Banks paid executives more than taxes in 2009, BSP says

While the banking industry paid only P18.9 billion in taxes last year, Philippine banks spent P74.4 billion to compensate executives, the central bank said in a report released on Friday. The money allotted for executive pay grew by 10 percent or P6.9 billion from 2008, according to the report. Bangko Sentral ng Pilipinas Gov. Amando M. Tetangco Jr. said in Friday’s report that the banking industry’s single biggest non-interest expense was in the form of executive compensation and fringe benefits, that the total tax payments banks made last year accounted for 9.2 percent of the industry’s total expense while executive pay was 35.8 percent of non-interest expense. Such development prompted the Bangko Sentral to write banks a note, saying the numbers pertaining to executive compensation were being closely watched by the central bank. “Following the highly publicized outrage of American taxpayers on the exorbitant bonuses paid to key officers of the ailing insurer, American Insurance Group (AIG), after receiving close to $180 billion bailout money from the Federal Reserve in 2008, the BSP is likewise keeping a close watch on the fringe benefits and bonuses paid to directors and key officers of BSP-supervised institutions," Tetangco said. It was the right thing to do, according to the central bank chief, as “75.4 percent of [banks'] operations are funded by deposits generally sourced from the public." What the banks paid executives was also larger than the money allotted for depreciation and amortization, which accounted for only 8.3 percent of total expenses or P17.3 billion. The Bangko Sentral said that interest income remains banks' biggest source of revenue, accounting for 66.4 percent of operating income and 3.4 percent of total assets. Cooperative banks collected the highest fee-based income in 2009, with high administrative costs linked to exposures to small scale or micro lending practices and calamity-prone agriculture areas. The situation, however, gave cooperative banks a more balanced proportion of interest and non-interest based income compared to other sectors, the Bangko Sentral said. —VS, GMANews.TV