The Bangko Sentral ng Pilipinas asked banks to adopt effective risk management systems in the wake of the P900-million internal fraud discovered in Metropolitan Bank & Trust Co. last week.
“Actually in our interaction with banks, there’s always the reminder about managing the risk. One of them is pertaining to this one”•operations risk. It’s a continuing thing as to engaging the bank regarding their risk management especially now that there’s an ongoing examination,” Bangko Sentral Deputy Governor Chuchi Fonacier said in Makati City Tuesday.
“It’s part of the assessment of the BSP on how internal controls in the bank are being carried out, and overall risk management system. It’s a usual thing for the BSP to assess these,” Fonacier said.
The National Bureau of Investigation arrested a senior Metrobank official last week for allegedly funneling disbursed loans into fictitious accounts created in the name of Universal Robina Corp. that cost Metrobank at least P900 million.
Metrobank said it immediately caused the arrest of the individual involved in the case, who has been detained by the authorities.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. downplayed any significant impact of the incident on the banking industry, saying banks were well capitalized. Espenilla said Bangko Sentral was looking into the circumstances and facts about the incident.
The Monetary Board, the policy making body of Bangko Sentral, earlier issued Circular 900 that approved the guidelines on operational risk management for BSP-supervised financial institutions. The guidelines were in line with the thrust of the regulator to promote the adoption of effective risk management systems to sustain the safe and sound operations of its supervised financial institutions.
Operational risk refers to the risk of loss resulting from inadequate or failed internal processes, people and systems; or from external events. This definition includes legal risk, but excludes strategic and reputational risk.
“We already issued the Circular 900 on the operation risk. But in our engagement with the bank, we will surely touch on these things and putting emphasis of course like for this instance maybe on the rotation of people or double controls. There will be surely a reminder to banks. It’s not only during examinations. We have people constantly engaging with them,” Fonacier said.
Fonacier said Bangko Sentral was currently doing its own investigation on the Metrobank incident. But she did not give the timeline on the investigation.
She did not discount the possibility that Metrobank committed some lapses. “For this scenario, there may be because how come that person was able to do it. There is that possibility. But as I said, it’s an ongoing investigation so I’m not going to comment on that. Of course, the effect will be if there’s something that was lost, it will be a loss to the bank,” Fonacier said.
She said given the size of Metrobank, it could very well absorb such a loss. “But I’m also aware that they have efforts now of recovery of what was lost. So there are efforts to recover,” she said.