Banks’ trust holdings rise 8.2% in Q1

The banking system’s trust holdings increased by 8.2 percent year-onyear to R2.51 trillion as of end-March, indicating clients’ confidence in banks’ investment management continues to grow.

The big banks accounted for R2.46 trillion of assets under management, higher compared to same time in 2017 of R2.27 trillion.

Including all banks such as thrift banks, data from the Bangko Sentral ng Pilipinas (BSP) showed that cash and due from banks jumped to R2 trillion from only R178.17 billion end-March 2017 with the additional liquidity in the financial system, while deposit in banks went up by 17.5 percent to R785.46 billion.

The industry's net financial assets, in the meantime, also increased by almost 12 percent year-on-year to R1.25 trillion while net loans were steady at R42 billion total during the period.

Banks’ unit investment trust funds continue its decline, it dropped to R555.39 billion as of end-March from R637.37 billion last year. Pre-need trusts rose 2.85 percent to R78 billion.

The universal and commercial banks accounted for R550.77 billion of UITFs and R77.30 billion for pre-need.

Last year, the BSP issued new rules on trust entities’ management of clients’ asset and investment portfolio with an emphasis on more transparency.

The changes on lending and investment disposition and the reporting requirements for discretionary and nondiscretionary accounts. The revised policy is consistent with the thrust of the BSP to adopt a differentiated regulatory approach based on the major business activities and investment mandate of trust entities particularly “trust,” “advisory,” “advisory with execution” and “execution only” mandates.

The central bank said this should improve operational efficiency and “promote greater investor confidence in the financial markets.”

BSP Circular No. 966, “Rationalizing the Regulatory Requirements of Trust, Other Fiduciary and Investment Management Accounts under Discretionary and Non-Discretionary Mandates) was approved in July last year.

The central bank has said that trust entities will have “more latitude” in handling clients’ funds with higher standards in placed in how to manage accounts and protect investors.

The BSP is critically monitoring the trust industry because – like banks – trust companies are vulnerable to systemic risks.