The Bangko Sentral ng Pilipinas (BSP) has amended the exposure limits for unit investment trust funds (UITFs), allowing funds invested in exchange-traded equities to take on larger exposure to a single entity or issuer under certain conditions.

Under the BSP’s Circular No. 1234 signed by BSP Governor Eli M. Remolona Jr. last May 20, the combined exposure of a UITF to any entity will generally remain capped at 15 percent of the fund’s market value. However, UITFs invested partially or substantially in exchange-traded equity securities may now have exposure of up to 20 percent to a single entity or issuer.

The BSP said any exposure beyond the original 15-percent ceiling up to the new 20-percent limit should be “solely in the form of investments in exchange-traded equity securities of the same entity/issuer.”

Meanwhile, equity index-tracking UITFs may exceed the 20-percent limit if the benchmark weighting of a specific index component issuer is higher than that threshold.

UITFs are pooled investment products managed by banks or trust entities that allow investors to collectively invest in various financial instruments such as bonds, equities, and money market assets.

The new circular amended Section 414 of the Manual of Regulations for Banks (MORB) and Section 414-Q of the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI).

The BSP also required trust entities (TEs) to remain “cognizant of the aggregate investments of a UITF in any entity and its related parties,” adding that they should have “adequate tools and controls in place to effectively manage the overall risk exposure.”

Under the circular, trust entities must immediately notify the BSP should exposure limits be breached. The notice should indicate the date of the breach, the factors leading to it, and the corrective actions undertaken by the trust entity.

Breaches arising from mark-to-market movements or extraordinary circumstances such as abnormal redemptions must be corrected within 30 days, while all other breaches should be addressed immediately.

The circular will take effect 15 calendar days after publication either in the Official Gazette or in a newspaper of general circulation.

The latest issuance forms part of a broader series of BSP regulatory refinements on UITFs under Remolona.

Earlier, BSP Circular No. 1152 issued in 2022 introduced sweeping reforms covering UITF classifications, licensing rules, disclosures, income distribution policies, benchmark requirements, and investor protection measures. Among others, the 2022 circular established updated definitions for money market, fixed income, multi-asset, and equity funds, while also setting rules for distributing funds, feeder funds, and multi-class funds.

In 2023, Remolona signed BSP Circular No. 1178, which further amended the UITF framework by introducing guidelines governing the use of benchmarks in presenting UITF returns. The circular required trustees to adopt policies on benchmark selection, review, and governance, while imposing additional disclosure requirements in key information and investment disclosure statements (KIIDS).

Meanwhile, BSP Circular No. 1220 issued by Remolona last year amended rules governing the access of personal equity and retirement account (PERA) UITFs to the BSP’s securities. Under those revised rules, PERA UITFs were exempted from the 10-percent limit imposed on UITFs with non-resident participants investing in BSP securities, recognizing that PERA participants may include overseas Filipinos (OFs) classified as non-residents.