THE BANGKO SENTRAL ng Pilipinas (BSP) is looking to implement a framework to assess and monitor the risks posed by its supervised entities’ operations to consumers.

The proposed Financial Consumer Protection and Market Conduct (FCPMC) framework will be the central bank’s “risk-based supervisory approach for assessing a Bangko Sentral Supervised Institution’s (BSI) business conduct and practices that pose risk of loss or other harm to financial consumers,” according to a draft circular posted on its website.

The framework will support the creation of supervisory plans for industry-wide monitoring and individual BSI-specific assessments, risk-based supervision, and calibrated supervisory actions to “promote good market conduct and customer-centric business practices.”

The circular, if approved, would add a new section to the Manual of Regulations for Banks and Manual of Regulations for Non-Bank Financial Institutions.

The framework includes guidelines on impact assessment, risk management assessment, and the corresponding supervisory intensity.

“A BSI with higher financial consumer protection impact and higher financial consumer protection risk profile requires a more intense FCPMC-focused supervision,” the BSP said.

The impact assessment “captures the potential impact of a BSI’s failure to identify, measure, monitor and mitigate FCPMC risks and related harm to consumers, which could result in diminished consumer trust and confidence in the financial system,” it added.

“It involves evaluating, among others, the size and complexity of a BSI’s operations; its dependency on third parties and agents for its consumer-facing activities; and the number and profile of its retail client base,” it added.

The risk management assessment process measures the effectiveness of a BSI’s consumer protection risk management system. 

“It aims to determine the adequacy, efficiency and effectiveness of the BSI’s consumer protection risk management system in identifying, measuring, mitigating and controlling risk events and incidents that could pose direct or indirect harm to its clients in particular, and to financial consumers or the public in general,” it added.

It seeks to assess standards such as disclosure and transparency, protection of client information, fair treatment, and effective redress, among others.

A risk profile will be generated from this assessment process, which serves as an evaluation of the risks posed by a BSI’s business conduct and operations on consumers.

Supervisory activities will then be implemented based on the impact grade and risk profile of a BSI.

“FCPMC supervisory intensity refers to the degree of supervisory attention required for, and applied to a BSI,” the BSP said.

These supervisory activities range from market surveillance and monitoring, onsite examination, and offsite supervision, among others. — Luisa Maria Jacinta C. Jocson