Steady growth for banks’ trust business in 2018

Published April 4, 2019, 12:00 AM

by manilabulletin_admin

By  Lee C. Chipongian

Banks’ trust holdings was at P2.56 trillion at end-2018, barely changed from the previous year’s P2.54 trillion, based on data from the Bangko Sentral ng Pilipinas (BSP).

MB file photo.
MB file photo.

The BSP maintained that banks’ investment management business, as evidenced by steady growth in trust activities, continue to grow with big banks accounting for P2.51 trillion of the total assets, and thrift banks with P47.63 billion.

The banking system’s cash and due from banks fell significantly in 2018 to P1.27 trillion from P1.99 trillion or down by 36.32 percent. Deposit in banks, in the meantime, went up by almost six percent to P834.95 billion from P789.47 billion.

The trust industry’s net financial assets also increased by 10.45 percent in 2018 to P1.40 trillion against P1.27 trillion in 2017, while net loans slipped 3.49 percent to P40.43 billion from P41.90 billion.

Banks’ unit investment trust funds continue its decline, it was down by 28.34 percent year-on-year as of end-December 2018 to P413.46 billion while pre-need accounts dipped 0.30 percent to P78.13 billion.

Overall trusts account fell by 17.43 percent to P971.79 billion from P1.17 trillion last year, according to the BSP.

At the end of 2018, the BSP amended anew its regulation on banks’ trusts investments by allowing it to invest money market funds in securities issued by the National Government.

A BSP circular cited a provision in the “Basic Standards in the Administration of Trust, Other Fiduciary Accounts and Investment Management Accounts” which were changed for “conservative” clients.

According to BSP Circular No. 1020, trust entities may invest their existing money market UlTFs for conservative clients in securities issued by the government with conditions, such as that “existing participants in the said money market UITFs will be immediately notified and be allowed to withdraw their participations within reasonable time prior to such investment but in no case less than ten banking/business days from notification.”

Under the amended circular, the BSP will have to be notified of any plan rules’ amendments within 30 banking or business days.

By BSP description, a conservative client is one who wants an investment strategy where the primary goal is to prevent the loss of principal, and where the client prefers investment grade and highly liquid assets, government securities, Republic of the Philippines’ bonds, deposits with local banks/branches of foreign banks operating in the Philippines, and/or deposits with financial institutions in any foreign country, said the BSP. Investment grade credit rating should come from a reputable international credit rating agency.