BSP eyes tighter watch on banks

Posted at 01/10/2014 7:52 AM

MANILA - The Bangko Sentral ng Pilipinas (BSP) is keeping a tighter watch on banks owned by conglomerates to better assess the financial stability of the economy.

BSP Governor Amando M. Tetangco Jr. told members of the Rotary Club of Manila yesterday such is included in the proposed charter amendments to the New Central Bank Act of 1993.

“We want to see what is the potential impact of the transactions between the bank, and the affiliates and subsidiaries of a conglomerate,” Tetangco said.

“The focus is really on the preservation of financial stability and the relationship between the banks and the affiliates and subsidiaries within the conglomerate is very important in pursuing this,” he added.

Tetangco said that banks have reports filed with the central bank but there needs to be more information in order to get a clearer picture of how they are linked with other companies, especially with other units if it is within a conglomerate.

“We have noticed conglomerates have a great number of companies within them and there are inter-linkages so we want to get a more accurate picture of that,” Tetangco said.

The BSP monitors the exposure of banks to different sectors, as well as the single-borrowers limit for large institutions. This aids the central bank in pushing forth its mandate of maintaining financial stability.

“We would like to see the nature of such transactions, the systems that are in place to manage the risks so that we can get a complete picture of how that particular bank is operating particularly in relation with the other companies within the group,” Tetangco said.

He explained that financial stability does only involve keeping the banking sector healthy but also keeping a tighter watch on companies, especially the large ones with huge exposures to various lenders.

“But what is important is our focus is really on banks because that’s our job — for banks to continue to be strong,” Tetangco said.

Last year, the International Monetary Fund warned against large conglomerates with high exposure to bank loans.

The industry and the central bank, however, said loans remain well-managed including those extended to conglomerates.