BSP Enforcement Actions and Penalties: How the Bangko Sentral Fines Banks and Officers

The Bangko Sentral ng Pilipinas may impose monetary penalties on supervised financial institutions and on their directors, trustees, officers, and employees for violations of banking and other applicable laws. Under Section 37 of Republic Act No. 7653, the New Central Bank Act, as amended, the maximum is P1 million for each transactional violation, or P100,000 per calendar day for a violation of a continuing nature. If profit was gained or loss avoided because of the violation, the Bangko Sentral may also impose a fine of no more than three times that profit or loss. These rules are restated in BSP Circular No. 1125, series of 2021.

Who may be penalized

The penalties apply to Bangko Sentral-Supervised Financial Institutions (BSFIs) and to their directors or trustees, officers, and employees. Circular No. 1125 covers violations of banking and other applicable laws whose sanctions fall under Section 37 of R.A. No. 7653, except where a specific monetary penalty is already provided under other laws or Bangko Sentral rules — including reporting violations such as erroneous, delayed, or unsubmitted regulatory reports, which carry their own prescribed penalties.

The Bangko Sentral treats monetary penalties as one of several possible administrative sanctions. Its stated objectives are to hold institutions and individuals accountable, deter future violations, change behavior, and mitigate risks.

Transactional versus continuing violations

The size of the penalty depends on how the violation is classified.

A transactional violation is an act or omission that is consummated and concluded in a single instance or occasion. For licensing-related violations, it refers to the failure to obtain approval before engaging in an activity the institution was qualified to undertake at the onset, based on an eligibility test and assessment of compliance with prudential criteria.

A continuing violation is an act or omission in which the violation persists or lingers over time, from the moment the act was committed or omitted until it is stopped. For licensing-related violations, it refers to an act the institution was not qualified to undertake at the onset based on the same eligibility and prudential assessment.

Because continuing violations are counted per calendar day, the exposure can grow the longer the violation remains uncorrected.

How the penalty is decided

The Bangko Sentral does not apply the maximum mechanically. It considers the attendant circumstances of each case, including aggravating and mitigating factors, to arrive at a reasonable and proportionate penalty. The factors include:

• The nature, gravity, and seriousness of the violation or irregularity;
• The financial or non-financial impact of the violation on the institution, its industry, or the financial system;
• The intentionality, frequency, and duration of the violation; and
• The measures undertaken to stop or correct it.

The Bangko Sentral may also impose non-monetary sanctions together with monetary penalties if the circumstances warrant.

The notice and show-cause procedure

Before a penalty is imposed, the appropriate department of the Bangko Sentral notifies the institution and the director, officer, or employee concerned of the violation, together with a directive to show cause within fifteen (15) banking days from receipt of the letter why no monetary penalty under Section 37 should be imposed.

The recommendation to impose monetary penalties is approved by the Governor or the Monetary Board, as the case may be. However, monetary penalties against directors, officers, and employees must be approved only by the Monetary Board. The decision is then communicated to the parties.

Paying the penalty

Monetary penalties must be paid within fifteen (15) calendar days from receipt of the notice of the decision of the Governor imposing them. Filing an appeal to the Monetary Board does not suspend payment.

Where the institution maintains a demand deposit account (DDA) with the Bangko Sentral, any penalty that remains unpaid is automatically debited from that account after the fifteen-calendar-day period lapses. In the absence of a DDA, payment is made through any acceptable means of payment under the applicable regulations.

For penalties imposed on a director, officer, or employee, the employer bank's DDA may be debited as advance payment on their behalf if the penalty remains unpaid after the fifteen-calendar-day period. If the individual is no longer connected with the bank, payment is made directly to the Bangko Sentral.

Appeals and finality

The imposition of monetary penalties by the Governor is final and executory until reversed, modified, or lifted by the Monetary Board on appeal. The appeal must be filed within fifteen (15) calendar days from receipt of the notice of the decision.

No motion for reconsideration of the Governor's decision, or of the Monetary Board's decision on appeal, is allowed. Original decisions of the Monetary Board imposing monetary penalties become final and executory after fifteen calendar days from receipt, unless a motion for reconsideration is timely filed.

An appeal or motion for reconsideration must be in writing and must specify the findings or conclusions claimed to be unsupported by the evidence or contrary to law. A pro forma appeal or motion is denied outright and does not prevent the decision from attaining finality.

Frequently asked questions

How much can the BSP fine a bank? Under Section 37 of R.A. No. 7653, as amended, the maximum is P1 million for each transactional violation, or P100,000 per calendar day for a continuing violation. If profit was gained or loss avoided, an additional fine of up to three times that amount may be imposed.

Can the BSP penalize bank officers personally? Yes. Directors, trustees, officers, and employees may be penalized, but monetary penalties against them must be approved only by the Monetary Board.

Can a bank appeal a BSP penalty? Yes. An appeal to the Monetary Board must be filed within fifteen calendar days from receipt of the notice of the Governor's decision. Payment is not suspended by the appeal, and no motion for reconsideration is allowed.

Practical takeaways

• The maximum monetary penalty is P1 million per transactional violation or P100,000 per calendar day for continuing violations, with up to three times the profit gained or loss avoided in appropriate cases.
• Both institutions and their directors, trustees, officers, and employees may be held liable.
• Penalties against individuals require Monetary Board approval.
• Payment is due within fifteen calendar days and is not suspended by an appeal; unpaid amounts may be automatically debited from the bank's demand deposit account.
• Appeals must be filed within fifteen calendar days and must raise specific evidentiary or legal grounds — pro forma appeals are denied outright.

Primary sources

The rules discussed above are drawn from the following issuances, embedded here in full for your reference.

Revised Guidelines on the Imposition of Monetary Penalties on BSFIs, and/or their Directors/Trustees, Officers and/or Employees for Violations with Sanctions Falling under Section 37 of R.A. No. 7653 (The New Central Bank Act), as AmendedOpen in Law LibraryDownload PDF

Replacement/Exchange of the NDS Banknotes from the General Public and NDS Banknotes in the Custody of (i) Authorized Agent Banks,(ii) Office of Provincial/City/Municipal Treasurers,(iii) Clerks of Court/All Law Enforcement Agencies and (iv) OFs as of 31 DOpen in Law LibraryDownload PDF

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.