The Bank Examination and Supervision is

done internally and externally.

› External Control: Government

› Internal Control: Within the Bank

Management

1) Conformity of Banks with banking laws

and that of rules and regulations of the

Central Bank and other Government

agencies.

Non-compliance can lead to closure or a

reprimand from the supervisory agencies.

2) Determine how sound the bank is financially. Unsound and unsafe practices of banks:

Granting of loans with inadequate credit information.

Granting of big loans to a single interest.

Receiving collaterals of inferior qualities.

Laxity in collection of loans.

Payment of excessive salaries or dividends.

Keeping of incomplete or inaccurate records.

Payment of unreasonably high rates on time deposit.

Supervision and Examination sector of

BSP

› Charged with the responsibility of

conducting spot and regular check on all

banking institutions.

› It is headed by the Deputy

Governor.

Sec. 25: Supervision and Examination

Sec. 26: Bank Deposits and Investments

Sec. 27: Prohibition

Sec. 28: Examination and Fees

Sec. 29: Appointment of Conservator

Sec. 30: Proceedings in Receivership and

Liquidation

Sec. 31: Distribution of Assets

Sec. 32: Disposition of Revenues and Earnings

Sec. 33: Disposition of Bank Franchise

Sec. 34: Refusal to make reports or Permit examination

Sec. 35: False Statement

Sec. 36: Proceedings upon violation of this Act and other Banking laws, Rules, and Regulations, Orders or Instructions.

Sec. 37: Administrative Sanctions on Banks and Quasi-Banks

A committee on Examination and

Supervision is usually created to effect

internal control.

“The purpose of Internal audit and

controls is to shield the weak from being

tempted, to prevent the strong from

opportunism, and to protect the

innocent from being involved”.

Embezzlement Means the taking of funds that belongs to depositors and

customers.

Defalcation Refers to misappropriation of funds which belong to stockholders

such as interest incomes, fees, and commissions.

Peculation Would mean all kinds of embezzlement, defalcation, or

misappropriation of funds.

Peculator.

Examination Refers to the review and analysis of the assets and liabilities of a

bank to determine their existence, values ad true ownership, and to ascertain that everything in regard to said assets and liabilities is in order.

a) Gambling

b) Pride and Envy

c) Living beyond one’s income

d) Unsound Salary practice

e) Poor employee relations

f) Immorality

The most effective prevention against

peculation is the establishment of sound

and adequate internal controls.

1) Dual control

2) Procedures and routines

An ounce of prevention

is worth a pound of cure.