A comprehensive consumer protection framework is now an integral part of banking supervision to ensure that the Philippine financial system will remain stable, the central bank said.
In a press briefing on Wednesday, Nestor Espenilla Jr., deputy governor for the Supervision and Examination Sector of the Bangko Sentral ng Pilipinas (BSP), said the Monetary Board has approved the adoption of a Financial Consumer Protection Framework for the Philippines.
The new framework aims to ensure that BSP-supervised financial institutions (BSFIs) develop a culture of fair and responsible dealings while continually protecting the welfare of financial consumers.
BSFIs consist of banks, subsidiaries and affiliates of banks, quasi-banks, subsidiaries and affiliates of quasi-banks engaged in allied activities, trust entities, non-stock savings and loan associations, pawnshops, and offshore banking units.
“This is an important development considering that for the first time, we will have a comprehensive framework that deals with the issue of financial consumer protection in a comprehensive manner and in a framework that is informed by international best practices, which we have carefully studied and adapted to Philippine conditions,” Espenilla said.
Espenilla added that the BSP Framework identifies disclosure and transparency, fair treatment, privacy, financial education and awareness, and effective recourse as the five consumer protection standards which BSFIs must observe at all times.
Under the standard of disclosure and transparency, it shall be the responsibility of BSFIs to ensure that financial consumers are provided all material details of an instrument or service before a transaction is consummated
Fair treatment standard requires that BSFIs must not only fully disclose product details but should also determine whether the products and services they are offering are suitable to the risk and financial profile of the financial consumer.
BSFIs are expected to respect the privacy of a client’s personal information.
“Information on a client could not generally be shared absent the client’s authorization. BSFIs are not at liberty to share the client’s information even with their subsidiaries and affiliates for purposes of marketing and referrals,” the BSP official said.
BSFIs are also expected to take active roles in promoting financial education and awareness and ensuring that this becomes a component of good governance by the BSFIs.
Lastly, Espenilla said that an effective recourse mechanism is expected of BSFIs so that an objective process and venue is in place to handle consumer complaints.
The BSP official said that the framework includes an evaluation process that consists of periodic on-site assessment, a continuing off-site evaluation of the BSFIs and their environment, a rating system, and the corresponding enforcement actions.
BSFIs will be rated on a scale of 1 (poor) to 4 (strong) based on the adherence of each BSFI to the standards set by the Framework.
“The BSP will react accordingly depending on the quality of the ratings that we assessed,” Espenilla said.
Overall, the BSP official said that the framework addresses the need to protect and empower the financial consumers. With increased transparency, fair treatment and assurance that their rights will be fully protected, financial consumers will have greater confidence in the formal financial system.
Empowered financial consumers drive competition, promote efficiency and productivity, thereby encouraging a dynamic and robust financial system, he said.