By Eileen A. Mencias

The Bangko Sentral is tightening up its rules on interlocking directorships in banks.

Bangko Sentral Gov. Amando Tetangco Jr. signed circular no. 646 on Feb. 23 that expands the prohibition on interlocking directorships between banks to include directorships in non-bank financial institutions, such as pre-need companies and leasing and financing corporations.

The central bank currently prohibits bank directors and officers from holding concurrent positions in another bank and a quasi bank, unless authorized by the Monetary Board. By March, even directorships in non-bank financial institutions will be prohibited.

The central bank said concurrent directorships posed serious problems of self-dealing and conflict of interest. According to the manual of regulations for non-bank financial institutions, ?multiple positions may result in poor governance or unfair competitive advantage.?

The tighter rules come amid the outrage over how the Legacy group scammed depositors and the government, through Philippine Deposit Insurance Corp., which now has to pay the depositors of the rural banks in the group.

The central bank said in the manual of regulations for banks that ?while concurrent directorship may be the least prejudicial of the various relationship... to the interests of the financial institutions involved, certain measures are still necessary to safeguard against the disadvantages that could result from indiscriminate concurrent directorship.?

The prohibition on interlocking directorships on banks was expanded to include directorships in non-bank financial institutions. A person may still have interlocking directorships, provided he seeks approval of the MB.