Philippine central bank authorizes banks to set up trust companies

Which will perform independently of their parents.

The central bank of the Philippines (BSP) has a new rule that will allow banks to establish standalone trust corporations that will perform independently from their parent banks.

According to a research note from Maybank Kim Eng, the BSP says certain benefits from this are that trust corporations will be subject to lower supervision fees and no reserve requirements.

Likewise, trust corporations will be exempt from DOSRI and single borrower’s limits. Trust corporations must have minimum capitalization of PHP100m at inception, which is expected to increase to PHP300m in five years.

Here's more from Maybank Kim Eng:

Trust corporations are expected to implement a sound risk management policy and ensure good corporate governance. Also, the existing Trust Rating System developed by BSP will be revised to take into account capital adequacy.

BSP believes this new rule will increase competition in the asset management business and enhance governance standards while the investing public benefits from more innovative trust products and services.