The Bangko Sentral ng Pilipinas (BSP) is urged to adopt various best international practices in banking supervision to better protect the interest of depositors and avoid losses of the public funds.

The call came from Sen. Edgardo J. Angara, chairman of the Senate finance committee, who pressed Congress to pass his Senate Bill 871 seeking to amend the BSP charter before it goes on a three-month election recess Friday.

The bill is in the period of amendment at the Senate which resumes regular session Monday.

“Experience in the past highlighted the inability of the BSP to deal effectively and expeditiously with problem banks,’’ Angara said.

He pointed out that the authority of the BSP over problem banks, in general, is limited to the grant of emergency advances in case of illiquidity, or closure in case of insolvency.

‘’Prompt corrective actions cannot be implemented due to the absence of clear and strong legal basis. Such inability of the BSP often causes losses of hard-earned money of the depositors and also losses of public funds,” said Angara who chairs the Senate Finance Committee.

“To better protect the interest of the depositors and to avoid losses of the public funds, the BSP must therefore adapt various international best practices in banking supervision and other measures that will strengthen the regulatory and supervisory powers of the BSP over banks and other financial institutions,’’ he added.

Through these amendments, the Central Bank could use transparency mechanisms that could give it more teeth to supervise formal and informal remittance firms. This in turn shall protect overseas Filipino workers (OFWs) from usurious practices in money transfer, he explained.

The bill allows BSP to adopt the following international best practices, among others, in banking supervision and other measures that will strengthen the regulatory and supervisory powers of the BSP over banks and other financial institutions:
1. The principle of consolidated supervision;

2. BSP's authority to approve transfers or acquisitions of shares in a supervised institution;

3. The authority of the Monetary Board to prescribe guidelines for the examination of supervised authorities;

4. The authority of the Monetary Board to direct existing stockholders to infuse additional capital or in case of their inability or refusal, to direct them to accept new investors or merge or consolidate with a qualified financial institution;

5. Prescribing additional and transparent grounds for bank closure announcement of unilateral closure, suspension of payment of deposit substitutes, or inability to pay liabilities as they become due;

6. Increase in penalties for violation of applicable laws and regulation and;

7. Indemnify BSP personnel for cost and expenses incurred by them in connection with any civil, administrative or criminal action, suit or proceedings.

This bill is aimed at providing better protection to the public, particularly the depositors and creditors of BSP's supervised institutions,” Angara said.