IDEffective Insolvency and Creditor Rights Systems
According to a 2005 report by the Asian Development Bank, the legislative framework for the insolvency regime of the Philippines was outdated and inconsistent. The 2008 Country Commercial Guide of the U.S. Department of Commerce found similar fault with the existing regime. In recognition of the weakness of the existing system, the Philippines currently has two bills pending before Congress, respectively called the Corporate Recovery and Insolvency Act, and the Corporate Recovery Act. Attorney Frederick Holden finds in 2007 that, while both draft bills address weaknesses in the existing legislation, the second draft bill offers more innovative options, but suggests that either would help to bring Filipino practice more closely into line with international best practices. According to the Senate of the Philippines website, as of July 2007, the proposed Corporate Recovery and Insolvency Act was still outstanding.
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CPInternational Financial Reporting Standards
Accounting practices in the Philippines were assessed by the World Bank in 2001 using International Financial Reporting Standards (IFRSs) as the benchmarks for assessing the national standards. It was concluded that although the Philippine Accounting Standards (PASs) were mostly consistent with internationally accepted accounting standards, differences did exist. According to a subsequent World Bank report in 2006, most of the shortcomings identified in the 2001 assessment had been addressed. In 2005, the Philippine Accounting Standards Council, later superseded by the Financial Reporting Standards Council (FRSC), completed the adoption of new Philippine Financial Reporting Standards which are based on IFRSs. According to the FRSC, future IFRSs and amendments to IFRSs will be adopted in the country as they are finalized and issued by the International Accounting Standards Board (IASB). In line with this policy, in August 2008, the FRSC issued a Press Release announcing the adoption of the latest, 2008 amendments to IFRSs. Non-publicly accountable entities were given the option not to apply the new standards that became effective in 2005, but to apply instead the accounting standards that were effective in 2004. The World Bank commended the Philippine authorities for the progress achieved; however it was noted that there were certain problems with the actual implementation of the accounting requirements. It was recommended that an oversight board for quality control be created, and the technical strength and resources of the Philippine Institute of Certified Public Accountants (PICPA) be built up to improve compliance with the accounting requirements. The PICPA website reports that in August 2006, the FRSC formed the Philippine Interpretations Committee (PIC), tasked with assisting the FRSC in establishing and improving financial reporting standards in the Philippines.
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ENPrinciples of Corporate Governance
The 2006 World Bank Report on the Observance of Standards and Codes (ROSC) states that the legal and regulatory framework for corporate governance is "largely in place" in the Philippines. The Philippine regulators have undertaken significant legal and regulatory reforms over the past decade, in an effort to establish the foundations for good corporate governance. In 2002, the Securities and Exchange Commission (SEC) of the Philippines issued its own mandatory Code of Corporate Governance for Registered Issuers and Public Companies. In combination with the 2000 Securities Regulation Code, the adoption of IFRS for financial reporting, and the establishment of new requirements for training directors, a fairly comprehensive legal and regulatory corporate governance framework has been established. Nonetheless, the ROSC report points out that implementation and enforcement of this framework still fall short. The report cites two reasons for these shortcomings. First, the limited supervisory capacity of the SEC, and the Central Bank of Philippines (BSP). Second, the legal and regulatory framework's inability to provide sufficient incentives for the development of a transparent and efficient market. The equity market in the Philippines is considered very small and illiquid. This underdeveloped capital market combined with highly concentrated ownership structures, reflect a weak shareholder and corporate governance culture. The World Bank therefore, recommends enhancing institutional capacity of the SEC and BSP to enforce laws and regulations; strengthening enforcement of existing requirements, especially those related to independence of the board and management, protection of stakeholders, insider trading, and tender offer rules; and enhancing monitoring of compliance with IFRS. The report also highlights the importance of private and non-government initiatives in this context, to overcome the shortcomings in the promotion of a corporate governance culture and to encourage enforcement.
