BSP may impose up to PHP 1-M fine for violations of foreign exchange rules

The Bangko Sentral ng Pilipinas (BSP) has approved amendments to the reporting guidelines for foreign exchange (FX) transactions, including the imposition of fines up to PHP 1 million for policy violations.

“The Monetary Board has approved further amendments to FX regulations to allow the BSP to gather more accurate and relevant information on FX transactions to promote and maintain price stability and ensure financial stability and effective supervision of banks,” it said in a statement on Wednesday.

This comes after weeks of volatility in the foreign exchange markets, which saw the peso drop to a 20-month low in May.  The peso closed at PHP 58.295 per dollar on Wednesday, strengthening by nine centavos from its PHP 58.385 close on Tuesday.

The Monetary Board in its Resolution No. 764 approved revisions to the Manual of Regulations on Foreign Exchange Transactions, according to a circular.

One of the main amendments is the imposition of a maximum penalty for violations by authorized agent banks (AAB), AAB forex companies, offshore banking units (OBU), representative offices and their directors, trustees, officers and employees (DTOE), pursuant to the amended New Central Bank Act.

The BSP can impose a “maximum monetary penalty of PHP 1 million for each transactional violation or PHP 100,000 per calendar day for violations of a continuing nature.”

It defines a transactional violation as an “act or omission constituting violation of any applicable law, or any order, instruction/directive or regulation issued by the Monetary Board (MB), or any order, instruction/directive or ruling by the governor which is consummated and concluded in a single instance/occasion.”

On the other hand, a continuing violation is one that “persists or lingers over time from the instant the particular act was committed or omitted until the violation is stopped.”

“To ensure fairness, consistency, and reasonableness in the imposition of monetary or nonmonetary penalties, the BSP takes into consideration the attendant circumstances of each case, such as the nature and gravity of the violation or irregularity, the size of the financial institution and other aggravating and mitigating factors,” according to the circular.

The BSP also included definitions of reports that are not compliant with reporting standards, such as delayed, erroneous and unsubmitted reports.

The revised rules also provide clear penalties for violations of reporting standards. Monetary penalties for reporting violations on primary reports range from PHP 300 for representative offices to PHP 3,000 for universal, commercial or Islamic banks.

For instance, the penalty for a delayed report will be computed by multiplying the fine by the number of calendar days delayed.

The revised rules also include the notification process of concerned BSP-supervised financial institutions (BSFI) on their policy violation, as well as appeals and requests for reconsideration.

“The amended guidelines will facilitate timely submission of reports by banks in accordance with the BSP’s reporting standards and instill accountability among BSFIs and/or their DTOEs,” the central bank said.

Reports submitted to the BSP must be “complete, accurate, consistent, reliable and timely” to be compliant with its reporting standards. It must also conform to the relevant submission and validation guidelines.

“These regulations will likewise enable the BSP to efficiently generate reports being used for policy studies and monitoring of the economy and financial system, among others,” it added.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said the amended rules would help the central bank achieve stability in the foreign exchange markets.

“This is good in general to achieve the BSP’s goal of FX stability and the prevention of unnecessary volatility in FX markets. The eventual compliance of banks will be advantageous for the industry,” he said in a Viber message.

In April, the Monetary Board approved amendments to the Manual of Regulations on Foreign Exchange Transactions to better facilitate access to FX resources of authorized agent banks or their units for legitimate transactions and streamline documentary requirements, procedures and reporting. — Luisa Maria Jacinta C. Jocson