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.