BSP Approves Separation of Trust Corporations from Banking Operations
The Monetary Board (MB), the policy-making body of the Bangko Sentral ng Pilipinas (BSP), has approved the rules and regulations governing the establishment of trust corporations.
As provided in the new guidelines, a trust corporation is primarily created, and duly authorized by the MB to engage in trust, other fiduciary business and investment management activities. It can perform the same functions as those presently undertaken by the trust departments of banks. By creating a separate corporate vehicle, however, the new rules allow market participants other than banks to provide trust services within the appropriate enabling framework and governance standards.
The trust corporation will have a required minimum capitalization of PhP300 million which will increase as Assets Under Management exceed PhP20 billion. To protect the interests of the public, directors and senior officers of the trust corporation are held to a minimum standard of actual industry experience. Market practitioners who already perform related functions but may not have been engaged directly by trust departments may likewise consider taking the tests given by accredited providers to demonstrate the expected competencies.
Banks currently with trust departments may spin off said department into a trust corporation. However, banks must choose between maintaining the trust department or providing the service through the trust corporations. Under the new guidelines, banks can only choose to operate one mode but not both. Should a financial institution opt to operate a trust corporation, said financial institution is limited to owning two trust corporations under the guidelines.
A key feature of the trust corporation is the treatment of the Single Borrower’s Limit (SBL). The new rules provide that for a trust corporation which is owned by a bank or quasi-bank, the Assets Under Management of the trust corporation do not form part of the SBL calculations for the parent bank/quasi-bank. This is in recognition that the arrangement between trustor-trustee is not a debtor-creditor relationship against which the SBL provisions apply. To prevent possible regulatory circumvention nonetheless, a bank or quasi-bank will not be allowed to be a trust account holder in any trust corporation.