Trust industry reforms pushed

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is pursuing major reforms in the country’s trust industry as assets under management (AUM) jumped more than 41 percent to P4.6 trillion from January to March.

In his weekly virtual press conference, BSP Governor Benjamin Diokno said the regulator continues to enhance the regulatory framework for trust entities due to the industry’s pivotal role in the deepening of the country’s financial markets.

Diokno said key policy reforms for the industry form part of the Trust Business Model Initiative which aims to provide an environment conducive for financial innovation and growth, thereby allowing the BSP-supervised financial institutions (BSFIs) to be more responsive to the needs of the investing public.

“At the same time, the framework shall further emphasize the importance of good governance, effective risk management and strong consumer protection,” he said.

The BSP chief said upcoming issuances as part of the reforms include comprehensive investment guidelines for trust entities, enhancements to the onboarding and client suitability assessment processes, and guidance to better align the management of unit investment trust funds (UITFs) with international standards.

Diokno said the BSP is rolling out the initiative in several phases starting with the reduction of the minimum required amount for investment management accounts (IMAs) and expanding the suite of financial instruments that a comingled fund may be invested in via a circular issued in February.

He also said the next phase covers seven areas including amendments to general guidelines governing all accounts as well as to the specific regulations on UITFs and personal management trust.

He pointed out draft circulars covering the licensing framework for UITFs and providing a common framework for the conduct of account reviews by trust entities are now being circulated among major stakeholders for comments.

“The trust industry contributes to the financial system by providing professional fund and asset management services that are consistent with their clients’ risk appetites and investment objectives,” Diokno said.

Latest data showed the industry’s AUM jumped by 41.3 percent to P4.6 trillion as of end- March after plunging in the same period last year as the stock market dipped and clients’ preference shifted amid heightened market uncertainties due to the impact of the pandemic.

The trust industry accounted for nearly one-fourth of the total assets of the Philippine banking system. Funds are invested primarily in debt securities, equities, and deposits in banks. There are 30 trust entities operating in the country.

The 59 percent jump in the UITFs fueled the growth of the trust entities’ AUM in the first quarter.

“The notable growth in UITFs is a welcome development. The BSP recognizes the importance of UITFs as an avenue for small retail investors to participate in the securities markets. Certainly, the online accessibility of UITFs contributed to their growth,” Diokno said.

He said the stable growth of the trust industry reflects the continued confidence of investors in the fund and asset management business in the country.