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The BSP wants banks and NBFIs to incorporate measures to identify, measure, monitor and control risks related to human resources in their ERM framework.
The BSP (Bangko Sentral ng Pilipinas) has issued amended guidelines on operational risk management for the staff of banks and non-bank financial institutions.
Under the new guidelines, the BSP proposes stricter risk-based screening procedures for employees who work or seek to work in banks and non-bank financial institutions under the supervision of the central bank.
In a draft circular, the BSP says that one of the main sources of operational risk in banks is “personal risk”.
The BSP wants banks to adopt and incorporate stricter risk management procedures for bankers and related personnel, ensuring that they “incorporate into the enterprise-wide risk management framework measures to identify, measure, monitor and control risks. risks related to human resources “.
The central bank has instructed banks to select candidates based on the potential risks to which their institutions expose.
“Management will develop a risk-focused approach to its pre-employment background investigation where an appropriate level of assessment is employed based on factors such as the position, the implication of reputational risk and the responsibilities associated with a particular position.” says the BSP.
According to the regulator, the information collected through a risk-based assessment will allow a proper understanding of “the applicant’s background and personal character, conflict of interest and susceptibility to collusion, fraud or illegal activities.”
Additionally, the BSP wants banks to screen prospective bankers against central bank registries and extend that pre-employment check to other registries if the candidate has held positions at other financial institutions. This is to ensure that thorough background checks are conducted on individuals who have been entrusted by the public to handle various financial instruments or provide investment advice.
The BSP says that boards should establish an effective mechanism that takes advantage of existing controls to facilitate the assessment of the continuing fitness and ownership of staff, taking into account factors that may affect an individual’s performance.
“For example, an employee who will be responsible for the custody or handling of cash-related transactions will be taken into consideration in evaluating his continuing qualification,” said the BSP.
“This mechanism must also be capable of detecting suspicious behavior by personnel such as reluctance or refusal to take vacations, or frequent overrides of internal controls, established limits or approving authorities, high incidents of circumvention of the policy, changes in employee behavior. , unusual activities in operations and sudden or significant changes in lifestyle, standard of living and spending habits that are incompatible with the salary, financial position and level of indebtedness of the personnel in question ”.
The circular will enter into force 15 days after its publication, either in the official gazette or in a local newspaper of general circulation.
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