By Lee C. Chipongian
The banking sector’s managed assets totaled ₱2.87 trillion as of end-third quarter 2019, up 16.19 percent from same time in 2018 of ₱2.47 trillion, based on Bangko Sentral ng Pilipinas (BSP) data.
While deposits in banks were up slightly by 4.95 percent year-on-year to ₱849.80 billion, cash and due from banks continue to decline to ₱449 million, or down by 65.32 percent from ₱1.29 billion in the previous year.
Net financial assets and net loans, in the meantime, increased by 34.54 percent and 38 percent year-on-year to ₱1.67 trillion and ₱56.81 billion.
The banking system’s trusts holdings also went up by 14.83 percent to ₱1.16 trillion, of which unit investment trust funds or UITFs totaled ₱562.68 billion. UITF holdings increased by 18.78 percent from the same period in 2018 of ₱473.69 billion. Pre-need trusts, on the other hand, was up a bit by 2.63 percent to ₱78 billion as of the end of the third quarter last year.
The universal and commercial banks’ assets under management comprised of bulk of the banking total at ₱2.848 trillion during the period. The banking system’s asset structure is largely influenced by the 45 big banks which is almost 60 percent gross loans, about 24-25 percent financial assets and the rest are cash and due from banks.
The BSP’s last major regulatory decision involving banks’ trust investments was in November 2018 when it allowed trust units to invest money market funds in securities issued by the government, under the provision – “Basic Standards in the Administration of Trust, Other Fiduciary Accounts (TOFAI and Investment Management Accounts (lMA)” – which specified clients that are “conservative.”
The BSP said trust entities “may already invest their existing money market UlTFs for conservative clients in securities issued by the National Government” but with conditions.
These conditions include that the amended plan rules have been approved by the trust entities’ board of directors, and that existing participants in the said money market UITFs will be immediately notified and 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.
For the purpose of the circular amendment, it refers to conservative clients investing in UITFs specifically.