By Melissa Luz T. Lopez, Senior Reporter

TRUST FIRMS will soon be allowed to invest pooled funds in more instruments under new rules released by the Bangko Sentral ng Pilipinas (BSP), as it also adjusted reporting standards relative to decision-making protocols in place.

The BSP introduced two new investment instruments wherein trust firms can allocate assets under management, under Circular 966 signed by Governor Nestor A. Espenilla, Jr. on Tuesday.

Under the circular, trust entities may now invest funds in traditional deposit products offered by big banks operating in the Philippines, as well as in tradable securities issued by a foreign country. These add to the current options of investing in government-issued debt papers, state-guaranteed loans, debts secured via hold-out on deposits, and in fully-secured loans by real estate and chattels.

On the other hand, the BSP removed the provision that allows trust firms to place the funds in the central bank’s term deposit facility, in keeping with the phase-out of their access to the auctions which took effect June 30.

The new guidelines accord “greater flexibility” for trust entities in managing a client’s portfolio, while making a distinction between discretionary and non-discretionary arrangements.

“As the revised rules give trust entities more latitude in managing the funds of clients, higher standards are set in terms of managing the accounts and in protecting the interest of the investors,” the central bank said in a statement yesterday.

The changes cover trust entities which make the decision as to where they will deploy the fund placements on behalf of the client, which will have to report their balance sheet, income statement, investment activity, and return on investment to clients on a quarterly basis, on top of the details of the trust account under a firm’s watch.

On the other hand, non-discretionary deals — or trust firms which act based on an investor’s specific instructions — will simply have to “confirm” each purchase and sale transaction.

Both arrangements would need to disclose the issuer’s name, type of instrument, collateral, principal amount, market value, marking-to-market gains of losses, yield, amount of earning, transaction date, and maturity date.

“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 BSP added, noting that the new scheme would “improve operational efficiency” and “promote greater investor confidence.”

As investment avenues were liberalized, the BSP also streamlined the regulatory standards to make firms with discretionary powers more accountable of their investment decisions, versus the expectations set for those simply carrying out client instructions.

Trust firms must adopt a “disciplined” investment strategy, the central bank said, as it gave the asset managers six months to adjust internal procedures to align with these changes.

The regulator said the new policy is one of a series of reforms covering trust and other fiduciary businesses. In June 2015, the BSP allowed bank trust departments to scale up as stand-alone trust corporations focused on portfolio management and investment.

THE Bank of Commerce (BanCom) saw its bottom line soar by more than half last year primarily driven by its robust core businesses, with the bank projecting to double its consumer loans for 2017.

In its 2016 annual report published on its Web site, the lender reported its net income stood at P610 million in 2016, surging by 85% from the P330 million booked in 2015.

“The last five years saw the Bank’s continuing profitability as Bank of Commerce accumulated P3.6 billion in audited net income from year 2012 to year 2016, of which P610.4 million was earned during the year 2016, which is an 85.09% growth from the 2015 net income of P329.8 million. ROE (return on equity) increased to 3.5% in 2016, from 1.9% in 2015. Earnings per share likewise increased to P5.44 in 2016, from P2.94 in 2015,” BanCom stated.

“Underlying this is the growth in the bank’s core businesses, the effectiveness of managing the cost of intermediation, and constant revisit of the cost of operations,” it added.

Meanwhile, its net loans and receivables by end-2016 also rose 18.4% year-on-year to P49.8 billion, bulk of which were consumer loans, which went up 35.4% year-on-year.

Its consumer and credit loans accounted for 14.91% of its total loan portfolio at end-2016 from the 13.04% seen in 2015.

“Consumer loans are further expected to double in 2017, as branches become more proactive in account origination. The roster of corporate accounts increased in tandem with the middle market segment.”

“The bank will further focus on increasing consumer loans for 2017, fuelled by a more efficient and decentralized backroom, diversified yet balanced distribution channels, and a more aggressive sales team in the head office,” it added.

Meanwhile, BanCom’s net interest income reached P863.3 billion, up from 2015’s P847.2 billion.

For this year, the bank also sees its deposit production expanding after it opened new branches in provincial areas in the second semester of 2016.

