BSP Drastically Reduces Investment Account Size – Manila Bulletin
The Bangko Sentral ng Pilipinas (BSP) lowered the minimum investment management account (IMA) size held by banks and non-banks to just P100,000 from P1 million.
The BSP Monetary Council approved Circular No.1109 at its regular meeting last week. The new circular not only reduced the minimum size of an IMA, but also extended the authorized securities that BSP considers eligible investments for the combined funds held by financial institutions supervised by BSP (BSFI) as activities of investment management.
The amended circular, signed by BSP Governor Benjamin E. Diokno on Feb. 4, said BSFI will determine the minimum IMA by a client as long as it is at least P100,000 initial contribution.
Diokno, in the circular note, said that banks and non-banks “should consider the adequacy of their risk management processes and operational capacities to set the minimum amount of their AMIs”.
The “book balance” after the initial contribution must not fall below the minimum unless there are investment losses, in which case the IMA client will be exempt from this requirement.
Regarding the mix of funds, the minimum amount is also 100,000 P on the previous million P1.
Blended funds were previously allowed if the funds will be invested in government securities or registered commercial papers. The new circular amended this article to specify securities issued by the national government, publicly traded stocks, fixed income securities and commercial papers. These securities, as before, must be registered with the Securities and Exchange Commission and issued by
banks that are incorporated locally, with the exception of securities issued through trust units or securities issued by other sovereign states exempt from registration with the SEC.
Fund mix, which refers to “the act of combining funds from multiple ALMs for the sole purpose of investing in one or more qualifying assets,” has stricter rules such as the maximum number of AMLs that can be blended into a single fund, as determined by the investment manager, will be based on its own operational ability to blend ALMs.
“The investment manager finds that he has the
ability to manage accounts participating in mixed funds, ”according to the circular.
The investment manager should be able to assess the following: the sufficiency of staff responsible for managing the pooled ALMs; ability of existing systems to accurately and easily identify each investor’s allocation in a blended fund and generate the following information on an IMA basis, at a minimum: accruals, coupons received, dividends received, gains or losses measured at value market and required reports; and the ability to perform periodic reconciliation of relevant files.
The circular also clarified that an investment manager must have adequate policies, procedures and controls for the mix of funds, such as compliance with rules on lending and disposition of investments and on tax exemptions. The provision on IMA loans and the provision of investments has not been changed.
AMIs are managed by bank trust entities and trust companies. The fiduciary departments of the big banks during the pandemic reduced their investments in financial assets during the first months of the lockdown period to manage the returns on their portfolios, but the BSP said the quality of the industry’s assets continues. to be satisfactory. These liquid fiduciary assets are highly negotiable securities and bank deposits.
Bank confidence, other fiduciary activities and investment management activities at end-September 2020 increased 6.20% year-on-year to 3.048 trillion pesos.
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