MANAGEMENT CHECKS WIDENED: BSP TIGHTENS SUPERVISION...
MANILA, March 31, 2006 (MALAYA) The Bangko Sentral ng Pilipinas yesterday tightened supervision over banks by including management checks on criteria for putting banks under prompt corrective action.
This follows a recent decision by the BSP that bank bailouts will no longer be automatic but will only be done if there is a systemic risk.
Formerly, the BSP was watching only capital adequacy but has now included risk-weighted capital ratios and CAMELS rating.
Under the new guidelines, a bank will be subject to prompt corrective action when its capital adequacy ratio, tier 1 risk-based capital ratio, or leverage ratio falls below the minimum level.
Corrective action will also be undertaken when the bank’s CAMELS composite rating or management component rating falls below "3," and when a serious supervisory concern has been identified that puts the bank at risk of failure.
The new triggers take into account the risk-based supervision, which the BSP adopted under the Basel Capital Accord framework.
At the same time, the BSP expanded the forms of corrective action that may be taken to include the implementation of capital restoration plan, business improvement plan, and corporate governance reforms.
The plan will be documented in a memorandum of understanding that the bank will enter into with the BSP.
The BSP said banks that fail to comply with or delay the implementation of the corrective action will be subject to penalties. By contrast, banks that comply promptly will be freed from the corrective action swiftly and will be given special access to the central bank’s credit facilities.
Chief News Editor: Sol Jose Vanzi
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