What's going on here?

"A DOSRI transaction is not illegal per se. It becomes criminal if stringent requirements of the BSP are unmet."


What's this we hear that one of top private universal banks in the country is in trouble because it has defaulted on a multi-billion loan exposure?

The bank is said to be part of a reputable investment firm with diversified exposure in the banking, property and retail sectors.

The lending institution is rumored to be under investigation for self-dealing transactions, or DOSRI, which stands for “directors, officers, stockholders, and related interests.”

Per Bangko Sentral ng Pilipinas (BSP) regulations, the threshold for “related interest” is 20 percent equity, which amounts to control over the entity.

We're told that a DOSRI transaction is not illegal per se. But it becomes criminal if stringent requirements of the BSP are unmet.

These requirements are: (1) approval by majority of the bank’s board minus the director, or who has a related business entity benefiting from the loan; (2) full reports characterizing the loan as DOSRI; and (3) waiver of secrecy of bank deposits of the borrower.

According to the grapevine, an entrepreneur engaged in town mall development and had a falling-out with an investment firm has filed a complaint with the Monetary Board to investigate the top officials of the bank over PhP4 billion worth of unreported and illegal DOSRI loans.

The complainant invoked the newly minted Citizen’s Charter adopted by the Monetary Board last year that vowed to take action on a complaint within five days. The complaint will be a litmus test of the resolve of the Monetary Board to uphold the Citizen’s Charter and rid the banking industry of recalcitrant bank directors and officers.

The investment firm is believed to have obtained a majority equity in the complainant’s firm through corporate layering and an offshore corporation not registered to do business in the Philippines on a pledge of access to credit from the bank where the investment firm appears to have a 20 percent equity.

With the merger, top officials of the bank and the investment firm involved themselves in the management and operations of the complainant’s firm.

A director of the bank is said to have approved the disbursement vouchers of the borrower-firm while another director of both the bank and the investment firm is a co-signatory in time deposits.

The complaint now in the desk of the Monetary Board is believed to be much bigger than its previous DOSRI investigation of a now-defunct bank.

The DOSRI investigation, once it pushes through, will test the Monetary Board's drive to rid the banking industry of scalawags.

It could also reveal the internal workings of the investment firm whose recent paper loss in the equity market combined with losses in the property sector is estimated at no less than P1.3 trillion.

The DOSRI probe of the dealings of the top officials of the bank and a number of its officers is expected to reveal whether the investment firm has been prudent or not in handling mergers and acquisitions. As of now, we just have to wait and see what happens.

Police reform, American style

With the recent killing of George Floyd by a Minneapolis cop, protests across the United States and even in Europe have condemned systemic racism, racist policing and police brutality. But an interesting development in the protest actions is the call to "defund the police."

Did they mean they want the government to totally withdraw funding for the police and in effect to abolish them?

From what I've read, far from it.

What the protesters really want is for government to drastically cut the billions of dollars the US spends for law enforcement every year and invest instead in other forms of public safety, from housing to mental healthcare, so as to "shrink the footprint of policing."

But wouldn't such a big restructuring of policing lead to an increase in serious offenses such as murder and rape and tie the hands of law enforcers in preventing or investigating such crimes?

The advocates of police defunding argue that arrests for violent crimes make up no more than five percent of arrests nationally. They assert that the vast majority of police arrests in the US are for crimes ranging from drug offenses to failure to pay traffic fines, and that communities would be better off if these issues were tackled by other kinds of civil servants, like counselors and social workers.

Adherents of defunding the police in the US also argue that the current system has not been all that effective at identifying offenders. They claim that nearly 40 percent of murders nationwide go unsolved, and only one percent of rapes end in a conviction.

They suggest that even serious crimes may effectively be tackled through non-police initiatives like Cure Violence, a non-profit organization that has succeeded in lowering rates of gun violence through programs that include training community members as “violence interrupters” to mediate local conflicts and helping those considered to be at risk of committing violence access resources like job training and substance dependency treatment.

In other words, government at the national to the local levels, perhaps after talking with people in communities, should decide the range of things that police officers can possibly do.

The approach is basically to look at what a community needs so that it does not need traditional policing at all.

Will a similar approach work here? And would the Philippine National Police agree to it? That would be interesting to find out.

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Topics: Ernesto Hilario , DOSRI , directors , officers , stockholders , and related interests , Bangko Sentral ng Pilipinas , BSP
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