The Bangko Sentral ng Pilipinas (BSP) will require the country’s financial conglomerates or conglomerates with banking business to report additional information on its project finance exposures.
In a draft circular, the BSP is proposing amendments in the prudential reporting of BSP supervised financial institutions (BSIs) on related party transactions and project finance exposures.
More data on project finance exposures will mean additional information on contingent financing for infrastructure projects funded through project finance.
The new circular will basically require a conglomerate structure to submit additional information of material related party transactions (RPTs). This will involve universal and commercial banks reporting RPTs of their non-bank financial subsidiaries and affiliates.
The BSP said supervised non-bank financial subsidiaries and affiliates “are therefore expected to report their material RPTs to the parent bank or affiliated bank, which in turn shall report the same to the Bangko Sentral.”
There will be revised reporting templates for this. The report on conglomerate structure will have a reporting period beginning on Dec. 31, 2025 while the report on material RPT will start on June 30, 2025.
The draft circular is currently circulated among big banks and conglomerates. The BSP has set a feedback deadline of Oct. 16, 2024 for comments and suggestions before approving the proposed guidelines.
The BSP has been monitoring the interrelationship between firms in a conglomerate structure as this set up is usually vulnerable to a possible contagion which happens if a company or entity with financial problems will affect other firms within the conglomerate group.
Based on a BSP paper, a commonly accepted definition of a financial conglomerate is “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”. This definition does not include mixed conglomerates that have commercial and industrial services, in addition to financial services.
The central bank currently supervises 44 universal and commercial banks or the big banks.
The BSP does not disclose which of the 44 big banks are domestic systematically important banks (D-SIBs) which are banks that are “too big to fail”. Most of the country’s big banks are part of conglomerate structures.
Banks considered as D-SIBs are those whose distress or disorderly failure would cause significant disruptions to the wider financial system and economy.
While the BSP does not publicly name D-SIBs, the 10 biggest banks in the country are identified as such, including BDO Unibank Inc., Metropolitan Bank and Trust Co., Bank of the Philippine Islands, Rizal Commercial Banking Corp., Philippine National Bank, Union Bank of the Philippines, China Banking Corp. and Security Bank Corp.
The two government-controlled financial institutions Land Bank of the Philippines and Development Bank of the Philippines are also considered as D-SIBs.