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The government must work to craft a legal framework
to improve its supervisory and regulatory functions over the
financial sector, a Bangko Sentral ng Pilipinas study said.
The Economic Policy Reform and
Advocacy program (EPRA), spearheaded by the Ateneo de Manila
University and the BSP and funded by the United States Agency for
International Development, is part of efforts aimed at harmonizing
and integrating the regulatory functions of the BSP, the Securities
and Exchange Commission and the Insurance Commission.
The study said that financial
institution failures are the result of the weaknesses in the
supervisory and regulatory functions of those entities and unifying
them will plug the loopholes in the financial market and will make
the bureaucracy more cost efficient.
The creation of a “super
body,” however, would encounter legal hurdles, Mario Lamberte,
lead author of the study, said.
He said that creating a single
supervisory agency for the financial system would require amending
some provisions of the Constitution, and would go against
international best practice.
“But this goes against the
worldwide trend of separating the function of the monetary policy
and financial supervision of a central bank. It will also
concentrate power in one single institution,” Lamberte, a former
president of state-run Philippine Institute of Development Studies,
said.
The move toward a more stringent
supervision of the financial market stemmed from past bank failures,
stock market scandal and the collapse of the preneed education plan.
Decentralized government
regulations are also in question amid the fast-changing pace of
developments in the financial market, wherein the emergence of
hybrid financial products is blurring the distinction among
financial institutions.
Those in favor of an integrated
supervisory body said the new system could facilitate better
supervision of financial conglomerates on consolidated basis and
enhance monitoring policy responses. In addition, this will allow
the government to develop and carry out a unified regulatory
approach for the entire financial system, which would reduce
regulatory arbitrage.
Insurance Commissioner Evangeline
Escobillo said she favors an immediate integration, hopefully within
three years, but BSP Deputy Governor Nestor Espenilla said that such
a move requires additional study and analysis.
“In other countries like the
US, financial regulation is more effective using a decentralized
system that’s why we should not hurry on integration,” he said.
“Each sector of the industry needs specific needs and therefore
requires different approaches in addressing issues.”
--Angelo S. Samonte
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