BSP should monitor banks’ compliance with MRB

FINANCIAL institutions, especially commercial banks, are all under the supervision of the Bangko Sentral ng Pilipinas (BSP). The Banking Regulation Manual (MRB) has been developed by the BSP for the financial institutions supervised by the BSP (BSFI) to serve as a guide in their day-to-day operations. The applicable sanctions and penalties are provided for in the document in the event of non-compliance by these BFIs.

Why am I writing about this? Well, an entrepreneur experienced the arbitrary and autocratic ways of a bank manager (BM), who clearly exceeded his duties and usurped the authority of his employing bank.

dormant account

A couple formed a limited partnership and started operating a small restaurant in 2015. As a necessary supplement to their small business, the couple opened a checking account with a commercial bank. To protect the bank’s anonymity, let me call it Sample Bank (“SBank” for short). The partners have authorized partner A to open the account with SBank and have designated the same partner as the sole signatory on this bank account. A duly notarized partnership resolution, using the pro forma document provided by SBank, has been signed to this effect.

The restaurant, like many other small businesses, has suffered financial losses during the relentless closures and quarantines caused by the Covid-19 pandemic. They finally closed the small restaurant. Based on their passbook, the last transaction they made was on February 2, 2021.

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Last week Partner A went to SBank to withdraw the money remaining in the partnership account and possibly close it. He was informed that the partnership account was “on hold” due to its “dormant” status. He was advised to go to the original agency where he opened the account to reactivate the partnership account.

The BM of his account agency asked him to sign a new signatory card, an account reactivation form and two other documents. Partner A complacently filled out the forms and put his signature on them. After receiving all these forms, the BM asked him to submit a copy of the Articles of Partnership issued by the Securities and Exchange Commission (SEC) and a notarized partnership resolution to “open a bank account” with SBank. The BM provided him with the pro forma partnership resolution of the SBank.

Partner A searched his old records and found a copy of the original partnership resolution signed in 2015. He returned to the bank branch and submitted the copy of the partnership resolution to the WB. The latter refused to accept the document on the grounds that it was old and that he needed a new and updated one. Partner A argued that the old document was still legally valid and binding and was essentially the same as the new pro forma document.

Not to be outdone (even though he had little knowledge of the law), the BM then asked Associate A to submit a new document, which was not even listed as the one of those from their initial discussion. The BM was now asking for a partnership resolution “to reactivate the account”. SBank does not have a pro forma document for this as it was never required in the first place. This fact was confirmed by BMs from other SBank branches – they claimed that SBank never required a partnership resolution “to reactivate the account”. It was only by whim and whim of the monocratic BM that such a resolution was demanded.

BM and SBank violations

SBank violated BSP regulations when it placed the partnership account in an inactive status without informing the account holder. Under BSP Memorandum M-2017-025, all non-exchange banks and credit unions must comply with notice requirements set by BSP by notifying depositors at least 60 days before their account becomes inactive and at least 60 days before their account becomes inactive. costs. SBank failed to comply with both of these notice requirements. Please note that failure to comply with the dormancy regulations will subject the banks and quasi-banks responsible to the applicable sanctions and penalties provided for in Article X299 of the MRB.

Section X1002 of the MRB has also defined the consumer protection standards required of OSFIs. Banks must regularly provide customers with clear and precise information on their accounts; inform customers of their rights and responsibilities, including their right to complain and how to submit a complaint; and have an internal system or processes in place to detect and respond to client abuse and serious violations.

Another question that needs to be answered, apart from these banking breaches, is whether the 2015 partnership resolution is still valid or not. For the information of readers, a notarized document never expires and an advisory/partnership resolution survives until specifically superseded by a more recent resolution. In fact, SBank provided a pro forma resolution containing the clause —

“Finally resolved, that the foregoing resolutions shall continue and remain in effect until repealed and/or modified by subsequent resolutions of the members of the Partnership and appropriate copies thereof served and received by the [S]Bank Corporation. Obviously, the Partnership Resolution remained in effect because it was neither repealed nor amended by subsequent resolutions.

Partner A has obviously been abused by the biased SBank BM. For this, the branch manager should be sanctioned appropriately.

The BSP should also investigate the SBank and determine if what was discussed above was an isolated case or if it became an institutionalized policy as a result.

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