MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) said the country needs a stronger insolvency framework to reduce the losses incurred by the bankrupt firms’ creditors.
“We really need a stronger insolvency framework and this weakness is not only true for the Philippines but it’s also true for other countries, as highlighted by the Asian financial crisis (in 1998),” BSP Governor Amando M. Tetangco Jr. told reporters on the sidelines of the Forum on Asian Insolvency Reform.
“A number of reforms have already been implemented but the task now is really to improve the quality… not only the framework but also the implementing agencies have to be empowered,” Tetangco said.
Tetangco explained that weak insolvency systems were one of the key problems of Asian markets that eventually led to the Asian financial crisis in 1998.
Tetangco said the government needs to focus on the proceedings following a company’s declaration of bankruptcy, specifically the liquidation and division of remaining assets to creditors.
“Having a well-developed insolvency law is important for the development of an effective insolvency system. But this is not enough, as we have seen in countries that have modernized their laws. We need to ensure its proper, effective and timely implementation,” Tetangco said.
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“It is equally important thereforeto focus on developing strong institutions that would interpret and implement the laws. Combined, a well-developed insolvency law and strong institutional capabilities provide a good foundation for a smoothly functioning insolvency system,” he added.
“Among others, we need appropriate accounting and auditing standards; transparent and accountable court systems and better insolvency administrators; enhanced corporate governance in corporations and financial institutions; and effective regulatory oversight,” Tetangco said.
