Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said financial regulators will start its cross-sectoral risk assessment of the country’s financial conglomerates by the second quarter this year.
The BSP-led Financial Sector Forum (FSF) has recently established a Supervisory College via a Memorandum of Understanding (MOU). It is for the tighter scrutiny of the country’s systemic-sensitive financial conglomerates and it will have a pilot run between the months of April to June.
“After the MOU signing, the FSF targets to issue the implementing rules and regulations on the first quarter of 2022,” said Diokno in an online press chat on Thursday, Feb. 10.
He added that the first Supervisory College “is expected to be piloted during the second quarter of the year. In addition, a training program shall be developed and operationalized for the College members.”
The difference between the FSF’s Supervisory College and the existing inter-agency Financial Stability Coordination Council or FSCC is that the former will have a microprudential approach while the latter already conducts macroprudential surveillance to monitor for systemic risks.
The supervisory college for financial conglomerates has scheduled a pilot run in the second quarter of this year, according to Bangko Sentral ng Pilipinas (BSP) Governor and Financial Sector Forum (FSF) Chairman Benjamin E. Diokno.
Diokno, who is the chairperson of both the FSF and FSCC, said the MOU among FSF members such as BSP, Philippine Deposit Insurance Corp., the Securities and Exchange Commission and Insurance Commission, will enable coordination on the supervision of conglomerates.
“It is necessary to further strengthen the supervision of financial conglomerates given their interconnectedness and systemic importance,” said Diokno. The Supervisory College will foster more effective regulation of these entities and promote financial stability, he added.
Basically, the Supervisory College will enhance information-sharing, develop common understanding of risks, further improve risk assessment, foster a shared agenda for addressing identified risks, provide a common platform for communicating key supervisory concerns, and establish a synchronized supervisory plan related to financial conglomerate regulation.
The FSF has adopted the Tripartite Group definition of financial conglomerates since there is no Philippine law or regulation to define financial conglomerates when the BSP first began to monitor these groups which are “any group of companies under common control whose exclusive or predominant activities consist of providing significant services in at least two different financial sectors such as in banking, securities, and insurance.”
Meantime, in the same online briefing, Diokno reiterated the BSP’s commitment to lead efforts in pursuing the country’s financial stability.
“Our work from previous years has resulted in the establishment of a regional dialogue in Asia, the creation of a network for regional peers, and interactions with neighboring jurisdictions on capacity building and emerging areas involving financial stability,” he said. Diokno currently co-chairs the Financial Stability Board’s Regional Consultative Group for Asia or FSB-RCGA. The regional group has 17 jurisdictions in Asia.
The Philippines’ local version of the FSB-RCGA is the FSCC. The FSCC includes all the members of the FSF plus the Department of Finance.
Some of the BSP’s “timely policies” to manage risks to the financial stability include the FSCC-approved Systemic Risk Crisis Management (SRCM) framework
“The framework outlines the coordination of financial authorities should systemic risks escalate into a crisis, together with the general arrangement during normal and post-crisis conditions,” said Diokno.
“With the SRCM in place, the FSCC can better protect the Filipino people from systemic risk damages that can be worse if we are caught unprepared. The release of the SRCM will be announced soon,” he added.