A measure seeking to strengthen the central bank’s oversight functions is currently being drafted, a senior legislator said Friday, following the release of an international assessment report on the Philippine financial sector.

“I am working on a draft and will be collaborating with Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno on matters we can work on,” House Ways and Means Chairman Jose Maria Clemente S. Salceda told BusinessWorld Friday.

The International Monetary Fund (IMF), in its financial sector assessment program, recommended the amendment of the bank secrecy law to give the BSP “additional teeth” in regulating financial institutions.

The IMF said the central bank’s regulatory framework “is broadly effective for the size and complexity of the Philippine banking system, but legislative gaps continue to hinder effective supervision of banks.”

“More work is needed to strengthen BSP’s oversight on the assessment of ultimate beneficial ownership of banks operating in the Philippines,” the report said. “Limitations on BSP’s enforcement powers also impair its ability to fully protect the bank from the actions of parent companies and affiliates.”

“The weaknesses in the regulatory oversight functions of the Bangko Sentral ng Pilipinas can be addressed with some changes in its charter,” Mr. Salceda noted, saying that a measure expanding BSP’s risk oversight powers “may be a useful backstop to induce banks to grow loans to more sectors faster.”

Mr. Salceda said various issues raised by the IMF are related to the Manual of Regulations for Banks, which the central bank can resolve without new legislation. “The crux of my work will be on a legislative framework for crisis management, recovery and resolution.”

“My options are to file an omnibus bill on the recommendations, or to take them up separately. An omnibus is probably the most effective way to do this, but I will consult with Governor Diokno on what he thinks is best,” Mr. Salceda said. “My inclination is to use the report as an impetus to expand financial inclusion in a safe manner and to future-proof our banking sector and prepare it for a more digital economy.” — Kyle Aristophere T. Atienza