REGULATORY AUDIT OF BANKS

Regulatory Audit of Banks

• R.A. No. 11211 “The New Central Bank Act”, signed 2019
• Bangko Sentral ng Pilipinas shall have supervision over the operations of
banks and exercise such regulatory and examination powers as provided in
the Act and other pertinent laws over the quasi-banking operations of non-
bank financial institutions.

• As may be determined by the Monetary Board, it shall likewise exercise

regulatory and examination powers over money service businesses, credit
granting businesses, and payment system operators.
The Bangko Sentral ng Pilipinas
• To maintain price stability conducive to a balanced and sustainable
growth of the economy and employment. (Monetary and Economics
Sector)

• To promote financial stability (Financial Supervision Sector)

• To oversee the payment and settlement systems in the Philippines

(Payments & Currency Management Sector).
Financial Stability
• Making sure that banks operate in a safe and sound manner is in the
public interests
• manage our savings
• offer critical services (fund transfer and payment)
• credit

• The BSP defines regulatory framework and monitor if banks operate

within those framework.
Financial Supervision Sector
• Financial Supervision Sub-Sector I & II
• Regular Banks and their subsidiaries

• Financial Supervision Sub-Sector III

• Government Banks, Quasi-Banks, and Non-Bank Financial Institutions
• Irregular Banks

• Policy and Specialized Supervision Sub-Sector

• Supervisory policies
• Data Analytics
• Specialists’ departments (Treasury, AML, IT)
BANK SUPERVISION
Bank Supervision
• Audit of Compliance with the Manual of Regulations for Banks
(MORB) and other BSP Circulars, Memorandums, and Issuances.
(international banking requirements and practices are considered)

• Unlike External Audit, Bank Supervision focuses on the whole

operations of a bank. (policies, governance, operations, financials)
Supervisory Actions

Risk-Based!
• Onsite Supervision
• Examiners visit the Bank to conduct compliance testing of the Banks
operations and transaction for a specified period. (fieldwork)

• Offsite Supervision
• Continuous monitoring of compliance of a Bank through submission of
regular reports and requirements.
Onsite Supervision
• Employs appropriate examination tools, techniques and procedures to
evaluate the safety and soundness of the BSP Supervised Financial
Institution (BSFI).
• Results to the REPORT OF EXAMINATION
• Discussion with BSFI Management of the findings, preliminary
ratings
• Issuance of directives to address findings and exceptions.
Enforcement and Resolution
• Letter of Commitment
• Prompt-Corrective Actions
• Cease and Desists Orders
• Sanctions against Director/Officer/Trustee
• Prohibition from doing business in the Philippines (Closure)
Offsite Supervision
• Develops and maintains a thorough and up-to-date working knowledge
of a BSFIs
• business models
• financial condition
• management structure
• strategic plans
• risk exposures and risk management policies
• reports of examination,
• external audit reports
• credit rating agency reports
• publicly available information
Offsite Supervision
• Evaluates requests of BSFIs
• Licenses
• Director/Officer Confirmation
• New Products and Services
• Mergers and Acquisitions
• Amendments in Articles of Incorporations and By-Laws

• Monitors BSFI’s Financials

• Capital Adequacy (10%) (computed by dividing qualifying capital over risk-weighted assets)
• Minimum Liquidity (20% to 16%) (computed by dividing liquid assets over qualifying
liabilities)
• Past Due and Non-Performing Loans
• ROA/ROI
THANK YOU!