Philippine Deposit Insurance Corporation (PDIC) President Jose C. Nograles expressed support for Congressional initiatives to amend the Charter of the Bangko Sentral ng Pilipinas (BSP).
In a statement, Nograles said that the PDIC welcomes moves of both the Senate and the House of Representatives to give BSP additional powers that will strengthen its capability to regulate and supervise banks and allow the central bank greater flexibility to deal with distressed institutions.
“BSP has the full support of the Corporation. Side by side the recent amendments of PDIC’s Charter, there is need for corresponding measures to ensure that the regulatory oversight framework is reinforced. The financial crisis taught us that a strong and effective regulatory framework over banks is crucial to the stability of the financial system”, he added. This will contribute to maintaining public trust and confidence in the banking system.
The PDIC has likewise put forward an eight-point proposal in support of the BSP Charter amendment which may help the Bangko Sentral better promote the general well-being of the banking system. Contained in these proposals are measures for strengthening co-regulations and those strengthening bank receiverships.
Among the amendments proposed by PDIC to the New Central Bank Act is Bridge Bank Authority, which is an alternative means of bank failure resolution practiced in countries such as the US.
A Bridge Bank is a temporary bank established and operated to take over the operations of a failed bank and maintain banking services for the customers. As the term implies, a bridge bank is designed to “bridge” the gap between the failure of a bank and the time when a satisfactory resolution of the failed bank can be implemented. It enhances the receivership of closed banks by providing orderly liquidation without attendant disruptions present in ordinary closure and take over operations.
PDIC had earlier proposed for bridge bank authority under the PDIC Charter amendments. The Congress Bicameral Conference Committee welcomed the proposal but wanted more time to consider it.
Nograles added that among the co-regulatory acts that PDIC is recommending is the inclusion of an additional ground for the closure of a bank. This is the actual cessation of operation by a bank notwithstanding that the bank represents itself to be a going concern.
PDIC is also proposing the grant of an express authority to dispose of assets of banks under receivership even without consent of closed banks’ stockholders. This will enable any rehabilitation efforts especially with strategic third parties to proceed smoothly. Other proposals are: authority to prescribe the terms and conditions and qualifications of banks’ rehabilitators; extension of receivership period for another 90 days; and inclusion of franchise or license as asset of closed banks.
Nograles said that the measures will contribute to overall enhancement of the regulatory framework and banking system stability.