Sanctions to be imposed on financial institutions that failed to comply with the Year 2000 BSP directives

CIRCULAR NO. 173 Series of 1998

The Monetary Board, in its Resolution No. 1188 dated August 19, 1998 approved the following sanctions to be imposed on financial institutions that failed to comply with the Year 2000 BSP directives, as follows:

1. For non-submission of the required action plan, the accomplished self-assessment questionnaire, the status report and other required reports.

For every banking day of delay, from the time bank was notified in writing up to the time of submission, a monetary penalty of:

Bank Type

Monetary Penalty

Commercial Banks

P1,000.00

Thrift Banks & Non-Bank Financial Intermediaries

P500.00

Rural Banks

P300.00

2. If after due validation and without reasonable justification, the financial institution is deemed to be substantially delayed in its Year 2000 compliance and/or has not taken appropriate steps to resolve it in accordance with the targeted schedule, the following sanctions shall be imposed:

First Notice

Issuance by the appropriate supervising and examining department  of a warning letter to non-compliant financial institutions to the effect that continuing non-compliance will be subject to more severe sanctions

Second Notice

suspension of branching privileges

restriction on certain activities such as limiting investments, overall loan growth, accepting government deposits, accepting demand deposits, and other activities where bank shall be exposed to material risks that may lead to potential losses, increase institutions' liquidity requirements by accelerating their  compliance with the capital build-up program or require institution to infuse additional capital to the extent determinable

Final Notice

exclusion from clearing arrangement

suspension of authorities to perform quasi-banking functions, trust operations, FCDU/EFCDU activities, derivatives activities, etc.

where all supervisory tools have been exhausted to resolve the Year 2000 problem of the institution and effects of the problem are wide-scale in nature, temporary closure of the financial institution shall be recommended

This Circular shall take effect immediately.

FOR THE MONETARY BOARD:

GABRIEL C. SINGSON Governor