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BSP Issues Revised Rules for Related Officers


The Bangko Sentral ng Pilipinas (BSP), after a policy review of the existing regulations disqualifying persons related to each other within the second degree of consanguinity or affinity from holding certain officer positions in the same bank or branch has come out with revised and rationalized rules to govern potential interlock of officer positions involving such relatives.
The revised guidelines specifically focus the prohibition to those officerships involving conflicting responsibilities and where the check and balance mechanism will likely be eroded. Officerships involving second degree relatives across the following functional categories within the bank shall be prohibited: (1) decision making and senior management functions, e.g., Chairman, President, Chief Executive Officer (CEO), Chief Operating Officer (COO), General Manager, and Chief Financial Officer (CFO) other than the Treasurer or Controller; (2) treasury function, e.g., Treasurer and Vice President – Treasury; (3) recordkeeping and financial reporting functions, e.g., Controller and Chief Accountant; (4) safekeeping of assets, e.g., Chief Cashier; (5) risk management function, e.g., Chief Risk Officer; (6) compliance function, e.g., Compliance Officer; and (7) internal audit function, e.g., Internal Auditor.

However, the prohibition shall not apply to any of the said positions within the same category. Thus, a relative within the second degree of consanguinity or affinity of any person holding the position of Chairman is not disqualified from holding the position of President, CEO, COO, General Manager or CFO other than the Treasurer or Controller. In the case of branches, the prohibition against related officerships applies to the positions of Manager, Cashier and Accountant.     
Governor Tetangco explained that the rationalized rules aim to more effectively prevent potential fraud and the risk of collusion among family members and relatives, and the tendency toward abuse of power which may result in poor governance if unchecked or unrestrained. He added that segregation of duties requires that different individuals be assigned responsibility for different elements of related activities, particularly those involving authorization of transactions, safekeeping of money and other property, and recordkeeping. At the same time, the revised rules allow enough management flexibility so as not to hamper succession planning especially in family-controlled banks.

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