BSP plans to issue scorecard for banks

By Jun Vallecera, BusinessMirror

Posted at Nov 20 2012 08:18 AM | Updated as of Nov 20 2012 09:43 PM

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) seeks to eliminate all notion of arbitrariness when assessing corporate governance among banks and should soon release a scorecard that makes the process not only transparent but a reliable yardstick as well.

This was bared by Deputy BSP Gov. Nestor A. Espenilla Jr. at the charter anniversary symposium of the Rural Bankers Association of the Philippines held on Monday at the Manila Hotel.

The proposed score sheet, now being circulated among the various lenders for comment, works in much the same manner as the CAMELS system that gauges the banks’ capital adequacy, asset quality, management quality, earnings ability, liquidity and sensitivity to market risks.

All six are considered critical aspects of any bank’s operations and condition and this was why the CAMELS rating system was pursued and implemented.

The score card on bank corporate governance works the same way and would tell regulators whether or not bank directors meet to discuss key operational aspects of lending and other matters and thus enable regulators to rate on the quality of discussions going on.

In some extreme cases, board directors seldom or never meet at all, it was learned.

Regulations require all bank directors to undergo corporate governance training program conducted by any of six BSP-accredited third-party trainers that include a university and an industry association, among others.

The goal is to professionalize the ranks of those making credit and other policy decisions in banks across the country as part of the larger goal of inspiring public confidence in the lending business.

Some banks, perhaps still in the process of adjusting to the higher governance standards the BSP has set, have difficulty accepting the presence of BSP auditors looking into banks’ governance structures.

Espenilla quickly soothed whatever feelings of ill-will or resentment among bank staff on the presence of BSP auditors on bank premises, particularly after some bank staff said the auditors were “boorish.”

He also said all banks regardless of type or capital structure need to have compliance officers although the same is mandatory on those rated as banks with complex operations.

Complex banks, whether rural or thrift, must have full-time compliance officers and must have corporate governance committees as well.

Complex banks are so rated on the basis of their relative size, range of products, business model (i.e. aggressive lenders) and geographical presence.

“Some element of judgment is involved but those rated complex are reviewed by the Monetary Board,” the policy-making body of the BSP, Espenilla said.