(Bloomberg) — A scandal involving ghost employees at the Philippine central bank threatens to shake up the monetary authority at a time when policy decisions are crucial amid elevated inflation and a weak currency.
The Bangko Sentral ng Pilipinas started investigating in April a report from a whistleblower alleging that two members of its rate-setting panel have under their payrolls individuals who weren’t working for the central bank, according to two BSP officials who asked not to be named because the information isn’t public. The probe is expected to conclude in the next few weeks, one of the officials said.
The central bank is facing potential vacancies in its seven-member Monetary Board as the inquiry into the presence of the ghost employees nears completion.
The central bank’s investor relations group didn’t immediately respond to requests for an official statement.
The controversy, also reported in local media, places under scrutiny the reputation of the central bank and its policy-making body responsible for the conduct of monetary policy and financial system supervision. The issue unravels as the Southeast Asian economy grapples with its highest borrowing cost in 17 years, a currency near record low, and sticky inflation.
“If you remove the two members, it can affect decision making and the varied points of view of the board,” said Dan Roces, chief economist at Security Bank Corp. in Manila. “If they’re going to be replaced, they need to be made soon, especially now in this current environment,” he said.
The ghost employees will be removed from the BSP’s payrolls and asked to return salaries dating back several years, but the fate of the two policy board members rests on President Ferdinand Marcos Jr., according to the two officials.
Under the New Central Bank Act, the president may remove any Monetary Board member for various reasons, including fraud or acts that harm the BSP’s interests.
Monetary Board members — comprising the governor, five full-time members from the private sector and one from the Cabinet — serve a term of six years, and can be reappointed.
The central bank’s charter requires all decisions of the Monetary Board to have the concurrence of at least four members. The minimum four applies even for a move to close a bank, but five votes are needed to extend an emergency loan.
–With assistance from Andreo Calonzo.
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