By Lee Chipongian
The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has required Metropolitan Bank and Trust Co. (Metrobank) to set aside a higher operational risk cover of P4.45 billion – for now – as part of sanctions for compromising the bank’s sound and safe banking business due to internal control neglect.
A statement from the BSP yesterday said that after investigating the Ty-controlled Metrobank’s internal control cracks which allowed a P1.75-billion fraud perpetrated by one of its officers, it deemed it appropriate to slap it with a higher operational risk cover.
“In determining the appropriateness of the sanctions, the Monetary Board took into consideration Metrobank’s strong financial condition and immediate corrective actions to contain further financial damage,” said the BSP.
The central bank also reprimanded and suspended bank directors and officers for failing to “perform adequate oversight and/or have been complacent/remiss of their duties and responsibilities.”
A major sanction was that Metrobank has to allocate P4.45 billion of its capital on a consolidated basis for higher operational risk cover. However, the BSP can ease this requirement subject to periodic reviews. “(This) would be lifted when the bank is determined to have put in place adequate risk control measures to address the weaknesses noted,” said the BSP.
The bank will have to execute and submit a Letter of Commitment to the BSP, which will be “implemented and completed” within one year. According to the central bank, this is to “enhance corporate governance, credit administration, internal controls and audit, risk management, and customer on-boarding and monitoring processes.”
“Together with medium to long-term initiatives that will serve to improve governance, controls, and compliance, the Monetary Board re-affirms the safety and soundness of Metrobank,” the BSP reiterated.
The BSP has strict banking rules and requires all banks to be well-capitalized and risk-based approaches implemented. Banks are also expected to adopt internal control frameworks that are suited to their size, risk profile and complexity of operations.
In July this year, Metrobank, the country’s second largest bank, suffered a blow on its operations and reputation, when police arrested one of its officers for fraudulent transactions.
Charges were filed against one of its vice presidents, Maria Victoria Lopez, for qualified theft, falsification and violations of the General Banking Law.
Lopez allegedly involved one of the accounts of the Gokongwei Group’s Universal Robina Corp. in the bank as recipient of these fraudulent accounts.
The BSP took four months to investigate the Lopez incident and decide on Metrobank’s sanctions. The BSP said it remains confident that Metrobank’s case was an isolated one and that the latter had aptly handled the situation.
An ‘isolated incident’
Metrobank said that the unfortunate internal fraud case involving Lopez is an isolated incident and that no client of theirs lost any money because of this.
“After conducting a 100 percent audit, the bank reiterates that no customer was affected. This is an isolated incident. The perpetrator acted alone and for her sole benefit. She has been apprehended and cases against her have been filed,” Metrobank said in a statement right after the Bangko Sentral ng Pilipinas (BSP) released its own announcement in connection to the Metrobank sanctions.
Metrobank said improvement on its systems and regular reviews has enabled it to detect the fraudulent act. “The bank’s control framework remains effective and even stronger,” it said, emphasizing its P2 trillion worth of assets and P210 billion of equity. “The bank has proactively absorbed the entire amount (P1.75 billion) related to this incident in the third quarter. Despite this, the growth momentum of the bank remains robust and results for the year are ahead of plan.”
With regards to the BSP’s sanctions including the higher operational risk cover of P4.45 billion, Metrobank said that its board and senior management “accept accountability and command responsibility for the incident and commits to implementing the directives.”
In cases of bank fraud, the central bank can file its own prosecution suit of an erring bank employee for violating BSP regulations such as falsification of documents and for reporting false statements to the BSP.
Fraudulent loans which are still reported as part of a bank’s total loan portfolio are submitted under the consolidated statements of condition, and the falsification of these documents when reporting to the BSP is a criminal offense. Sanctions will be imposed on a bank, or its directors and officers, if it is proven that they committed an error or went against BSP regulations.
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