“RURAL BANKS: MAKING A DIFFERENCE IN FINANCIAL ... - RBAP

1

63rd RBAP Annual National Convention and General Membership Meeting

Radisson Blu Hotel, Cebu CityMay 23 ‐ 24, 2016

“RURAL BANKS: MAKING A DIFFERENCE INFINANCIAL INCLUSION”

2

OUTLINE

I. Rural Banks as Catalyst for Financial Inclusion

III. AML Rules Promoting Financial Inclusion

II. Financial Inclusion and Financial Integrity Symbiosis

3

Rural Banks as Catalyst for Financial Inclusion

Serves micro/small enterprises and agri‐agraclients target of financial inclusion initiatives

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

All Banks U/KBs TBs RCBs

% MSE % Agri‐Agra

Source: Status Report on the Phil. Financial System Dec 2015 

4

Rural Banks as Catalyst for Financial InclusionBank coverage – 60% to 79% (Dec 2015) with dense concentration 

in highly urbanized areas.

Source: Status Report on the Phil. Financial System Dec 2015 

NCR – 100%CALABARZON – 94.4%Central Luzon – 93.8%Western Visayas – 82.2%

Low Bank coverageARMM, Eastern Visayas, Cordillera AR and Zamboanga Peninsula

‐ low population density, geographic inaccessibility, prevailing geopolitical and socio‐economic situations 

5

Financial Integrity and Financial Inclusion

Financial Inclusion

Financial Integrity

Mutually reinforcing public‐policy objectives

COVEREDPERSON

BOD and SM Oversight + Compliance Office

MLPP

Internal Controls and Audit

Monitoring and Management information 

system

6

Link Policies of Inclusion and Integrity 

PROPORTIONALITY AND RISK‐BASED APPROACH

Areas of Sound Risk 

Management Practices

7

AML Rules Promoting Financial Inclusion• AML policies and guidelines and monitoring tools

required are appropriate to the size, risk profile andbusiness complexity

• Adopt clear, written and graduated customeracceptance policies and procedures so as not to denyaccess to financial services by financially or sociallydisadvantaged

• Risk profiling of customers – low, normal and high risk

8

AML Rules Promoting Financial Inclusion• Apply reduced due diligence for low risk customers

assessed based on defined criteria – minimumverification of information, less frequent updating andless intensive monitoring

• Acceptance of customer based on 1 ID and list ofacceptance identification documents has beenexpanded

9

Policy Proposals for Financial Inclusion• Tiered customer due diligence – can open account

even without ID subject to certain conditions (low riskcustomer, low value transactions, reduced minimuminformation)

• Define threshold amount for the conduct of customerdue diligence (bank still need to gather customeridentification information for monitoring oftransactions)

12

13