BSP to raise lending caps, adopt better rules

Banks may soon expand their lending limits to particular borrowers, separate themselves from their trust units, and reduce the number of documents they submit for regulatory purposes, the central bank said this weekend. Bangko Sentral ng Pilipinas (BSP) managing director Johnny Noe Ravalo announced the possible adoption of some reforms after the US Federal Open Market Committee said last week that the Federal Reserve would have a second round of monetary stimulus to jump start the sluggish US economy. This list of reforms was included in the BSP’s quantitative impact study or QIS, which will be released “within two weeks or so," Ravalo told reporters. There is a long list of unpursued reforms because central banks around the world are redefining their regulatory landscape to police the financial sector in an efficient way, he said “We are reassessing the lending caps to provide some leeway in financing broad applications like infrastructure and medical services, while taking cognizance of the nature of deposits between banks and trading instruments," Ravalo. “We are also working with the Securities and Exchange Commission, Insurance Commission, and Philippine Deposit Insurance Corp. in crafting a formal regulatory framework for private banking. We have proposed the creation of trust corporations that are separate juridical entities from banks," he added. At present, there are trust entities that form part of a larger banking unit, like the Metropolitan Bank and Trust Co., one of the country’s largest financial institutions. The central bank also intends to reduce the number of documents — normally 17 — that banks must submit to the BSP, Ravalo said. “Submitting 17 documents is not fun. But there’s the question of making the process more efficient without sacrificing any of the prudential controls. We will not simplify just because it’s simple, but do so because it is efficient. That is important," he said. Paring down the paper work to the bare minimum will cover such activities as declaring dividends, remitting profits by foreign bank branches, and extending the time bank branches are allowed to stay open. “We are streamlining our applications so that we require less submission of documents, while others no longer require prior approval but only require due certification from the chief executive officer and the compliance officer," Ravalo said. It will also benefit the BSP, which only has 36 accountant-processors reviewing over 1,700 applications a year. Also covered by the ongoing review are central bank “policies on distribution so that relatively simple products can be handled within the cross-selling framework while allowing more complex products to be handled by parallel guidelines but with sufficient mitigants." With the revision, the ability to handle risks will be the sole issue when it comes to approvals instead of inclusion within a set of permissible activities. “We are revitalizing our check-and-balance pillars, making sure that the functions carried out respectively by the compliance officer, the chief risk officer, and the internal auditor are clearly understood and effectively administered," Ravalo said. — JE/VS, GMANews.TV