The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, liberalized the regulations on dividend declaration of banks and quasi-banks on shares of stock and similar capital instruments.
Under the amended rules, banks can now declare and pay dividend even without prior approval from the Bangko Sentral provided they meet pre-qualification criteria, including capital adequacy requirement.
“Basically, no more prior BSP evaluation/clearance before a bank can declare dividend unless a bank has been specifically directed by MB [Monetary Board] otherwise,” Deputy Governor Nestor Espenilla Jr. said in a text message Monday.
“It will be bank’s responsibility to determine and certify its compliance with BSP requirements. Sanctions apply if a bank is later found to violate conditions including loss of privilege,” Espenilla said.
The bank regulator said in a statement the policy change aligned the dividend declaration standards with international standards on the rights of shareholders in particular. It holds more accountable the board of directors and management of the bank and quasi banks on the declaration of dividends and makes the dividend declaration more transparent to the public because of the required disclosures.
“The policy will bring publicly-listed banks/quasi banks in a position to comply with the 30 calendar days’ timeline prescribed under the Asean Corporate Governance Scorecard for the payment of dividends to shareholders of record,” the statement said.
The new policy also requires banks to immediately recognize the dividend declaration as a liability according to Philippine accounting standards and disclosed it in the statement of equity changes and in the notes to the financial statements.
The Bangko Sentral said dividend declaration was ultimately the responsibility of the bank and quasi bank and its board of directors.
Banks and quasi banks that meet the pre-qualification criteria, including capital adequacy requirements are qualified to declare and pay dividends without prior Bangko Sentral verification.
The bank regulator also said any bank or quasi bank that misrepresented or did not comply with the amended regulations on dividend declaration would reverted back to the “prior Bangko Sentral verification” requirement. It may also be subject to other enforcement actions provided by law, including possible declaration of unsafe or unsound banking practice.
Espenilla said banks now “can declare and pay out cash dividends faster in line with global best practice on corporate governance.”