BSP asks banks to prepare disaster contingency plans

Posted on March 13, 2017

BANKS will soon be required to prepare contingency plans that would allow them to operate in disaster-hit areas, as the central bank seeks to ensure financial services are available in times of distress.

Bangko Sentral ng Pilipinas
The Bangko Sentral ng Pilipinas (BSP) will require banks to install a quick recovery protocol for branches and offices that would allow them to get back on their feet after disaster strikes, as captured under a business continuity management circular to be issued by the regulator.

“It prescribes standards for banks to make sure that they are resilient to natural disasters and typhoons. Banks need to prepare for those so that when such things happen, they can be up for business within hours if possible,” BSP Deputy Governor Nestor A. Espenilla, Jr. told reporters in an ambush interview last week.

“As you know, our country is a disaster-prone country so we have to be ready for those things.”

The Philippines is considered as one of the 20 countries most vulnerable to the impact of natural disasters and climate change. The Finance department previously said that more than 1,000 deaths occur yearly in the Philippines due to natural calamities, with typhoons accounting for 74% of lives lost, 62% of damage to properties, and 70% of damage to agriculture.

Mr. Espenilla said the BSP will set the basic standards which the banks will use as a model in crafting their own contingency protocols. These action plans must be submitted for the central bank’s approval, then implemented by all of a bank’s branches and units across the country.

Mr. Espenilla said that while regulatory relief extended to banks in disaster areas will remain available, preparedness is another issue: “Relief is one thing. Banks still actually need to open their doors for business.”

The BSP has been extending regulatory relief to banks and quasi-banks operating in provinces and towns badly hit by disasters. Relief measures were given to banks in 16 areas in Luzon and Visayas badly hit by typhoon Nina in December, which include the non-imposition of penalties even if reserves fall below the central bank’s requirement and a 60-day grace period for rediscounting dues, among others.

In March last year, the central bank also required “too-big-to-fail” banks to craft recovery plans that would allow the lenders to remain in business despite a possible funding crunch, as part of an overall framework on risk management to strengthen the local banking system. -- Melissa Luz T. Lopez