BSP readies disaster-recovery plan for banks

Posted at 11/09/12 8:13 AM

MANILA, Philippines - The Bangko Sentral ng Pilipinas is nearly done fine tuning an expanded set of guidelines under which banks must work out their systems to recover quickly from any disaster.

According to BSP Director Gail U. Fule, the expanded guidelines are now being bounced off among the various banks in the country for their comments.

Feedback from the banking community is solicited because the guidelines follow a principles-based format and recognize that different banks face system risks differently from its rivals or colleagues.

Because disaster-recovery systems are bank-specific rather than generic, it was important that bank comment or feedback was sought, Fule said.

When completed, the guidelines replace an existing eight-page framework in place since 1999 when the banks were faced with the uncertainties believed at that time to bedevil the industry as the year 2000 or the Y2K scare unfolded.

Since then, threats of widespread flooding, massive earthquake, incessant rain or even a military revolt were some of the risks to the continued operation of any bank’s electronic payments or settlement systems and for which the banks must steel themselves against.

Fule said the nature and magnitude of risks the banks face then and now have evolved as well and this was why the guidelines were recalibrated in a manner that will address not just the concerns of some of the country’s largest and most complex bank but the risk and business continuity requirements of even the simplest of their colleagues.

Fule said the guidelines should be in place early next year once the Monetary Board, the policy-making body of the BSP, approves them.

Such guidelines are important given that even lenders as big as the Bank of the Philippine Islands lose millions of pesos worth of revenues for each hour that its online banking facilities are offline.

Automated teller machines generate substantial fee earnings for their owners, particularly from clients of other banks who must use their machines for convenience or other reasons, it was learned at a briefing hosted in behalf of information technology solutions provider Dimension Data at the Resorts World Hotel on Thursday.

Fule said once the guidelines come on stream, the BSP anticipates putting in place a system that rewards compliant banks with a rating mechanism patterned after the CAMELS yardstick.

The yardstick measures any bank in terms of its capital adequacy, asset quality, its management, its earnings ability, liquidity and sensitivity to market risks.

Banks with a high rating of four or five are “rewarded” with less stringent requirements for branch petitions by the BSP, for instance.

Disaster recovery-compliant banks would have a similar mechanism that rewards those lenders with say, less frequent bank book and system audits than the BSP normally conducts, Fule said.