THE CENTRAL BANK is proposing a maximum rate of increase for compensation packages of officials and employees of nonstock savings and loans associations (NSSLAs) to ensure financial soundness is maintained.
The draft circular posted on the website of the Bangko Sentral ng Pilipinas (BSP) also seeks to impose compensation restrictions if NSSLAs’ financial condition is tight.
“The board shall establish a sound policy on compensation and per diem, as herein defined, that can be used by the NSSLA to attract/recruit and retain highly qualified workforce.
Based on the proposal, increases in the compensation of trustee and trustee-officers that exceed 10% per annum will need prior approval from the BSP.
Accumulated compensation of all board members should also not exceed 10% of the NSSLA’s net income before tax during the preceding year, in accordance to the Revised Corporation Code.
The BSP said a compensation committee will be in charge of determining thresholds and limits in line with existing regulations. The body will be composed of senior officers who are not trustees or other independent of the organization.
NSSLAs that seek a compensation increase of beyond 10% for their officers need to seek prior approval from the BSP.
These NSSLAs may only apply for approval if the increase is in line with existing laws and has been approved by the majority of their members; the organization has a composite rating of at least 3 “stable”; its capital-to-risk assets ratio is at 10% minimum.
Other conditions that should be met by an NSSLA before applying for a compensation increase of more than 10% include not having continuous losses for the past two years; no major supervisory concern; and not prejudicial to the interest of members.
For its part, the Monetary Board may restrict compensation of NSSLAs for its trustees and officers in order to ensure funds of depositors and creditors are protected.
This will be the case when NSSLAs are found to be in an unsatisfactory financial condition, which could be seen through their impaired capital or if they post a three-year streak in losses. Organizations found to be engaging in practices prejudicial to its members may also be restricted from providing compensation for its officials.
Stakeholders are given until March 27 to give their feedback to the BSP regarding the proposed circular. — Luz Wendy T. Noble