Public Bank must take 236 steps to rid itself of financial irregularities

The General Supervisory Authority for Financial Entities (Sugef) asked BP to draw up an action plan after a risk-based supervisory assessment, which found loopholes such as the constant turnover of directors. The board has elected three chairmen in 15 months, and the government rejected the four members elected by the workers’ congress. Instead, he appointed four replacements. temporary Then left them indefinitely.

As stated in document SGF-1981-2024 dated June 26, a copy of which you have nation, On February 6, BP’s board approved corrective measures that were approved by regulators.

“Determine that the Action Plan meets the effectiveness attributes of SUGEF Protocol 24-22 (Regulated entity qualification). Accordingly, the regulator approved the action plan sent by the banking entity and set a maximum deadline of December 2024 for its compliance, except for activities related to continuous optimization of processes, for which a maximum deadline of December 2025 was set,” Sujeev’s letter detailed.

Sugef will review and approve the progress of compliance with each measure to determine when public banks can return to normal levels, the head of the entity, Rocío Aguilar, and the director, Alexander Arriola, confirmed in an interview with this newspaper that the supervisory body is monitoring the situation.

“The plan does have to address that. Based on the issues that were noted (in the assessment of BP) that had to be addressed, the entity will remain at a level of non-compliance until it continues to comply with the plan,” Aguilar explained.

The official added that the rating will not be revised until the regulator is satisfied with the effectiveness of the solutions proposed by Public Bank to correct the identified deficiencies.

The public bank reported through its communications office that the action plan was approved by the regulator last March and all measures are being implemented.

“Since March till date, the central bank has made nearly 45% progress in implementing these measures, in line with the established timeline, which stipulates a compliance date of 2025,” the agency stressed.

BP added that the findings on corporate governance noted by Sugef reflected a “very idiosyncratic” body, including the make-up of the board and the management of the workers’ assembly itself, which is made up of 290 representatives from 10 different sectors.

“By the way, the political composition of this bank has never affected the financial indicators of this entity so far,” got a written response.

BP’s board consists of three representatives appointed by a government committee and four representatives of the workers’ congress, who must be approved by the executive.

Sugef conducted an assessment based on Regulatory entity qualifications, The law, which came into effect last year, reviews each audited institution based on the quality of its corporate governance, compliance with laws and regulations, the quality of its risk management, and an assessment of its economic and financial conditions.

The regulations set a rating range of 1 to 4 for each level, with 1 indicating an adequate level and 4 indicating weak. The regulations state that when two or more categories are rated at level four, the assessment agency moves from normal to abnormal.

For violation 1, the entity must present a remediation plan to correct the identified deficiencies, which is what BP did, and according to the information released, the company received a level 4 in the corporate governance and legal and regulatory compliance categories. nation.

Blood pressure correction program

One of the strategies proposed by the financial entity, which this newspaper has learnt, is to prepare quarterly reports on issues discussed in the board of directors and send them to alternate directors so that they are informed.

In addition, a minimum suitability requirement profile will be designed for all members of the academic community of BP and its subsidiaries. In addition, a program will be implemented to bridge the gap among managers to enhance their skills and knowledge for effective and more technical decision making.

BP’s proposal details “the preparation of regular internal communications to enhance understanding of corporate governance, prioritising issues relating to the responsibilities of management bodies, control bodies and line of defence members”.

The entity also recommended developing an internal communication plan to reinforce the importance of corporate governance management and accountability.

In addition, a risk culture plan will be developed to define the responsibilities of members of the board and senior management; and the group will establish a dedicated department to manage legal and regulatory compliance controls.

The Sugef Director of Supervision noted that the proposed actions are aimed at correcting weaknesses in the governance and suitability of Public Bank.

“In Breach 1, a lot of the actions that entities are required to take are short-term, although we’re not necessarily talking about months, it could be a year or longer,” Arriola stressed.

The official added that the entity would be removed from the given rating until the effectiveness of the proposed and implemented measures is assessed.

Last February, nation disclose Jorge Eduardo Sanchez CibajaCurrently serving as Chairman of the Board of Directors of Public Bank and elected by the government as a national representative, but does not meet the experience requirements for the position. This is shown in 2023 Suitability Assessment Report of the Board of Directors, its Members and Senior ManagementOperated by KPMG and applies to Public Bank and its subsidiaries.

In addition, the Sugef audit found that a total of 21 out of 30 members The board members of the Public Bank subsidiary failed to meet the personal suitability criteria established to hold their positions.

Public Bank is one of them Four banking entities are classified as systemic banking entities This means that if, under certain circumstances, its operating conditions deteriorate or it falls into bankruptcy, it has the ability to affect the entire financial system and the national economy.

First evaluation

The regulator ordered Public Bank to submit quarterly reports at the end of April, July, October and January next year to assess the progress of rectification.

The first progress report was approved at the 6,106th regular meeting of the public bank’s board of directors on May 15. “As shown in this monitoring report, the compliance rate for activities included in the SUGEF 24-22 protocol care plan timeline is 21% so far, while the average progress is 33%,” said the BP Regulatory Authority.

According to the first report, as of March last year, the entity had taken 25 actions covering various areas of the institution, such as general management, enterprise risk management, financial management, etc.