BSP reminds banks on controls vs operation risk

THE CENTRAL BANK will be reminding financial firms of existing rules on employee rotation and internal checks and balances, in light of a P900-million case fraud faced by Metropolitan Bank & Trust Co. (Metrobank) said to be engineered by a senior bank official.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said the regulator will remind banks about existing governance and risk management rules, particularly on the regular rotation of bank staff, in the aftermath of an embezzlement case reportedly crafted by a bank vice president.

“We already issued the Circular 900 on the operation risk. But in our engagement with the bank, we will surely touch on these things and putting emphasis… like for this instance, maybe on the rotation of people or double controls,” Ms. Fonacier told reporters on the sidelines of a launch event in Makati City. “There will be surely a reminder to banks.”

The BSP issued Circular 900 in January last year, which outlines standards and policies versus operational risks, which includes risk assessment and mitigation protocols within a bank.

In particular, lenders must be able to identify and respond to incidents of internal fraud; employee theft; robbery; hacking; labor practices; physical damages; and business disruptions due to calamities and systems failures, to name a few.

The National Bureau of Investigation (NBI) arrested Metrobank assistant vice president and corporate service management head Maria Victoria S. Lopez in a sting operation last week, amid irregularities in the letters and checks she processed for the reportedly fake loan disbursements.

“Actually in our interaction with the banks, there’s always the reminder about managing the risk. One of them is pertaining to this one — operations risk. It’s part of the assessment of the BSP on how internal controls in the bank are being carried out, and overall risk management system,” the newly-appointed Deputy Governor said.

Ms. Fonacier added that the BSP’s investigation on the case is ongoing, which proceeds alongside Metrobank’s internal probe on the incident. She noted that the bank could face possible sanctions: “For this scenario, there may be [liabilities] because how come that person was able to do it. There is that possibility.”

On Friday, the NBI presented Ms. Lopez to the public as she is currently detained for charges of qualified theft, falsification, and violation of the General Banking Law.

Ms. Fonacier added that Metrobank is also in the process of recouping portions of the loot.

“There are efforts to recover,” the BSP official said, noting that funds kept intact in the bank accounts used in transferring the supposed loan proceeds have been reverted after it was discovered that the borrowings under the name of conglomerate Universal Robina Corp. were fake.

Ms. Fonacier noted that it was possible that the scheme involved more than one person, but said that only Ms. Lopez’s involvement has been unveiled so far. She added that the BSP’s investigation could take a month, to be followed by the crafting of a report which will be used to assess the bank’s liabilities and possible penalty, if any.

Central bank officials said the bank would have to suffer losses drawn from the multimillion-peso case, but said that the country’s second-biggest bank can “absorb” the blow and still remain in business.