation and Development or OECD countries. Philippine banks scored a high of 84 percent in the last CGS survey. “Although this did not come as a surprise, we are nevertheless pleased as we take this as an indication that the banking industry is indeed embracing the principles of good governance," Tetangco said. —VS, GMANews.TV