THE Bangko Sentral ng Pilipinas (BSP) is looking into a lender’s alleged violation of rules on lending to related parties, BSP Governor Benjamin E. Diokno said on Monday.

“Please be informed that a complaint was indeed filed on June 3 with the Monetary Board against the directors and officers of a certain bank for alleged violation of provisions of Republic Act (RA) No. 7653 (The New Central Bank), as amended, and RA No. 8791 (The General Banking Law of 2000),” Mr. Diokno told reporters in a Viber message.

“The matter is already with the Investigation and Prosecution Group of the Office of the General Counsel and Legal Services which is now conducting an investigation. Rest be assured that the legal processes will be observed in handling this complaint,” Mr. Diokno said.

The same day saw a filing with the bourse by China Banking Corp. (China Bank), which noted “some newspaper articles and Viber messages circulating and making insinuations about banking violations by a certain universal bank”. The lender confirmed it has a non-paying client, whose case has been referred to their legal team.

“We would like to emphasize that the said obligation has been properly classified and reported to the BSP. It constitutes less than 1% of our total loan book and for which we have made adequate loan loss reserves,” the bank said in the filing.

China Bank added it is “complying with all regulatory requests for information,” noting it adheres to “the highest” professional standards.

“Rest assured that the China Bank Group continues to be liquid, well capitalized and profitable with Q1 2020 earnings that are 19% higher year on year,” it said.

The statements came following a Manila Standard Today column published on June 12 which said the BSP is dealing with a complaint against top officials from a universal bank for P4-billion worth of unreported and illegal DOSRI or Directors, Officers, Stockholders, and their Related Interests loans.

The opinion column written by Ernesto M. Hilario said the involved “top universal bank” is under investigation for unmet requirements under the BSP’s guidelines on credit extended to a related party.

The General Banking Law imposes individual and aggregate ceilings and regulatory requirements for DOSRI borrowings. DOSRI loans cannot exceed the capital contribution and deposit of the borrowing party. They also need prior written approval by the majority of all the directors of the board.

All DOSRI borrowings should likewise be reported to the BSP within 20 days from the approval. Violations of the central bank’s rules are subject to sanctions.

China Bank’s net income climbed by 19% year-on-year to P2.2 billion in the first quarter. It was the sixth largest bank in terms of assets as of March with P983.498 billion, up 10.73% from the previous year.

Its shares closed trading at P19.80 apiece on Monday, down by 90 centavos or by 4.35% from its previous finish. — LWTN

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