The banking sector’s trust holdings rose 9.84 percent as of end-June to P4.063 trillion compared to P3.699 trillion same time last year, according to Bangko Sentral ng Pilipinas (BSP) data.

Banks’ trusts under management accounted for about 17.5 percent of the banking system’s total assets. These are considered “highly liquid” assets in the form of investment in securities and deposit in banks.

A trust is an arrangement whereby a person called a trustee is appointed by a person called a trustor to administer, hold and manage funds and/or property of the trust or for the benefit of a beneficiary.

The big banks or the universal and commercial banks accounted for bulk of trust holdings at P4.036 trillion while the thrift banking sector have P27.617 billion of the total.

Of the big banks, the universal banks manage P3.384 trillion while commercial banks have P652.277 billion. The difference between the category of a universal bank versus a commercial bank is how the General Banking Law defines them. A commercial bank has an additional function of an investment house while a universal bank has more authority in that it is allowed to invest in non-allied undertakings and can own up to 100 percent its own thrift and rural bank.

The industry’s asset structure is largely influenced by the 45 big banks which is almost 60 percent of gross loans, about 25 percent of total financial assets and the rest are cash and due from banks.

As of end-June, banks’ trust entities have cash and due from banks of P469 billion, up by 38.76 percent compared to P338 billion same time in 2022. Deposit in banks totaled P1.070 trillion.

Net financial assets totaled P2.405 trillion which was slightly lower or 0.54 percent down from P2.418 trillion in the previous year. Net loans also dipped 0.14 percent to P76.686 billion.

Under total accountabilities, banks’ trust assets fell 13.45 percent to P1.428 trillion from P1.65 trillion in 2022.

As of end-June, unit investment trust funds (UITF) held by banks declined by 41.16 percent to P495.238 billion versus P841.721 billion last year, considering the BSP allowed more entities to invest in UITF in 2022.

As for employee benefit and pre-need, these increased by 11.74 percent and eight percent year-on-year, to P353.026 billion and P91.808 billion. Personal trusts also went up by 15.21 percent to P379.893 billion.

Meanwhile, agency trusts under total accountabilities totaled P2.023 trillion, up by 34.15 percent compared to end-June 2022 of P1.508 trillion. The special purpose trust reported a significant increase of 115 percent to P1.329 trillion from P618 billion last year.

Based on BSP data, in 2022, trust entities of banks traded a total P1.8 trillion of BSP securities.

Last year, the BSP allowed trust entities of banks to buy BSP securities or bills in the secondary market to counter the effect of higher excess liquidity.

The BSP securities are monetary instruments that help the central bank to absorb liquidity in the financial system. It has recently added a 56-day tenor as catch basin after the BSP cut banks’ reserve requirements ratio on June 30.

Trust entities may purchase securities in the secondary market for any UITF in which the share of net assets of non-residents does not exceed 10 percent of the net assets of the fund. This effectively improved the tradability and viability of BSP securities as a highly liquid instrument, thus allowing for better price discovery and monetary policy transmission. 

The BSP currently monitors 30 trust entities owned by banks.