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CPInternational Standards on Auditing
Auditing practices in the Philippines were assessed by the World Bank in 2001 in order to evaluate the weaknesses and strengths of the auditing requirements, and to review the reporting requirements against actual practices. The team conducting the assessment concluded that there was a need to strengthen regulation of the auditing profession, enforcement powers, and coordination among the regulators, adopt International Standards on Auditing (ISAs), and to improve auditors' performance, among other issues. According to the 2006 Update to the assessment, most of the shortcomings identified in 2001 were addressed. In 2004, the PICPA adopted with only minor modifications the International Federation of Accountants' Code of Professional Ethics, and the Accountancy Act was revised the same year. By 2005, ISAs had been also fully adopted. The World Bank commended the Philippine authorities for the progress achieved; however it was noted that there were certain problems with the actual implementation of the auditing requirements. It was recommended that an oversight board for quality control be created, and the technical strength and resources of the PICPA built up to improve compliance. In December 2005, the Auditing and Assurance Standards Council (AASC) was established tasked with issuing auditing standards in the Philippines. According to its website, the AASC's objective is to harmonize national auditing standards with those of the International Auditing and Assurance Standards Board (IAASB). In line with this objective, as of 2009, the AASC was in the process of incorporating the changes brought about by the IAASB's Clarity Project into the national pronouncements.
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IDAnti-Money Laundering/Combating Terrorist Financing Standard
The Financial Action Task Force (FATF), in its report "Annual Review of Non-Cooperative Countries and Territories 2005-2006," indicates that owing to amendments in the 2001 Anti Money Laundering Act (AMLA), the FATF removed the Philippines from its list of Non-Cooperative Countries and Territories in 2005. The report adds that subsequent changes enacted by the Philippines' authorities resulted in the FATF ending of its formal monitoring of the Philippines in 2006. In its 2004 Article IV Consultation report (published in 2005), the International Monetary Fund points to a number of laws and amendments that are in place in order to prevent the financial sector from being used as a conduit of money laundering. A subsequent FATF report in 2008 lists the Philippines as one of the jurisdictions which have undertaken measures to implement the 40 Recommendations and 9 Special Recommendations. One the main concerns raised by several reports regarding the Philippines anti-money laundering/combating the financing of terrorism regime was the lack of an anti-terrorism law. However, according to a 2008 report by the U.S. Department of State, in 2007, the Philippines enacted an anti-terrorism law, the Human Security Act, that defines and criminalizes terrorism and terrorist financing. The 2001 AMLA established a Financial Intelligence Unit, the Anti Money Laundering Council, which is part of the Egmont Group.
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IICore Principles for Systemically Important Payment Systems
A Financial System Stability Assessment (FSSA) was conducted by the IMF on the Philippines in 2002, however, the findings of this report were only published in 2005 in the IMF's Report on Observance of Standards and Codes. At the time of the FSSA, in 2002, there were three systemically important payment systems (SIPS) in the country, namely, the Multi-transaction Inter-bank Payment System (MIPS2), the check clearing system, and the PDDTS - U.S. dollar gross systems. At the time of the FSSA, the IMF assessors concluded that the Central Bank of Philippines (BSP) had established a legal and regulatory framework for interbank clearing facilities, yet the legal language for finality of settlement was unclear. The assessors also noted that the responsibility of the BSP with regard to payment systems oversight and supervision was also unclear. In 2002, however, after the FSSA was completed, the MIPS2 was replaced by the Philippine Payments and Settlements System (PhilPaSS), a real time gross settlement, as the large value interbank settlement system. According to the information provided on the BSP's website, in designing and operating PhilPaSS, the BSP adhered closely to the Committee on Payment and Settlement Systems' Core Principles for Systemically Important Payment Systems (CPSIPS). Nevertheless, apart from this statement from the BSP, there is insufficient information publicly available regarding the Philippines compliance with the CPSIPS.
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