MORNBFI Vol. 1 - Planters Development Bank

App. Q-3908.12.31assets and capital. The QB/individual mayhave substantial/serious violations thatcould impact the reputation and earningsof the QB.• Minimal actual loss or substantialrisk of loss – The QB has incurred minimalloss or will be exposed to substantial risk ofloss of earnings or capital although both donot materially impact financial condition.The volume of accounts involved forminimal loss or substantial risk of loss isreasonable and manageable. While a losswas incurred, the QB could absorb the lossin the normal course of business.Substantial risk of loss includes anypotential losses the aggregate of whichamounts to at least one percent (1%) ofthe capital of the QB 1 .• Minimal risk of loss – The riskexposure on earnings or capital is minimal.QB is not vulnerable to significant loss. Thevolume of accounts involved for potentialloss/risk is minimal/negligible. The risk ofloss would have little impact on the QB orits financial condition. The risk of lossaggregating to less than one percent (1%)of the capital of the QB will fall under thisclassification.(f) Impact to QB/banking industry– Inassessing this factor, it is appropriate toconsider any possible negative impact orharm to the QB. (e.g. A violation of lawinvolving insider abuse may result inadverse publicity for the institution,possibly causing a run on deposits andaffecting the QB’s liquidity). Resultingeffect on the banking industry on theviolation/offenses committed by the QB,if any, will also be considered. Sources ofdata may come from news reports.• Substantial impact on QB. Noimpact on banking industry. This mayinvolve reputational risk of the QB as aresult of negative publicity generated forexample, by involvement of QB’s director/officer in activities not acceptable to theregulatory bodies, e.g. pyramiding,investment scams etc. This may alsoinvolve insider abuse of authority/power.However, the banking industry is notaffected for this isolated case.• Moderate impact on bankingindustry or on public perception ofbanking industry. This may involve poorcorporate governance and mismanagementof QB that may result to erosion of publicconfidence leading to bank run in variousbranches. This may also trigger a bank runin other subsidiaries.• Substantial impact on bankingindustry or on public perception ofbanking industry. This is a worst-casescenario. The violations/irregular activitiesof the QB may totally erode the trust andconfidence of the quasi-banking publicresulting to a nationwide bank run.Pessimistic perception of the banking publicon the banking industry is highly observed.2. Mitigating Factors(a) Good Faith – Good faith is theabsence of intention of the erringindividual/entity in the commission of aviolation.• Full Cooperation - This isdetermined by the actions of the individualand/or QB towards the regulators after oreven before notification of the offense and/or omission. Assistance rendered by theQB during the investigation and/orexamination conducted relative to the citedoffense and/or omission may be viewedfavorably when computing the amount ofpenalty to be imposed on the QB/individual.• With positive measures/actionundertaken although not correctedimmediately. The QB is willing to remedy/1Cir. 410 dated 29 October 2003 provides that external auditors of QBs must report to BSP, among others, any potentiallosses the aggregate of which amounts to at least one percent (1%) of the capital to enable the BSP to take timely andappropriate remedial action.Manual of Regulations for Non-Bank Financial InstitutionsQ RegulationsAppendix Q-39 - Page 5