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Bank’s Compliance Program Under Scrutiny: Did Guidelines Followed?
The Monetary Board has taken a closer look at the compliance programs of banks in the country, raising questions about whether they followed prescribed guidelines in administering transactions, handling procedures, making decisions, and undertaking related activities.
Importance of Compliance Programs
According to the board, compliance measures must be institutionalized in each bank through its program, taking into account the size and complexity of operations. The program should clearly identify avenues for business risks to occur and implement corresponding measures to mitigate them.
Organizational Structure
The board also emphasized the importance of an appropriate organizational structure to manage the compliance function. This includes:
- Defining duties and responsibilities of the Chief Compliance Officer (CCO) and other personnel involved in the function
- Ensuring the CCO has commensurate skills and expertise to provide guidance and direction on developing, implementing, and maintaining the compliance program
Compliance Program Guidelines
In addition, banks with wholly-own subsidiary banks may appoint a COO for the banking group, while those operating under a “simple” business model may designate a non-executive director as CCO.
Timeline for Compliance
The Monetary Board has given banks until July 1, 2012 to comply with these new guidelines.
Breaches of Compliance Program
The board warned that any compliance system found to be materially inadequate shall be construed as unsafe and unsound banking practice. Banks are required to ensure the integrity and accuracy of all documentary submissions to the Monetary Board, failure to do so may result in serious consequences.
Monitoring and Reporting Obligations
Banks must also:
- Establish clear and open communication lines within their organization to educate and address compliance matters
- Train bank personnel on the compliance program and identify business risks
- Report periodically to the Board of Directors or its designated committee on compliance-related issues
- Obtain approval from the Board of Directors for any changes, updates, or amendments to the compliance program
Conclusion
The Monetary Board’s guidelines aim to ensure that banks maintain a robust compliance program to mitigate business risks and adhere to regulatory requirements. Failure to comply with these guidelines may result in unsafe and unsound banking practices, which could have serious consequences for the bank and its stakeholders.