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By Robert JA Basilio Jr., Subeditor
Conclusion
NOT everyone knows that all banks in the
Philippines keep accounts—called demand deposit accounts (DDAs)—with
the Bangko Sentral ng Pilipinas, the same way that regular
depositors do with their banks.
But unlike individual depositors, the banks
leave money with the BSP, which supervises banks, to comply with
their reserve requirements, a regulatory tool used to protect their
depositors. The cash, estimated to reach billions of pesos, is then
stored in the vaults of the BSP’s cash department (CD).
However, the deposit and withdrawal process to
and from the CD takes some time, according to Leonilo G. Coronel,
executive director of the Bankers’ Association of the Philippines.
He told The Manila Times that the CD may require
some lead time especially if a bank needs to withdraw say, 10
million pesos in denominations of twenties and fifties.
This delay can easily be explained by the
withdrawal and deposit process involving the head offices of more
than 40 banks and the CD.
Every banking day, Coronel said, these banks,
using their own armored vehicles, withdraw their cash requirements
from the CD.
The banks then send off the withdrawn cash to
their service branches, where the money will be counted again. Only
after counting and verification will such cash be distributed to
3,000 bank branches in Metro Manila.
As such, bankers like Coronel felt that the
whole process of withdrawing and depositing money to and from the
BSP involves a lot of downtime, which costs money.
Thus, in 1998, the BAP proposed the cash
management center, despite initial opposition from the Commission on
Audit. In July 2003 the CMC project was approved, paving the way for
the banks to deposit and withdraw money from their DDAs in
September, when the CMC is in operation.
Unfortunately, in doing so, the CMC will simply
take over functions that are, by law, solely reserved for the
BSP’s CD, according to a Times source familiar with CD operations.
The source said the proposed cash center cannot
accept the banks’ deposits, store them, and let banks withdraw
from the center’s own stock, because only the BSP is allowed to do
so, according to Republic Act 7653, the same law which created the
BSP itself.
Withdrawal, the source said, already constitutes
issuance of money, which only the BSP is mandated to do. This
assertion is underscored by Section 50 of the same law.
Entitled “Exclusive Issue Power,” the
provision states that “the Bangko Sentral shall have the sole
power and authority to issue currency within the territory of the
Philippines.” Violation of this provision is punishable by
imprisonment of not less than five years but not more than 10 years;
more, if the revised Penal Code provides for a greater penalty.
But BSP Comptroller Evelyna Avila disagrees.
Avila, who worked with the Bankers’
Association of the Philippines-CMC task force before she joined the
BSP, said that allowing banks to withdraw from CMC’s “working
stock” is not the same as issuance.
“Issuance adds money to circulation,” Avila
said in a Times interview. “This process doesn’t do that. The
banks are just withdrawing money.”
However, the same Times source said that
issuance and withdrawal is just a matter of semantics.
“Cash withdrawn by banks from the proposed CMC
consists of either fit notes or new bills, which have replaced the
unfit notes,” the source said.
“And that is already considered issuance.”
Another Times source familiar with CD operations
pointed out that the BSP’s exclusive power to issue money will be
“diluted.”
“Once the BSP issues say, one hundred million
pesos to the CMC, the BSP will not be able to determine whether one
hundred million pesos was in turn issued by the CMC to the banks,”
the source said.
The question of issuance of money, however, is
just one of the things that critics say are wrong with the cash
center project.
Once the CMC is in operation, the BSP will no
longer possess the cash of the banks in its vaults. Thus, the
BSP’s regulatory function may be compromised, according to a Times
source familiar with the CD’s operations.
Simply put, the CMC will keep the cash in its
own vaults while the BSP CD will just be given a piece of paper
stating the exact amount of money in its possession.
This arrangement, according to The Times source,
is like a depositor asking the bank to credit a cash deposit without
actually turning over the money to the bank.
Not only does this process negate the principle
of public accountability; a November 2003 document shown to The
Times indicated that “a mere credit to the participating bank’s
DDA without physical transfer of cash deposits to the BSP’s cash
department would be tantamount to a Cash Held in Trust (CHIT)
arrangement. This arrangement would constitute a trust relationship
between the trustor (BSP), a government entity, and the trustee
(CMC), a private entity. Hence, public funds which are entrusted to
a private entity are not allowed by existing regulations.”
Introduced by a Monetary Board resolution in the
late eighties, the CHIT facility authorized certain Philippine
National Bank branches to maintain cash for the BSP, including
reserve requirements of other provincial banks because the BSP
lacked branches in these areas.
The cash deposited by other provincial banks in
these six PNB branches—in compliance with their reserve
requirements—was theoretically segregated from the cash held by
these same PNB branches.
Unfortunately, such cash deposits were
reportedly used by PNB bank officers for purposes other than
maintaining these banks’ reserve requirements.
Because of these incidents the CHIT facility was
later discontinued.
Once the CMC is established, the CHIT
arrangement will resume, together with the risks associated with it.
And this may come sooner than later.
After all, by September this year, the
P152-million government-funded building being constructed to house
the CMC is expected to be finished.
Part 1 |
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