Jerry B. Coloma


Jerry B. Coloma


Rural Bankers Association of the Philippines (RBAP)


Gone were the days when rural bankers and staff tremble as examiners of Bangko Sentral ng Pilipinas (BSP) approach their premises for an annual examination. They trembled because of lack of knowledge of the methodology of examination, audit objectives and internal controls adapted within the bank organization The last decade showed, however, an increasing awareness of said lack of knowledge thru the hiring of internal auditors, compliance officers and seminars conducted by BSP and Rural Bankers Association of the Philippines (RBAP). In fact, the rural banking industry opposed the move to make the examination once every three (3) years because management would not be more cautious in executing bank transactions due to long periods of non-verification of transactions, and would not provide a leverage against third parties that demand transactions which are disadvantageous to the bank. At times, bank owners can even use the periodic examinations conducted by BSP examiners as a convenient reason for denying the requests of clients for preferential treatment.

Bank examiners are the only people privy to the financial transactions and financial condition of a rural bank. Our association has no knowledge regarding the financial condition of any member bank and, therefore not in a position to give management and financial advise to any of our members. We only have a glimpse of members' problems when a member asks for help in the form of liquidity assistance, at which point it is too late to institute the necessary management remedies and solutions. Bank examiners should segregate these banks and provide closer supervision to save them from imminent collapse. Directors and officers of these banks must be sent to remedial training to be conducted by your department to inculcate the rules and regulations that should be followed. RBAP thru its training arm, the Academy for Banking in the Countryside (ABC) can create a training module for "these officers and directors to be conducted by the best bank officers in the industry as their financial and management advisers in the hope that most of their management mistakes can be remedied. Through your recommendation, RBAP can invite the said officers and directors to avail of this training and follow through until these banks recover. This mechanism allows our association to help its members indirectly and uplift their operational standards without actually divulging the identity of problem banks by BSP.

By helping these problem banks, can the examiner still maintain his independence? Can the advice rendered to member banks by BSP examiners be construed as operational interference? Independence is a state of mind and exists only in the minds of the examiner. Independence and interference should be set aside to give way to the survival of a bank that demands extraordinary solutions. Under ordinary circumstances, however, it would not be reasonable for a non-driver to try to tell a driver how to drive a car, or for a non-farmer to tell a farmer how to till the soil. But it would be reasonable for someone to tell a driver about the new instruments and new capabilities of the car to maximize its usage or to show a farmer new technologies to increase the yield of his farm. Bank examiners are well equipped with experience of the methods and techniques in resolving issues and problems of rural banks because of their regular training at BSP, learning experience from their peers and the solutions employed by the examined rural banks. Discussion of the result of CAMELS rating that showed the areas of weaknesses in the operation of rural banks is an experience we always look forward to, for in this discussion, solutions are discussed and the examiners provide several alternatives to avert further deterioration of assets of the bank. Bank management can clarify certain provisions in the manual of regulations and the newly issued BSP circulars on its effective implementation and correct interpretation. Though majority of management personnel of rural banks are highly educated with exemplary training in business, verification and inquiry from the examiners produce more practical solutions to some management problems. BSP examiners must think like a Bank President or a Manager in order to relate to management the alternative solutions gained from their experiences.