Banks bear brunt of RP crackdown

Banks bear brunt of RP crackdown

MANILA (AFP): Monetary authorities in the Philippines are
publicly identifying and fining banks linked to speculation of
the embattled peso currency in an unprecedented name-and-shame
campaign.

But the banks are not taking it lying down, seeking
clarification from the central bank on laws under which they have
been sanctioned and suggesting that they may have been wrongly
penalized.

The Bangko Sentral ng Pilipinas (BSP), the central bank, last
week slapped fines on nine banks, including Hongkong and Shanghai
Banking Corp, Standard Chartered Bank and Citibank, for violating
currency trading procedures.

It was the first time the independent central bank had
identified a large number of banks deemed violating currency
trading laws.

"We said we are going to penalize you but please stop. Since
they did not stop, we decided to publish their names," said BSP
governor Rafel Buenaventura.

"Some of the banks were saying 'we were not informed of this,
we were not aware of these violations.' That's a lot of
nonsense," he said.

Following the action, the BSP has threatened to expose more
such banks and impose harsher penalties on them -- including
raising the fines 10-fold, suspending them from trading, and
identifying and suspending individual bank officers who executed
illicit trades.

The unparalleled action came after President Gloria Arroyo,
concerned over the sharp depreciation of the peso, urged the
central bank to crack down on speculators and dollar hoarders and
prop up the Philippine currency to the "fundamental" level of 50
to the greenback.

Arroyo also warned that exchange controls could be used if
necessary to stop the peso rot.

The central bank crackdown, backed with an order to banks to
increase their reserve requirements to their highest level since
the 1997 Asian financial crisis, pushed the peso to an eight-week
high of 51.85 to the dollar Friday.

The tough action against speculators "will clearly make banks
more reluctant to push the envelope," commented financial markets
research and analysis firm IDEAglobal.com.

But the firm added that "it is highly likely" that pressure on
the peso would emerge again due to an export slump and little
other sources of revenue.

Central bank governor Buenaventura at the weekend met top
officials of the Bankers Association of the Philippines (BAP),
the umbrella body for about 50 local and foreign commercial
banks, to underline the seriousness of the crackdown against peso
speculation.

The BAP said in a statement after the talks that the fines
imposed on the nine banks were for "specific violations of
documentary and prudential regulations" and "not for speculation
on the peso as earlier reported".

"Observing however that certain regulatory provisions may have
been the subject of misinterpretation, BAP officials sought
clarification from the BSP on what practices are being allowed
and disallowed," the statement said.

Central bank governor Buenaventura said there had been
"blatant" violations by banks of rules limiting the amount of
dollars a person could buy without documentation.