The Bangko Sentral ng Pilipinas (BSP) has lowered the minimum size of investment management account (IMA) held by banks and non-banks to just P100,000 from P1 million.
The BSP’s Monetary Board approved Circular No. 1109 during its regular meeting last week. The new circular not only reduced the minimum size of an IMA but also expanded the allowed securities that BSP considers as eligible investment for commingled funds held by BSP-supervised financial institutions (BSFIs) as investment management activities.
The amended circular, signed by BSP Governor Benjamin E. Diokno on February 4, said BSFIs will determine the IMA minimum by a client so long that it is at least P100,000 initial contribution.
Diokno in the circular memo said banks and non-banks “should consider the adequacy of their risk management processes and operational capabilities in setting the minimum amount for their lMAs.”
The “carrying balance “ after the initial contribution should not fall below the minimum except if there are investment losses, in which case the IMA client will be exempted from this requirement.
As for the commingling of funds, the minimum amount is also P100,000 from the previous P1 million.
Commingled funds before was allowed if the funds will be invested in government securities or registered commercial papers. The new circular amended this section to specify securities issued by the National Government, exchange-traded equities, fixed income securities and commercial papers. These securities, as before, should be registered with the Securities and Exchange Commission and issued by
banks that are locally incorporated except for securities issued through the trust units or securities issued by other sovereigns exempted from SEC registration.
Commingling of funds, which refers to the “act of combining funds from multiple lMAs for the sole purpose of investing in qualified asset/s”, have stricter rules such as the maximum number of lMAs that could be commingled into a single fund, as determined by the investment manager, will be based on its own operational capability to commingle lMAs.
“The investment manager shall determine that it possesses the operational
capability to manage the accounts participating in commingled funds,” according to the circular.
The investment manager should be able to assess the following: sufficiency of personnel handling commingled lMAs; capability of existing systems to accurately and readily identify the allocation of each investor in a commingled fund and generate the following information on a per IMA basis, at a minimum: accruals, coupons received, dividends received, mark-to-market gains or losses and required reports; and ability to conduct periodic reconciliation of relevant records.
The circular also made clear that an investment manager must have adequate policies, procedures, and control mechanisms for commingling of funds such as compliance to the rules on lending and investment disposition and on tax exemptions. The provision on IMA lending and investment disposition was not amended.
IMAs are handled by banks’ trust entities and trust corporations. Big banks’ trust departments during the pandemic reduced their investments in financial assets in the first months of the lockdown period to manage their portfolio returns but the BSP said the quality of industry assets continue to be satisfactory. These liquid trust assets are highly marketable securities and deposits in bank.
Banks’ trust, other fiduciary business and investment management activities as of end-September 2020 went up by 6.20 percent year-on-year to P3.048 trillion.