Philippines Banks Must Comply with New Regulations to Avoid Legal and Regulatory Sanctions

The Bangko Sentral ng Pilipinas (BSP) has issued new regulations aimed at strengthening the banking sector in the Philippines. The circular requires banks to establish a dynamic and responsive compliance risk management system to mitigate risks that may erode their franchise value.

Key Requirements

• Banks must identify and manage risks associated with legal or regulatory sanctions, material financial loss, or loss of reputation.
• Risks arising from failure to manage conflict of interest, treat customers fairly, or effectively manage risks associated with money laundering and terrorist financing activities must also be addressed.
• The compliance function within the bank must have a formal status and be established by a charter or other formal document approved by the board of directors.
• A board-level committee chaired by a non-executive director shall oversee the compliance program, while senior management shall periodically report to the board of directors or its designated committee.

Cross-Border Compliance

The BSP has emphasized the importance of addressing cross-border compliance issues, particularly for banks that conduct business in other jurisdictions. Banks must ensure that their compliance function and structure are in accordance with local legal and regulatory requirements.

Outsourcing Compliance Risk Assessment and Testing

Outsourcing of compliance risk assessment and testing may be allowed, but the handling and management of this outsourcing arrangement shall be governed by BSP’s guidelines.

Consequences of Non-Compliance

Failure to comply with these regulations may result in a bank being considered as unsafe or unsound banking. Banks found to be materially inadequate in their compliance systems shall face legal and regulatory sanctions.

Timeline for Compliance

Banks must ensure that they comply with these regulations by [insert date]. Failure to do so may result in severe consequences. The BSP has urged banks to take immediate action to review and update their compliance systems to avoid any legal and regulatory sanctions.

The BSP is committed to maintaining a strong and stable banking system, and these new regulations are aimed at ensuring that banks operate in accordance with high standards of integrity, transparency, and accountability.

Takeaway

Philippines banks must comply with the new regulations by [insert date] to avoid legal and regulatory sanctions. It is essential for banks to review and update their compliance systems to ensure they meet the requirements and maintain a strong reputation in the industry.