Editorial

Prompt corrective action

For a moment during yesterday?s hearing at the House of Representatives committee on banks and financial institutions, Rep. Luis Villafuerte and Bangko Sentral Deputy Gov. Nestor Espenilla quibbled over semantics as they defined ?prompt corrective action.?

Apparently the General Banking Act?and some lawmakers? proposals to amend it?contemplates an action much different from what is practiced by the central bank?s supervision and examination sector. It appeared to Villafuerte that Espenilla was dodging his questions by splitting hairs; the latter was insistent that the distinction be drawn.

The deputy governor said there have been more or less 200 instances where the Bangko Sentral carried out prompt corrective action on banks as a preemptive measure to ensure the stability of the banking system. The idea was to remind a bank to correct its flaws so that regulators do not anymore have to do anything drastic. Apparently, the practical definition is softer than it sounds.

We learned a few more things today. For instance, Espenilla admitted his team was not able to audit the banks within their scope every year, and that reports of examination were not readily available.

We also heard the central bank?s claim that it would have been able to do something about the erring banks belonging to Celso de los Angeles (curiously, the name does not turn up in the ownership structure of any of the Legacy banks) had not a Manila court issued a retraining order on its takeover of the banks, and had not a division of the Court of Appeals upheld this ruling.

?We are dealing here with an organized syndicate that from day one was created to exploit human nature and weak links in the legal, regulatory and enforcement framework of our banking and financial system,? Espenilla said of the Legacy Group, as he urged Congress to fill the gaps in banking laws that provided loopholes for these predators.

But De los Angeles maintained he was a victim of harassment just because he was collecting from the brother of yet another deputy governor, Alberto Reyes, who had taken out a loan from one of his banks.

The idea that the Bangko Sentral could be evasive, incompetent or corrupt, or all of the above, is unnerving for most of us. The institution has always been viewed as professional and efficient, free from the taint of politics or vested interest.

To arrest the erosion of its credibility, prompt corrective action?in the form of immediate amendments to the law and administrative, if not criminal, charges against erring individuals?needs to arise from these hearings with the aim of making sure none of this ever happens again.

That, we believe, is self-explanatory.