Another related issuance of the BSP is the revision of the prompt corrective action or PCA framework following the issuance of Circular No. 523 dated 23 March 2006. This was done to compel banks to take pre-emptive action against what may constitute as threats to financial stability and thereby, ensure that they continue to operate in a safe and sound manner.
As part of the PCA framework, banks are encouraged to align capital with actual risk exposures, implement business improvement measures, and institute corporate governance reforms. And in the interest of accountability, we have required banks to establish a sound compliance system. The aim is to ensure a bank’s identification of relevant laws and regulations, analysis of risks of non-compliance, and prioritization of compliance risks.