As of end-2016, BanCom had a total branching network of 132 and 262 automated teller machines situated across the country. — JMDS

FINEX Folio — By Reynaldo C. Lugtu, Jr.

While watching my 19-year-old daughter at home with her friends playing some arcane group games, while checking on their smartphones, I couldn’t help but think about this next generation of youngsters, collectively known as Generation Z or the 16-19 years of age group. What’s going to be their impact to society? How will they be as consumers and workers? There has been much talk about millennials, but businesses and institutions should start planning around the emergence of this distinct generation, also known as Gen Z in short, which is numbering numbers approximately two billion globally and comprising more than 20% of the population in the Philippines.

In her seminal book From Boomers to Linksters: Managing the Friction Between Generations at Work, author Meagan Johnson defines Gen Z or those born after 2002 (and therefore post-millennial) as the Linkster generation, because it is the first generation to be linked into technology from day one.

This is one of the characteristics of Gen Zs, that is, they are dependent on technology, smartphones and apps, and social media for help and expertise. As a result, the skill of face-to-face communication will deteriorate; hence, potentially there will be more misunderstandings and miscommunications among this group and within others.

In addition, “as each generation is believed to get more progressively liberal and tolerant, it is likely Linksters will be highly socially aware and accepting”; hence, Gen Z “will be more accepting and probably take the idea of different lifestyles to a different level.”

With these basic characteristics of Gen Z, coupled with my interaction with them in the university, organizations, and at home, here are some of my evaluations of Gen Z:

1. They are better at multi-tasking and split-tasking. Compared to millennials, performing multiple tasks at the same time is hardwired in their brains. They can create a document on their computer, do research on their tablet, take notes on a notepad, while talking to a friend virtually. They can quickly and efficiently shift between work and play, real and virtual in bursts of intense attention with multiple distractions going on in the background.

Many attribute this behavior to having less focus. That is true, but then again it doesn’t mean they are less effective and efficient. They are just an evolved generation who can perform multiple tasks. Just think about how this kind of behavior will reshape the workplace. Newer collaborative tools and interfaces should be fast and efficient enough to accommodate multiple tasks. Imagine the need for advertisers to work differently.

According to a landmark study of Kantar Millward Brown titled “AdReaction: Engaging Gen X, Y and Z”, which surveyed more than 23,000 consumers in 39 countries, brands need to work hard to capture the attention of Gen Z when they are consuming media — either traditional or digital — or risk being missed altogether. Moreover, according to this study, advertisers need to use humor in their ads to effectively capture the attention of Filipino Gen Zs.

2. More early-starters. Many employers are predicting that more Gen Z students go straight into the workforce, opting out of the traditional route of higher education, and, instead finishing school online, will go straight into apprenticeships or internships.

As an example, my 19-year old daughter has mastered analytics programming and tools in a short span of time. Her employers tracked her in social media and urging her to work for them even before graduation. Since Gen Zs easily and quickly learn new things, while there’s a gap of skill in the workforce, employers are willing to get them to fill the skills gap.

3. They have higher expectations. Since they were born with technology at their hands, what was deemed to be inspiring, innovative, and unique are now taken as a given among teens.

Engaging Gen X, Y and Z highlights that Gen Z in the Philippines are harder to impress in comparison to the older generations. According to the Kantar Millward Brown study, they expect more from brand advertising and are less easily impressed with new formats such as augmented reality or sponsored lenses than previous generations, favoring humor as the key characteristic of a successful ad.

4. They are more entrepreneurial. My daughter shared that many of her classmates have start-ups, some already successful. Gen Z’s access to technology and tools, and their ability to process multiple information has resulted in an entire generation thinking and acting more entrepreneurially. They desire more independent work environments. According to one survey in the US, 72 percent of teens say they want to start a business someday.

Generation Z is indeed a different crop compared to millennials. Businesses, marketers, and even institutions need to prepare for their rise into the mainstream workforce and consumer populace.

Reynaldo C. Lugtu Jr. is a senior executive in the information and communications technology sector. He is the Chairman of the ICT Committee of the Financial Executives Institute of the Philippines. He teaches strategic management in the MBA Program of De La Salle University. He is also Adjunct Faculty of the Asian Institute of Management.