The Monetary Board enhanced and streamlined the central bank’s licensing policy on supervised financial institutions to align the regulator with international best practices and improve the ease of doing business in the country.
In a statement over the weekend, the Bangko Sentral ng Pilipinas (BSP) said this development provides a more consistent risk-focused supervision in the licensing process under the enhanced Supervisory Policy on Granting of a License/Authority (Licensing Policy), and brings the central bank’s regulatory function on a par with global standards.
BSP-Supervised Financial Institutions (BSFI) must have a CAMELS rating of at least 3 and governance and independent control functions that meet what is considered appropriate relative to an institution’s size, complexity of activities and risk profile, apart from being able to comply with central bank directives.
The CAMELS rating is based on six assessment factors:
Capital adequacy; Asset quality; Management quality; Earnings; Liquidity; and Sensitivity to market risk.
“These criteria are intended to incorporate the licensing process into BSP’s enforcement regime, anchored on good governance, sound risk management system and effective controls system,” the BSP said.
An enhanced licensing policy will help rationalize and streamline the criteria that BSFIs need to comply with to facilitate ease of doing business, it added.
The policy features a three-tier licensing system, based on categories, to facilitate ease of doing business and submission of applications, the central bank noted.
A “Type A” category is a license application where compliance with prudential screening criteria is a pre-condition for the BSFI to be considered eligible.
“Type B” is a license application that does not require compliance with prudential screening criteria, and “Type C” covers activities that no longer require BSP approval but the BSFI is required to submit reports, certifications and notifications denoting that pre-qualification requirements were met.
The central bank said the 3-tier system promotes transparency of the licensing process and facilitates faster action on applications, along with rationalized and simplified prudential criteria.
“The enhanced Licensing Policy sets forth BSP’s expectations and criteria in granting licenses and authorities, as well as the right to reject applications that do not meet the criteria and deploy appropriate enforcement actions against BSFIs that no longer meet the criteria or standards,” it said.
“The BSP thereby reaffirmed its policy of not restricting the scope of risk-taking activities of BSFIs, provided the licenses and authorities are in line with their business model and strategic direction, and the BSFIs demonstrate the capacity to implement these strategies and the ability to manage attendant risks,” the central bank noted.
The enhanced policy is consistent with the mandate to promote a safe and sound banking system, it added.