MANILA, Philippines – To spot unsound and unsafe banking practices faster, the Bangko Sentral ng Pilipinas (BSP) has started the generation of data by surveying the deposit interest rates across provinces and to publicize such data to encourage competition and transparency in the industry.

In a report, BSP Managing Director Johnny Noe E. Ravalo presented to monetary officials a survey conducted by private banks, wherein they tallied the deposit interest rates of 80 provinces as per provisions of Circular No. 640 of 2009. The survey was supposed to help BSP in determining whether a bank is practicing unsafe and unsound banking by ‘excessive reliance of large, high-cost or volatile deposits/borrowings to fund aggressive growth that may be unsustainable.’

For this purpose, according to the circular, a ‘bank is considered offering high-cost deposits/borrowings if the effective interest rate paid on said deposits/borrowings and/or non-cash incentives is 50 percent over the prevailing comparable market median rate for similar bank categories, maturities and currency denomination and accompanied by other circumstances such as undue reliance on solicitation and acceptance of brokered deposits from commissions and/or payment of advance interest on deposits deferral or delay of expenses and/or inaccurate amortization of advance interest paid on deposits.”

Ravalo said in the report that in aid of this circular, the BSP with the Bankers Association of the Philippines, the Chamber of Thrift Banks and Rural Bankers Association of the Philippines agreed to conduct periodic surveys to generate relevant deposit/borrowing rates.

The first survey, which has been submitted to the BSP in January and remains confidential, includes information on the interest rates offered by head offices and branches, walk-in rates (as opposed to special rates for favored clients), and basic savings deposit account.

The survey, conducted in the provincial level and to be done quarterly, separate rates for balances below P100,000 and above P100,000.

The survey includes not only deposit interest rates, but also distinguished time deposits and other deposit products, as well as deposit rates for accounts above P1 million.

According to Ravalo, “from a policy and monitoring standpoint, there appears to be value in generating the data for time deposits (as this) provides a useful juxtaposition of the pricing of savings deposits and time deposits.”

“There is considerable information value to the survey results,” he added, “both to the public as well as to institutions such as the BSP and the PDIC (Philippine Deposit Insurance Corp.). Making available said information to the public encourages competition and provides for improved transparency.”

Ravalo said the survey can be used for improving the framework of the BSP’s ‘ICU’ unit for problematic banks, mainly capitalization concerns, called prompt corrective action or PCA.

Ravalo said the BSP should further coordinate with banking groups to improve the response rate per region and to standardize required information.