BSP seeks tougher oversight of bank execs

The Bangko Sentral ng Pilipinas (BSP) wants directors and officers of supervised financial institutions to undergo regular assessments for fitness and propriety, rather than being evaluated only when they are elected or appointed.

At the same time, the BSP is also considering requiring firms to reconstitute their boards when their financial and supervisory condition deteriorates, in a bid to restore effective oversight and protect depositors and other stakeholders.

The central bank is seeking industry comments on a draft circular that would amend corporate governance rules for banks and nonbank financial institutions under its supervision.

Under the proposal, financial institutions would be required to submit to the BSP documentation which show that directors and officers had been assessed for fitness and propriety.

The assessment would determine whether they meet the minimum qualifications for their positions and the institution’s internal standards for ensuring they remain fit to serve and capable of carrying out their responsibilities effectively.

Directors and officers who fail to submit complete documents within the prescribed period, or who do not appear for a scheduled BSP interview without valid justification, would be deemed to have failed to establish their qualifications for the position.

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Firms would also be required to conduct periodic fitness and propriety assessments of their executives and notify the BSP within five banking days of learning of any information that could materially compromise a director’s or officer’s fitness to serve.

The proposed rules also broaden the responsibilities of a financial institution’s corporate governance committee amid the rapid adoption of digital technologies.