Buck adverse pandemic impact
Banks’ trust units continue to resist the adverse effects of the pandemic with asset holdings of P3.461 trillion as of end-March this year, 23.60 percent higher than same period last year of P2.80 trillion.
Trust operations remain profitable, said the Bangko Sentral ng Pilipinas (BSP) in a report, adding that the trust operations of banks withstood the effects of COVID-19 pandemic.
The industry total assets increased as the universal and commercial banks’ total assets also grew by almost six percent in the first quarter. By portfolio distribution, it is mostly financial assets and deposits in banks.
As of end-March, trust units’ net financial assets grew by 27.80 percent to P2.165 trillion versus P1.694 trillion same time in 2020. Deposits in banks also went up by 17.21 percent to P902.309 billion from P769.834 billion.
“Investment in debt and equity securities remained high, indicating greater preference of trust entities for higher yielding instruments,” said the BSP. The trust industry also reported higher earnings after an increase in fees and commissions.
Banks’ trust liabilities also grew by 47.94 percent to P1.691 trillion from P1.143 trillion, of which unit investment trust funds (UITFs) accounted for P892.368 billion. UITFs went up by 58.75 percent year-on-year.
As of end-2020, there are 32 banks – a mix of big and small banks -- with trust licenses but only 25 have active trust departments. Fourteen of the 21 big banks with trust departments accounted for about 60.6 percent of total trust assets while trust corporations have 24.7 percent.
The BSP said that as an initial response to the COVID-19 uncertainties, the
trust industry “skewed towards safe” investments and “tempered” exposures in risky assets such as equity securities.
Last June 7, BSP Governor Benjamin E. Diokno signed Circular No. 1119 for “Amendments to Derivatives Regulations of Banks, Quasi-Banks and Trust Corporations” which eased and expanded rules in derivatives activities.
In the circular memo, Dioko said “these amendments demonstrate the continuing commitment of the BSP to support the development of the Philippine financial markets by further expanding the menu of financial derivative instruments available to banks, quasi-banks, trust entities and their clients for risk
management and diversification of exposures, and at the same time ensuring the prudent use of the same.”
In the meantime, the BSP is proposing stricter UITF rules such as on the establishment of UITFs and amendments to the features of UITFs. It is also proposing to change the requirements on plan rules and external audit for UITFs, and reinvestments of unit income of unit-paying funds. The draft UITF circular is awaiting banks and non-banks’ suggestions and recommendations. They are given until June 23 to submit feedbacks to the BSP.