BSP sets rules on compensation of NSSLA officials

THE BANGKO SENTRAL ng Pilipinas (BSP) has issued guidelines on the compensation of trustees, officers, and employees of nonstock savings and loan associations (NSSLAs).

The Monetary Board in Resolution No. 1012 dated Aug. 29 approved amendments to its Manual of Regulations for Non-Bank Financial Institutions to add new sections containing rules on how these NSSLA personnel are compensated, according to BSP Circular No. 1200 Series of 2024 dated Sept. 6 posted on its website.

The guidelines are meant to ensure that NSSLAs operate “on a sound, stable, and efficient basis, and to curtail or prevent acts or practices which are prejudicial to their members’ interest.”

The rules also outline the minimum requirements and the standards under which NSSLAs may organize and operate.

The BSP said compensation and per diem shall be considered “reasonable or not excessive” when the amounts paid are proportionate to the services performed and in consideration of an individual’s qualifications, scope of work, compensation history, the financial condition of an NSSLA, and economic conditions, among others.

An NSSLA’s board of trustees shall establish a “sound” policy on compensation and per diem that the association can use to recruit or retain their workforce.

“Said policy shall appropriately motivate personnel and discourage excessive risk taking. This can be achieved through timely assessment of individual work performance and competencies based on set standards,” the BSP said.

“Results of the individual work performance assessment/appraisal and not merely the number of loans made or on the interest of fees collected thereon can be used in the NSSLA’s compensation related decisions,” the central bank added.

Under the guidelines, increases in the compensation of an NSSLA trustee and trustee-officer of above 10% annually will require BSP approval.

Only NSSLAs that meet prudential criteria set by the BSP can apply for an increase in annual compensation of above 10%, including: having a composite rating of at least three “stable” in the latest central bank examination report; a capital-to-risk assets ratio of at least 10%; not incurring continuous losses from operations for the past two years; and having no major supervisory concerns, among others.

These associations’ trustees and trustee-officers are not allowed to be part of the determination of their own per diems or compensation, the BSP added.

The total annual accumulated compensation of all NSSLA board members received in their capacity as trustees should not exceed 10% of the association’s net income before tax for the preceding year.

An NSSLA’s board of trustees should also be transparent to its members about all compensation and per diem received.

The BSP said the Monetary Board may regulate or restrict the payment of compensation “to protect the funds of depositors and creditors” if circumstances warrant, such as if an NSSLA is found engaging in acts prejudicial to the interest of its members, if compensation packages are not reasonable, and if an NSSLA is in an “unsatisfactory” financial condition.

NSSLAs will have one year to comply with the new guidelines. — AMCS